<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 18, 1998
REGISTRATION STATEMENT NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
BRADLEY REAL ESTATE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 6798 04-6034603
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
40 SKOKIE BOULEVARD, SUITE 600
NORTHBROOK, ILLINOIS 60062-1626
(847) 272-9800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
----------------
THOMAS P. D'ARCY
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BRADLEY REAL ESTATE, INC.
40 SKOKIE BOULEVARD, SUITE 600
NORTHBROOK, ILLINOIS 60062-1626
(847) 272-9800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
WILLIAM B. KING, P.C. DAVID L. HEFFLINGER, ESQ.
JOSEPH L. JOHNSON III, ESQ. GUY LAWSON, ESQ.
GOODWIN, PROCTER & HOAR LLP MCGRATH, NORTH, MULLIN & KRATZ, P.C.
EXCHANGE PLACE SUITE 1400, ONE CENTRAL PARK PLAZA
BOSTON, MA 02109-2881 OMAHA, NEBRASKA 68102
(617) 570-1000 (402) 341-3070
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: Upon
consummation of the merger of Mid-America Realty Investments, Inc. ("Mid-
America") with and into Bradley Real Estate, Inc. ("Bradley") pursuant to an
Agreement and Plan of Merger dated as of May 30, 1998 described in the
enclosed Proxy Statement/Prospectus.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration
statement. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER UNIT(2) PRICE(2) FEE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8.4% Series A Convertible
Preferred Stock, par
value $.01 per share
("Series A Preferred
Stock")................ 3,570,301 $23.6607 $84,475,856 $24,950
- ----------------------------------------
Common Stock, par value
$.01 per share ("Bradley
Common Stock")......... 3,644,652(3)
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Represents the estimated maximum number of shares of Series A Preferred
Stock of Bradley to be issued to stockholders of Mid-America in the merger
of Mid-America with and into Bradley. If the Merger described herein is
consummated, a maximum of forty-two hundredths (0.42) of a share of Series
A Preferred Stock of Bradley will be issued for every one share of common
stock of Mid-America outstanding.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f)(1) and based on the average of the high and
low sales price per share of common stock of Mid-America on June 15, 1998,
on the New York Stock Exchange. No separate consideration will be received
for the shares of Bradley Common Stock as may be issued from time to time
upon conversion of the Series A Preferred Stock and no additional
registration fee is required in connection with the registration thereof
pursuant to Rule 457(i) under the Securities Act of 1933, as amended.
(3) This registration statement also relates to a currently indeterminate
number of shares of Bradley Common Stock as may be required for issuance
upon conversion of the shares of Series A Preferred Stock being registered
hereunder, including such additional shares as may be issuable as a result
of adjustments to the conversion price. See "Description of Bradley
Capital Stock--Series A Preferred Stock--Conversion Price Adjustments."
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC.
11506 NICHOLAS STREET, SUITE 100
OMAHA, NEBRASKA 68154
June , 1998
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Mid-America Realty Investments, Inc. ("Mid-America") to be held on July ,
1998 at 9:00 a.m., local time, at Omaha, Nebraska (the "Mid-America
Special Meeting").
At the Mid-America Special Meeting, you will be asked to approve the merger
(the "Merger") of Mid-America with and into Bradley Real Estate, Inc.
("Bradley") and the Agreement and Plan of Merger, dated as of May 30, 1998, as
amended (the "Merger Agreement"), by and among Bradley and Mid-America.
Pursuant to the Merger Agreement, Mid-America will merge with and into
Bradley, and Bradley will be the surviving company. As a result of the Merger,
you will be entitled to receive forty-two hundredths (0.42) of a share of 8.4%
Series A Convertible Preferred Stock, par value $.01 per share, of Bradley for
each share of common stock, par value $.01 per share ("Mid-America Common
Stock"), of Mid-America held by you at the effective time of the Merger.
Approval of the Merger and the Merger Agreement requires the affirmative vote
of the holders of at least two-thirds of the outstanding shares of Mid-America
Common Stock.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, MID-AMERICA AND ITS STOCKHOLDERS. THE BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE MERGER AND THE MERGER AGREEMENT AND UNANIMOUSLY
RECOMMENDS THAT YOU VOTE TO APPROVE THE MERGER AND THE MERGER AGREEMENT. THE
INVESTMENT BANKING FIRM OF SBC WARBURG DILLON READ INC. HAS ISSUED ITS OPINION
TO YOUR BOARD OF DIRECTORS, A COPY OF WHICH IS ATTACHED AS ANNEX C TO THE
ACCOMPANYING PROXY STATEMENT/PROSPECTUS, THAT THE CONSIDERATION TO BE RECEIVED
BY MID-AMERICA'S STOCKHOLDERS IS FAIR TO SUCH HOLDERS FROM A FINANCIAL POINT
OF VIEW.
The accompanying Proxy Statement/Prospectus provides detailed information
concerning the proposed Merger, the reasons for your Board of Directors'
recommendation of the Merger and the Merger Agreement and certain additional
information, including, without limitation, the information set forth under
the heading "RISK FACTORS," which describes, among other items, potential
adverse effects to Mid-America's stockholders as a result of the Merger. We
urge you to carefully consider all of the information in the Proxy
Statement/Prospectus. IT IS IMPORTANT THAT YOUR SHARES OF MID-AMERICA COMMON
STOCK BE REPRESENTED AT THE MID-AMERICA SPECIAL MEETING, REGARDLESS OF THE
NUMBER OF SHARES YOU HOLD. THEREFORE, PLEASE SIGN, DATE AND RETURN YOUR PROXY
CARD AS SOON AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MID-AMERICA
SPECIAL MEETING. THIS WILL NOT PREVENT YOU FROM VOTING YOUR SHARES IN PERSON
IF YOU SUBSEQUENTLY CHOOSE TO ATTEND THE MID-AMERICA SPECIAL MEETING.
Sincerely,
Jerome L. Heinrichs
Chairman of the Board and Chief
Executive Officer
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC.
11506 NICHOLAS STREET, SUITE 100
OMAHA, NEBRASKA 68154
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY , 1998
----------------
To the Stockholders of Mid-America Realty Investments, Inc.:
A Special Meeting of Stockholders of Mid-America Realty Investments, Inc., a
Maryland corporation ("Mid-America"), will be held at 9:00 a.m., local time,
on July , 1998, at , Omaha, Nebraska (the "Mid-America Special
Meeting") for the following purposes:
1. To consider and vote upon a proposal to approve the merger (the
"Merger") of Mid-America with and into Bradley Real Estate, Inc.
("Bradley") and the Agreement and Plan of Merger, dated as of May 30, 1998
(the "Merger Agreement"), by and between Bradley and Mid-America, pursuant
to which, among other things, each outstanding share of common stock, par
value $.01 per share, of Mid-America ("Mid-America Common Stock") will be
converted into the right to receive forty-two hundredths (0.42) of a share
of 8.4% Series A Convertible Preferred Stock of Bradley (the "Series A
Preferred Stock"). A copy of the Merger Agreement is attached as Annex A to
the Proxy Statement and Prospectus ("Proxy Statement/Prospectus")
accompanying this Notice and a copy of the Articles Supplementary
establishing and fixing the rights and preferences of the Series A
Preferred Stock is attached as Annex B.
2. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The Board of Directors of Mid-America has fixed the close of business on
June , 1998 as the record date for the determination of the holders of shares
of Mid-America Common Stock entitled to notice of, and to vote at, the Mid-
America Special Meeting. The Merger and other related matters are more fully
described in the accompanying Proxy Statement/Prospectus, and the Annexes
thereto, which form a part of this Notice.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. TO
ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, HOWEVER, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A
POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE. ANY STOCKHOLDER
ATTENDING THE SPECIAL MEETING MAY VOTE IN PERSON EVEN IF THAT STOCKHOLDER HAS
RETURNED A PROXY.
By Order of the Board of Directors
Jerome L. Heinrichs
Secretary
June , 1998
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE,
SIGN, DATE, AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED SELF-
ADDRESSED ENVELOPE AS PROMPTLY AS POSSIBLE. IF YOU ATTEND THE SPECIAL
MEETING, YOU MAY VOTE YOUR SHARES IN PERSON, EVEN THOUGH YOU HAVE PREVIOUSLY
SIGNED AND RETURNED YOUR PROXY.
PLEASE DO NOT SEND IN ANY CERTIFICATES FOR YOUR SHARES AT THIS TIME.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
JUNE 18, 1998
MID-AMERICA REALTY INVESTMENTS, INC.
PROXY STATEMENT
-----------
BRADLEY REAL ESTATE, INC.
PROSPECTUS
This Proxy Statement and Prospectus ("Proxy Statement/Prospectus") is being
furnished to the holders of common stock, par value $.01 per share ("Mid-
America Common Stock"), of Mid-America Realty Investments, Inc., a Maryland
corporation ("Mid-America"), in connection with the solicitation of proxies by
the Board of Directors of Mid-America for use at a Special Meeting of
Stockholders of Mid-America to be held at , Omaha, Nebraska , on
July , 1998, at 9:00 a.m., local time, and at any and all adjournments or
postponements thereof (the "Mid-America Special Meeting"). This Proxy
Statement/Prospectus also constitutes the Prospectus of Bradley Real Estate,
Inc. ("Bradley") with respect to the issuance of up to 3,570,301 shares of 8.4%
Series A Convertible Preferred Stock, par value $.01 per share (the "Series A
Preferred Stock"), of Bradley to be issued to stockholders of Mid-America (the
"Mid-America Stockholders") in connection with the Merger (as hereinafter
defined) and approximately 3,644,652 shares of common stock, par value $.01 per
share (the "Bradley Common Stock"), of Bradley issuable upon conversion of the
Series A Preferred Stock in accordance with its terms. Bradley expects that the
Series A Preferred Stock will be approved for listing on the New York Stock
Exchange (the "NYSE") under the symbol "BTRPRA." Bradley Common Stock is traded
on the NYSE under the symbol "BTR." On June 16, 1998, the closing price for
Bradley Common Stock as reported by the NYSE Composite Tape was $20 3/8 per
share.
This Proxy Statement/Prospectus relates to the proposed merger (the "Merger")
of Mid-America with and into Bradley, pursuant to the Agreement and Plan of
Merger, dated as of May 30, 1998 (the "Merger Agreement"), by and between
Bradley and Mid-America. Bradley will be the surviving corporation in the
Merger and upon completion of the Merger, the separate corporate existence of
Mid-America will cease. At the time the Merger becomes effective, each issued
and outstanding share of Mid-America Common Stock will be converted into the
right to receive forty-two hundredths (0.42) of a share of Series A Preferred
Stock. Consummation of the Merger is subject to various conditions (which must
be satisfied or waived), including approval of the Merger and the Merger
Agreement by the holders of two-thirds of the outstanding shares of Mid-America
Common Stock at the Mid-America Special Meeting.
FOR CERTAIN FACTORS, INCLUDING CAUTIONARY STATEMENTS ABOUT FORWARD-LOOKING
STATEMENTS, WHICH SHOULD BE CONSIDERED IN EVALUATING THE MERGER, SEE "RISK
FACTORS" BEGINNING ON PAGE 20.
All information contained in this Proxy Statement/Prospectus with respect to
Bradley has been provided by Bradley. All information contained in this Proxy
Statement/Prospectus with respect to Mid-America has been provided by Mid-
America.
This Proxy Statement/Prospectus and the accompanying forms of proxy are first
being mailed to the Mid-America Stockholders on or about June , 1998. A
stockholder who has given a proxy may revoke it at any time prior to its
exercise.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is June , 1998.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL, OR THE SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES
OFFERED BY THIS PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN
ANY JURISDICTION TO OR FROM ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION OF AN OFFER, OR PROXY SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR THE
ISSUANCE OR SALE OF ANY SECURITIES HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET
FORTH OR INCORPORATED HEREIN SINCE THE DATE HEREOF.
AVAILABLE INFORMATION
Bradley and Mid-America are each subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith file reports, proxy and information
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy and information statements and other
information filed by Bradley and Mid-America can be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and may be
available at the following Regional Offices of the Commission: Chicago
Regional Office, Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661; and New York Regional Office, 7 World Trade
Center, 13th Floor, New York, New York 10048. Copies of such materials can be
obtained at prescribed rates from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
Bradley and Mid-America are also required to file electronic versions of these
documents with the Commission through the Commission's Electronic Data
Gathering Analysis and Retrieval (EDGAR) system. The Commission maintains a
world wide web site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. In addition, reports, proxy and
information statements and other information concerning Bradley and Mid-
America can be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005, on which the Bradley Common Stock and Mid-America Common
Stock are listed and on which Bradley expects that the Series A Preferred
Stock will be approved for listing.
This Proxy Statement/Prospectus does not contain all the information set
forth in the Registration Statement on Form S-4 and exhibits relating thereto,
including any amendments (the "Registration Statement"), of which this Proxy
Statement/Prospectus is a part, and which Bradley has filed with the
Commission under the Securities Act of 1933, as amended (the "Securities
Act"). Reference is made to such Registration Statement for further
information with respect to Bradley and the Series A Preferred Stock offered
hereby. Statements contained herein or incorporated herein by reference
concerning the provisions of documents are summaries of such documents, and
each statement is qualified in its entirety by reference to the copy of the
applicable document if filed with the Commission or attached as an annex
hereto.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents previously filed by Bradley with the Commission
pursuant to the Exchange Act (Commission File No. 1-10328) are incorporated in
this Proxy Statement/Prospectus by reference: (i) Bradley's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997; (ii) Bradley's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998; (iii)
Bradley's current reports on Form 8-K filed on January 28, 1998, February 20,
1998, June 2, 1998 and June 17, 1998; and (iv) the description of Bradley
Common Stock contained or incorporated by reference in Bradley's Registration
Statement on Form 8-A, filed August 8, 1994, including any amendments thereto.
(ii)
<PAGE>
The following documents previously filed by Mid-America with the Commission
pursuant to the Exchange Act (Commission File No. 1-09663) are incorporated in
this Proxy Statement/Prospectus by reference: (i) Mid-America's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997; (ii) Mid-America's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998; and (iii)
Mid-America's current report on Form 8-K filed on June 2, 1998.
All reports and other documents filed by each of Bradley and Mid-America
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent
to the date hereof and prior to the Mid-America Special Meeting shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing of such reports and documents. In addition, all documents filed
with the Commission by Bradley or Mid-America pursuant to the Exchange Act
after the date of the initial Registration Statement and prior to the
effectiveness of the Registration Statement shall be deemed to be incorporated
by reference into this Proxy Statement/Prospectus. Any statement contained in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that a statement contained herein, or in
any other subsequently filed document that also is incorporated or deemed to
be incorporated by reference herein, modifies or supersedes such statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy
Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (NOT INCLUDING
EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE INTO SUCH DOCUMENTS) ARE AVAILABLE, WITHOUT CHARGE, UPON WRITTEN
OR ORAL REQUEST OF ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS
PROXY STATEMENT/PROSPECTUS IS DELIVERED TO, IN THE CASE OF DOCUMENTS RELATING
TO BRADLEY, 40 SKOKIE BOULEVARD, SUITE 600, NORTHBROOK, ILLINOIS 60062,
ATTENTION: MARIANNE DUNN (TELEPHONE NO. (847) 272-9800), OR, IN THE CASE OF
DOCUMENTS RELATING TO MID-AMERICA, 11506 NICHOLAS STREET, SUITE 100, OMAHA,
NEBRASKA 68154, ATTENTION: SHEILA TRUEBLOOD, SHAREHOLDER RELATIONS (TELEPHONE
NO. (402) 496-3300). IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST SHOULD BE MADE BY JULY , 1998.
(iii)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY................................................................... 1
The Companies........................................................... 1
The Merger.............................................................. 2
Federal Income Tax Consequences......................................... 4
Risk Factors............................................................ 4
Mid-America Special Meeting of Stockholders............................. 5
The Merger Agreement.................................................... 5
Description of Series A Preferred Stock................................. 8
Comparison of Stockholder Rights........................................ 10
Summary Historical and Unaudited Pro Forma Combined Financial Data...... 11
Summary Historical Financial Data....................................... 15
Selected Comparative per Share Data..................................... 16
Comparative Market Data................................................. 17
Bradley's Distribution and Dividend Policy.............................. 18
RISK FACTORS.............................................................. 20
Stock Price Fluctuations................................................ 20
Lack of Market for Series A Preferred Stock............................. 20
Failure to Effectively Manage Growth and Integrate Properties Following
the Merger............................................................. 21
Debt Obligations; Effect of Interest Rates.............................. 21
Benefits to Certain Mid-America Executive Officers and Employees........ 21
Real Estate Investment Considerations................................... 22
Possible Environmental Liabilities...................................... 23
Uncertainty of Meeting Acquisition Objectives; Acquired Properties May
Not Meet Management's Expectations..................................... 24
Certain Provisions in Organizational Documents May Discourage Acquisi-
tion Proposals......................................................... 24
Adverse Consequences of Failure to Qualify as a REIT.................... 25
Dependence on Key Personnel............................................. 26
Competition............................................................. 26
Substantial Expenses and Payments if Merger Fails to Occur.............. 26
Shares Available for Future Sale Could Adversely Affect Price of Bradley
Common Stock........................................................... 27
Status of the Merger as a Tax-Free Reorganization....................... 27
Risks Relating to Year 2000 Compliance.................................. 27
No Dissenters' Rights................................................... 27
THE COMPANIES............................................................. 28
Bradley................................................................. 28
Mid-America............................................................. 29
Operations of Bradley Following the Merger.............................. 29
THE MERGER................................................................ 33
General................................................................. 33
Background of the Merger................................................ 33
Recommendation of the Mid-America Board; Reasons for the Merger......... 37
Opinion of Mid-America's Financial Advisor.............................. 38
Interests of Certain Executive Officers and Employees of Mid-America.... 41
Certain Federal Income Tax Considerations............................... 43
Accounting Treatment.................................................... 43
Regulatory Approval..................................................... 43
Certain Resale Restrictions............................................. 43
New York Stock Exchange Listing......................................... 43
</TABLE>
(iv)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reasons for Bradley Board Approval of Merger; No Requirement for Ap-
proval by Holders of Bradley Common Stock.............................. 44
Dissenters' Rights...................................................... 44
FEDERAL INCOME TAX CONSIDERATIONS......................................... 44
Tax Consequences of the Merger.......................................... 44
Pre-Merger Dividends.................................................... 45
REIT Qualification...................................................... 45
Taxation of Taxable U.S. Stockholders................................... 46
Backup Withholding...................................................... 48
Taxation of Certain Tax-Exempt Stockholders............................. 49
Other Tax Consequences.................................................. 49
MID-AMERICA SPECIAL MEETING OF STOCKHOLDERS............................... 50
THE MERGER AGREEMENT...................................................... 51
General................................................................. 51
Effective Time of the Merger............................................ 51
Exchange of Mid-America Stock Certificates.............................. 51
Conditions to the Merger................................................ 52
Representations and Warranties.......................................... 54
Certain Covenants....................................................... 54
Termination............................................................. 57
Termination Amount and Expenses......................................... 58
Reduction of Termination Amount or Expenses............................. 60
No Solicitation of Transactions......................................... 60
Indemnification......................................................... 61
Amendments.............................................................. 61
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK
DIVIDENDS ............................................................... 62
DESCRIPTION OF BRADLEY CAPITAL STOCK...................................... 62
General................................................................. 62
Bradley Preferred Stock................................................. 62
Series A Preferred Stock................................................ 63
Bradley Common Stock.................................................... 67
Bradley Excess Stock.................................................... 68
Business Combinations................................................... 69
Control Share Acquisitions.............................................. 70
COMPARISON OF STOCKHOLDER RIGHTS.......................................... 70
Voting Rights........................................................... 71
Dividend Rights......................................................... 71
Liquidation Preference.................................................. 72
Redemption.............................................................. 72
Board of Directors...................................................... 72
Amendment of Charter and Bylaws......................................... 73
Required Vote for Authorization of Certain Actions...................... 73
Special Meetings........................................................ 73
Dissolution............................................................. 74
Restrictions on the Ownership, Transfer or Issuance of Shares........... 74
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS......................... 75
OTHER MATTERS............................................................. 92
LEGAL MATTERS............................................................. 92
</TABLE>
(v)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
EXPERTS.................................................................... 92
STOCKHOLDER PROPOSALS...................................................... 92
</TABLE>
ANNEXES
A. Agreement and Plan of Merger dated May 30, 1998 by and between Bradley Real
Estate, Inc. and Mid-America Realty Investments, Inc.
B. Form of Articles Supplementary Establishing and Fixing the Rights and
Preferences of a Series of Shares of Preferred Stock for the 8.4% Series A
Convertible Preferred Stock of Bradley Real Estate, Inc.
C. Opinion of Mid-America's Financial Advisor: SBC Warburg Dillon Read Inc.
(vi)
<PAGE>
BRADLEY/MID-AMERICA PROPERTY LOCATIONS IN THE MIDWEST
[MAP SHOWING LOCATIONS OF PROPERTIES
OF BRADLEY AND MID-AMERICA IN THE MIDWEST]
(vii)
<PAGE>
SUMMARY
The following is a brief summary of certain information contained elsewhere
in this Proxy Statement/Prospectus and the Annexes hereto relating to the
proposed merger (the "Merger") of Mid-America Realty Investments, Inc. ("Mid-
America") with and into Bradley Real Estate, Inc. ("Bradley"). This summary
does not purport to contain all material information relating to the Merger and
the Agreement and Plan of Merger, dated as of May 30, 1998 (the "Merger
Agreement"), by and between Bradley and Mid-America, and is qualified in its
entirety by the more detailed information and financial statements contained or
incorporated by reference in this Proxy Statement/Prospectus. As used herein,
the term "Bradley Real Estate, Inc." refers also to its predecessor Bradley
Real Estate Trust and the term "Bradley" as used herein refers to Bradley Real
Estate, Inc. and its subsidiaries on a consolidated basis (including Bradley
Operating Limited Partnership and its subsidiaries) or, where the context so
requires, Bradley Real Estate, Inc. only. The term "BOLP" as used herein means
Bradley Operating Limited Partnership and its subsidiaries on a consolidated
basis, or, where the context so requires, Bradley Operating Limited Partnership
only. The term "Mid-America" as used herein refers to Mid-America Realty
Investments, Inc. and its subsidiaries on a consolidated basis. STOCKHOLDERS OF
MID-AMERICA SHOULD READ CAREFULLY THIS PROXY STATEMENT/PROSPECTUS AND THE
ANNEXES ATTACHED HERETO IN THEIR ENTIRETY.
THE COMPANIES
BRADLEY
Bradley is a fully-integrated real estate operating company which owns and
operates community and neighborhood shopping centers located in the Midwest
region of the United States. As of June 1, 1998, Bradley owned 63 properties in
12 states, aggregating over 11.5 million square feet of gross leasable area
("GLA"). Title to such properties is held by or for the benefit of BOLP, of
which Bradley is the sole general partner and the owner of approximately 94% of
the economic interests in BOLP.
Bradley owns and operates and seeks to acquire grocery-anchored, open-air
community and neighborhood shopping centers located in the Midwest, generally
consisting of the states of Illinois, Indiana, Minnesota, Michigan, Wisconsin,
Ohio, Missouri, Iowa, Kansas, Nebraska, Kentucky, North Dakota and South
Dakota. Bradley currently owns properties in ten states in this region. Through
past experience as well as current research, Bradley believes that this region
is economically strong and diverse, thus providing a favorable environment for
the acquisition, ownership and operation of retail properties. Bradley
evaluates prospective acquisitions in certain Midwest markets which, based upon
Bradley's research, demonstrate opportunities for favorable investment returns
and long-term cash flow growth. Bradley favors grocery-anchored centers
because, based on its past experience, such properties offer strong and
predictable daily consumer traffic and are less susceptible to downturns in the
general economy than apparel or leisure anchored shopping center properties.
For a more detailed description of Bradley, see "The Companies--Bradley."
Bradley has elected to qualify as a real estate investment trust ("REIT")
under the Internal Revenue Code of 1986, as amended, (the "Code") for federal
income tax purposes since its organization in 1961 and is the nation's oldest
continuously qualified REIT. Originally organized in 1961 as a Massachusetts
business trust under the name Bradley Real Estate Trust, Bradley was
reorganized as a Maryland corporation in October 1994. Bradley's principal
executive office is located at 40 Skokie Boulevard, Suite 600, Northbrook,
Illinois 60062-1626 and its telephone number is (847) 272-9800.
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MID-AMERICA
Mid-America is a self-administered REIT which owns, manages and operates
income-producing commercial real estate, primarily community and neighborhood
shopping centers and enclosed malls. Mid-America was incorporated under the
laws of Maryland in October 1986. As of June 1, 1998, Mid-America owned 18
neighborhood shopping centers and four enclosed malls located in Illinois,
Minnesota, Michigan, Wisconsin, Indiana, Iowa, Nebraska, South Dakota,
Arkansas, Tennessee and Georgia. Additionally, Mid-America is a 50% general
partner in Mid-America Bethal Limited Partnership, a Nebraska limited
partnership ("Mid-America Bethal"), which owns two neighborhood shopping
centers and one enclosed mall. The properties aggregate over 3.2 million square
feet of GLA. Mid-America has one wholly-owned subsidiary, Mid-America Centers
Corp. ("MACC" and together with Mid-America Bethal, the "Mid-America
Subsidiaries"), a Nebraska corporation and a "qualified REIT subsidiary" as
defined in Section 856(i) of the Code, which manages Mid-America's and Mid-
America Bethal's properties. For a more detailed description of Mid-America,
see "The Companies--Mid-America."
Mid-America's principal executive office is located at 11506 Nicholas Street,
Suite 100, Omaha, Nebraska 68154 and its telephone number is (402) 496-3300.
THE MERGER
TERMS OF THE MERGER; EXCHANGE RATIO
The Merger Agreement provides for the merger of Mid-America with and into
Bradley with Bradley as the surviving corporation. The current executive
officers and directors of Bradley will manage the business and affairs of the
surviving corporation following the consummation of the Merger. For information
concerning these persons, see "The Companies--Operations of Bradley Following
the Merger--Management."
At the effective time of the Merger (the "Effective Time"), the separate
corporate existence of Mid-America will cease and each issued and outstanding
share of common stock, par value $.01 per share (the "Mid-America Common
Stock"), of Mid-America will be converted into the right to receive forty-two
hundredths (0.42) of a share of 8.4% Series A Convertible Preferred Stock, par
value $.01 per share ("Series A Preferred Stock"), of Bradley (such ratio, the
"Exchange Ratio"). In lieu of fractional shares, holders of Mid-America Common
Stock ("Mid-America Stockholders") will be paid an amount in cash (without
interest), rounded to the nearest cent, determined by multiplying $25.00 by the
fraction of a share of Series A Preferred Stock, if any, to which such holder
would otherwise be entitled. The Series A Preferred Stock will pay an annual
dividend equal to 8.4% of the $25.00 liquidation preference and is convertible
into shares of common stock, par value $.01 per share ("Bradley Common Stock"),
of Bradley at a conversion price of $24.49 per share of Bradley Common Stock,
subject to certain adjustments (the "Conversion Price"). At any time after five
years, the Series A Preferred Stock is redeemable at Bradley's option for
$25.00 per share so long as the Bradley Common Stock is trading at or above the
Conversion Price. Bradley expects that the Series A Preferred Stock will be
approved for listing on the NYSE. See "Description of Bradley Capital Stock--
Series A Preferred Stock."
Based upon the number of shares and options of Mid-America Common Stock
outstanding at June 1, 1998, the former Mid-America stockholders will hold,
immediately after the Merger, up to approximately 3,570,301 shares of Series A
Preferred Stock convertible in the aggregate into 3,644,652 shares of Bradley
Common Stock, representing approximately 12.32% of the aggregate number of
outstanding shares of Bradley Common Stock on a fully diluted basis.
MID-AMERICA'S REASONS FOR THE MERGER; RECOMMENDATION OF MID-AMERICA'S BOARD OF
DIRECTORS
The Board of Directors of Mid-America (the "Mid-America Board") believes that
the Merger is fair to and in the best interests of Mid-America and its
stockholders. THE BOARD OF DIRECTORS OF MID-
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AMERICA HAS UNANIMOUSLY APPROVED THE MERGER AND THE MERGER AGREEMENT AND
UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF MID-AMERICA VOTE "FOR" THE MERGER
AND THE MERGER AGREEMENT. The material factors that the Mid-America Board
considered in reaching the foregoing conclusions were: (i) the opportunity for
Mid-America Stockholders to participate as stockholders in a larger, more
diversified company following the Merger; (ii) the Exchange Ratio and the terms
of the Series A Preferred Stock; (iii) the slightly higher pre-tax dollar value
of dividend income from the Series A Preferred Stock as compared to the
dividend income of the Mid-America Common Stock; (iv) the strategic and
financial alternatives available to Mid-America, including remaining an
independent company, and other indications of interest received by Mid-America;
(vii) the historical market prices of Mid-America Common Stock and Bradley
Common Stock and historical market prices of shares of Mid-America Common Stock
compared to Bradley's acquisition price per share of Mid-America Common Stock
based on the Exchange Ratio; (v) certain publicly-available information with
respect to Bradley; (vi) the May 30, 1998 opinion of SBC Warburg Dillon Read
Inc. ("SBCWDR") that the consideration was fair from a financial point of view
to the holders of Mid-America Common Stock; (vii) the fact that the Merger was
designed to be tax-free to the Mid-America Stockholders; and (viii) the fact
that the Mid-America Board may withdraw its recommendation and terminate the
Merger Agreement, in certain circumstances. For a discussion of the
circumstances leading up to the execution of the Merger Agreement and the
factors considered by the Mid-America Board in making its recommendation, see
"The Merger--Background of the Merger" and "--Recommendation of the Mid-America
Board; Reasons for the Merger."
OPINION OF MID-AMERICA'S FINANCIAL ADVISOR
On May 30, 1998, the Mid-America Board received the oral opinion of its
financial advisor, SBCWDR, later confirmed in writing dated May 30, 1998, which
provided that, as of such date, the consideration to be received by the Mid-
America Stockholders pursuant to the terms of the Merger Agreement, was fair to
the Mid-America Stockholders from a financial point of view. See "The Merger--
Opinion of Mid-America's Financial Advisor." A copy of SBCWDR's written opinion
is attached as Annex C hereto and should be read in its entirety for a
description of the procedures followed, matters considered, assumptions made
and methods employed by SBCWDR.
INTERESTS OF CERTAIN EXECUTIVE OFFICERS AND EMPLOYEES OF MID-AMERICA
In considering the recommendation of the Mid-America Board with respect to
the Merger, Mid-America Stockholders should be aware that certain executive
officers, and employees of Mid-America have certain interests summarized herein
that may present actual or potential conflicts of interest in connection with
the Merger. Specifically, upon the Merger, Jerome L. Heinrichs, the Chairman
and Chief Executive Officer (who is also a director of Mid-America), and Dennis
G. Gethmann, the President and Chief Operating Officer, will receive a total of
approximately $521,681 and $485,205, respectively in severance payments, fringe
benefits, option termination payments and bonuses. All of these arrangements
were approved prior to the beginning of merger discussions with Bradley. In
addition, certain other employees may, under certain circumstances, be eligible
to receive up to an aggregate of $587,703 in severance payments and bonus
payments upon the Merger. See "The Merger--Interests of Certain Executive
Officers and Employees of Mid-America."
BRADLEY'S REASONS FOR THE MERGER
The Board of Directors of Bradley (the "Bradley Board") approved the Merger
because it fits with its stated acquisition plan to acquire community and
neighborhood shopping centers in the Midwest that are anchored by strong
national, regional and independent grocery chains. See "The Companies--
Bradley." In connection with the Merger, Bradley will acquire additional assets
in existing markets such as Minnesota, Wisconsin and Indiana as well as
acquiring assets in new Midwest target markets such as Omaha, Nebraska. See
"The Companies--Operations of Bradley Following the Merger." Another factor
considered by the
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Bradley Board in approving the transaction is that the Merger will be accretive
to Bradley's net income per share and to funds from operations ("FFO") per
share. See "Summary--Summary Historical and Unaudited Pro Forma Combined
Financial Data" and "Pro Forma Condensed Combined Financial Statements."
ACCOUNTING TREATMENT
Bradley will account for the Merger as a purchase in accordance with
Accounting Principles Board Opinion No. 16. See "The Merger--Accounting
Treatment."
CERTAIN RESALE RESTRICTIONS
All shares of Series A Preferred Stock received by the Mid-America
Stockholders in the Merger will be freely transferable, except that shares of
Series A Preferred Stock received by persons who are deemed to be "affiliates"
(as such term is defined under the Securities Act of 1933, as amended (the
"Securities Act")) of Mid-America at the time of the Special Meeting of Mid-
America Stockholders (including any and all adjournments thereof, the "Mid-
America Special Meeting") may be resold by them only in certain permitted
circumstances. See "The Merger--Certain Resale Restrictions."
NEW YORK STOCK EXCHANGE LISTING
It is a condition to Mid-America's and Bradley's obligations to consummate
the Merger that, prior to the Effective Time, Bradley obtain approval from the
NYSE for the listing of the shares of Series A Preferred Stock to be issued in
the Merger and the shares of Bradley Common Stock issuable upon conversion of
the Series A Preferred Stock on the NYSE, subject to official notice of
issuance. See "The Merger--New York Stock Exchange Listing" and "The Merger
Agreement--Conditions to the Merger."
DISSENTERS' RIGHTS
Under the Maryland General Corporation Law ("MGCL"), stockholders of Mid-
America and Bradley are not entitled to dissenters' rights in connection with
the Merger. See "The Merger--Dissenters' Rights."
FEDERAL INCOME TAX CONSEQUENCES
Goodwin, Procter & Hoar LLP, counsel for Bradley, has delivered its opinion to
Bradley and Mid-America substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, the Merger will be
treated for United States federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Code. Accordingly, (i) no gain or loss will
be recognized by Bradley as a result of the Merger, (ii) no gain or loss will be
recognized by Mid-America as a result of the Merger, and (iii) no gain or loss
will be recognized by any Mid-America Stockholder who receives Series A
Preferred Stock in exchange for Mid-America Common Stock (except with respect to
any cash received in lieu of a fractional interest in Series A Preferred Stock).
See "Federal Income Tax Considerations--Tax Consequences of the Merger" and "The
Merger Agreement--Conditions to the Merger."
RISK FACTORS
In considering whether to approve the Merger and the Merger Agreement, the
Mid-America Stockholders should consider, in addition to the other information
in this Proxy Statement/Prospectus, the matters discussed under "Risk Factors."
Such matters include:
. Risks associated with potential fluctuations in the price of Bradley
Common Stock between the date of this Proxy Statement/Prospectus and the
Effective Time and the resulting effect on the value of the Series A
Preferred Stock. See "Risk Factors--Stock Price Fluctuations."
. Risks associated with the lack of an established market for the Series A
Preferred Stock prior to the Effective Time and the possibility that
such a market may not develop or be sustained after the Effective Time.
See "Risk Factors--Lack of Market for Series A Preferred Stock."
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. Risks associated with Bradley's recent growth and Bradley's ability to
successfully integrate recent and proposed property acquisitions as well
as Mid-America's properties into its portfolio. See "Risk Factors--
Failure to Effectively Manage Growth and Integrate Properties Following
the Merger."
. Possible adverse consequences on Bradley's ability to make distributions
to its stockholders or service its debt resulting from risks associated
with the absence of a limitation on indebtedness in Bradley's
organizational documents or an increase in interest rates. See "Risk
Factors--Debt Obligations; Effect of Interest Rates."
. Possible conflicts of interests due to the fact that certain executive
officers and employees of Mid-America have certain interests in, and
will receive certain benefits from, the Merger that are separate from
the interests of and benefits to the Mid-America Stockholders generally.
See "Risk Factors--Benefits to Certain Mid-America Executive Officers
and Employees," and "The Merger--Interests of Certain Executive Officers
and Employees of Mid-America."
. Following the Merger, Bradley will continue to own, manage, operate,
acquire and develop community and neighborhood shopping centers located
in the Midwest region of the U.S. Bradley will be faced with similar
business risks after the Merger as it faces now, including the
illiquidity of real estate, possible environmental liabilities and the
dependence upon a specific geographic region and industry. See "Risk
Factors--Real Estate Investment Considerations" and "Risk Factors--
Possible Environmental Liabilities."
MID-AMERICA SPECIAL MEETING OF STOCKHOLDERS
The Mid-America Special Meeting will be held at , Omaha, Nebraska ,
on July , 1998, at 9:00 a.m., local time. At the Mid-America Special Meeting,
holders of Mid-America Common Stock will consider and vote upon a proposal to
approve the Merger and the Merger Agreement. This proposal must be approved by
the affirmative vote of the holders of two-thirds of the outstanding shares of
Mid-America Common Stock entitled to vote thereon. Mid-America Stockholders are
entitled to one vote per share. Only holders of Mid-America Common Stock at the
close of business on June , 1998 (the "Mid-America Record Date") will be
entitled to notice of and to vote at the Mid-America Special Meeting. As of the
Mid-America Record Date, directors and executive officers of Mid-America, all
of whom have indicated that they will vote all of their shares of Mid-America
Common Stock for approval of the Merger and the Merger Agreement, and their
affiliates, were beneficial owners of 53,996 shares of Mid-America Common
Stock, representing approximately 0.65% of the outstanding shares of Mid-
America Common Stock. See "Mid-America Meeting of Stockholders."
THE BOARD OF DIRECTORS OF MID-AMERICA HAS UNANIMOUSLY APPROVED THE MERGER AND
THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT MID-AMERICA STOCKHOLDERS
VOTE FOR APPROVAL OF THE MERGER AND THE MERGER AGREEMENT. SEE "THE MERGER--
BACKGROUND OF THE MERGER," AND "--RECOMMENDATION OF THE BOARD OF DIRECTORS OF
MID-AMERICA; REASONS FOR THE MERGER."
THE MERGER AGREEMENT
EFFECTIVE TIME OF THE MERGER
In accordance with the MGCL, the Merger will become effective upon the
acceptance for record of the Articles of Merger by the State Department of
Assessments and Taxation of Maryland or at such later time as is specified in
such Articles of Merger. The day on which the Effective Time occurs is referred
to herein as the
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"Closing Date." Subject to the fulfillment (or waiver) of the other conditions
to the obligations of Bradley and Mid-America to consummate the Merger, it is
currently expected that the Merger will be consummated as soon as practicable
following the approval by the stockholders of Mid-America of the Merger and the
Merger Agreement at the Mid-America Special Meeting. See "The Merger
Agreement--Effective Time of the Merger."
EXCHANGE OF MID-AMERICA STOCK CERTIFICATES
Promptly after the Effective Time, an exchange agent selected by Bradley (the
"Exchange Agent") will mail a letter of transmittal and instructions to each
holder of record of a certificate representing shares of Mid-America Common
Stock (a "Certificate") as of the Effective Time for use in effecting the
surrender of the Certificate in exchange for certificates representing shares
of Series A Preferred Stock and cash in lieu of fractional shares. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together
with such letter of transmittal, duly executed and completed in accordance with
the instructions thereto, the holder of such Certificate will be entitled to
receive in exchange therefor (i) a certificate representing the number of whole
shares of Series A Preferred Stock to which such holder shall be entitled, and
(ii) a check representing the amount of cash in lieu of fractional shares, if
any, to which such holder shall be entitled plus the amount of any dividends or
distributions, if any, to which such holder shall be entitled as provided in
the Merger Agreement, after giving effect to any required withholding tax, and
the Certificate so surrendered will be canceled. Certificates should not be
surrendered until the letter of transmittal and instructions are received. See
"The Merger Agreement--Exchange of Mid-America Stock Certificates."
CONDITIONS TO THE MERGER
The respective obligations of Bradley and Mid-America to effect the Merger
and the other transactions contemplated in the Merger Agreement are subject to
the fulfillment or waiver of certain conditions at or prior to the Effective
Time including, among others: (a) approval of the Merger and the Merger
Agreement by the requisite vote of the Mid-America Stockholders; (b) receipt of
various third-party consents; (c) receipt by Bradley of an opinion from
Deloitte & Touche LLP, independent public accountants for Mid-America, or
another nationally recognized law firm or accounting firm selected by Mid-
America, to the effect that, among other things, for the taxable year ended
December 31, 1995, December 31, 1996 and December 31, 1997 and for the short
taxable year ending on the date on which the Merger closes, Mid-America has
qualified to be taxed as a REIT under Sections 856 through 860 of the Code; (d)
the Registration Statement shall have been declared effective by the Commission
under the Securities Act, and no stop order suspending the effectiveness of the
Registration Statement shall have been issued by the Commission and no
proceedings for that purpose shall have been initiated or, to the knowledge of
Bradley or Mid-America, threatened by the Commission; (e) Bradley shall have
obtained approval from the NYSE for the listing of the shares of Series A
Preferred Stock to be issued in the Merger and the shares of Bradley Common
Stock issuable upon conversion thereof, subject to official notice of issuance;
(f) Bradley shall have received all state securities or "blue sky" permits and
other authorizations necessary to issue the Series A Preferred Stock; and (g)
Mid-America shall have obtained and delivered to Bradley estoppel certificates,
dated no earlier than 60 days prior to the Effective Time, with respect to (i)
90% of the rented space represented by certain leases and agreements set forth
in a schedule to the Merger Agreement and (ii) leases representing a total of
50% of the total rented space of each Mid-America property, other than rented
space represented by the leases listed in the schedule referred to in (g)(i)
above. See "The Merger Agreement--Conditions to the Merger."
TERMINATION
The Merger Agreement may be terminated and abandoned at any time prior to the
Effective Time, whether before or after approval of the Merger and the Merger
Agreement by the stockholders of Mid-America, in a number of circumstances,
including, among others: (a) by the mutual written consent of Mid-America and
Bradley; (b) by either Mid-America or Bradley if (i) the Merger Agreement and
the transactions contemplated
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thereby shall have failed to receive the requisite vote for approval by the
Mid-America Stockholders at the Mid-America Special Meeting, or (ii) the Merger
shall not have been consummated on or before September 30, 1998 (other than due
to the failure of the party seeking to terminate the Merger Agreement to
perform its obligations under the Merger Agreement required to be performed by
it at or prior to the Effective Time); (c) by action of Mid-America if (i) the
Mid-America Board recommends to the Mid-America Stockholders approval or
acceptance of an Acquisition Proposal (as defined below in "The Merger
Agreement--No Solicitation of Transactions") by a person other than Bradley,
but only in the event that the Mid-America Board, after consultation with and
based upon the advice of McGrath, North, Mullin & Kratz, P.C. or another
nationally recognized law firm, has determined in good faith that such action
is necessary for the Mid-America Board to comply with its fiduciary duties to
its stockholders under applicable law, or (ii) Bradley enters into a definitive
agreement pursuant to which Bradley agrees (a) to sell all or substantially all
of its assets or (b) to merge or consolidate with another person if
consummation of such merger or consolidation would result in the voting
securities of Bradley outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving person) less than 50% of the combined voting power
of the voting securities of Bradley or such surviving person outstanding
immediately after such merger or consolidation; provided, however that Mid-
America's right of termination under this clause (ii) shall expire and become
null and void on the seventh (7th) day after receipt of notice by Mid-America
that Bradley has entered into such definitive agreement; or (d) by action of
Bradley if the Mid-America Board shall have recommended or shall have resolved
to recommend that stockholders of Mid-America accept or approve an Acquisition
Proposal by a person other than Bradley. See "The Merger Agreement--
Termination."
TERMINATION AMOUNT AND EXPENSES
If (a) Bradley terminates the Merger Agreement because (i) the Mid-America
Board has recommended that the Mid-America Stockholders accept or approve an
Acquisition Proposal by a person other than Bradley (or the Mid-America Board
has resolved to do such), or (ii) any representation, warranty, covenant or
agreement on the part of Mid-America set forth in certain sections of the
Merger Agreement has been willfully breached; or (b) Mid-America terminates the
Merger Agreement because the Board of Directors of Mid-America, after
consultation with and based upon the advice of McGrath, North, Mullin & Kratz,
P.C. or another nationally recognized law firm, has determined in good faith
that its fiduciary duties to its stockholders under applicable law require it
to recommend to its stockholders approval or acceptance of an Acquisition
Proposal by a person other than Bradley, then Mid-America shall pay to Bradley
an amount in cash equal to the sum of (i) $2,500,000 plus (ii) Bradley's out-
of-pocket costs and expenses in connection with the Merger Agreement and the
transactions contemplated thereby, including, without limitation, fees and
disbursements of accountants, attorneys, and investment bankers, up to $875,000
(clauses (i) and (ii) collectively, the "Termination Amount").
If Bradley terminates the Merger Agreement because (i) the Mid-America Board
has failed to make, or has withdrawn, amended, modified or changed its approval
or recommendation of the Merger Agreement and any of the transactions
contemplated thereby; (ii) Mid-America has failed as soon as practicable to
mail this Proxy Statement/Prospectus to the Mid-America Stockholders or to
include the recommendation of the Mid-America Board regarding the Merger
Agreement and the transactions contemplated thereby in this Proxy
Statement/Prospectus; (iii) Mid-America or the Mid-America Board has resolved
to do either (i) or (ii) above; or (iv) any representation, warranty, covenant
or agreement on the part of Mid-America set forth in the Merger Agreement has
been breached or become untrue, as the case may be, and is incapable of being
satisfied by September 30, 1998 (except for a termination because of a willful
breach by Mid-America in which case the previous paragraph will apply), Mid-
America shall pay all of Bradley's out-of-pocket costs and expenses in
connection with the Merger Agreement and the transactions contemplated thereby,
including, without limitation, fees and disbursements of accountants,
attorneys, and investment bankers (collectively, "Expenses"), up to $875,000.
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If Bradley or Mid-America terminates the Merger Agreement because the Merger
Agreement and the transactions contemplated thereby failed to receive the
requisite vote for approval by the Mid-America Stockholders upon the holding of
a duly convened stockholder meeting, then Mid-America shall pay all of
Bradley's Expenses in connection with the Merger Agreement and the transactions
contemplated thereby, up to $500,000.
If at any time within one year after termination of the Merger Agreement,
unless such termination was pursuant to certain events or circumstances
specified in the Merger Agreement, (i) Mid-America enters into an agreement
relating to a post-termination acquisition proposal ("PTAP"), as defined below
in "The Merger Agreement--Termination Amount and Expenses," with a person other
than Bradley or (ii) the Mid-America Board recommends or resolves to recommend
to the Mid-America Stockholders approval or acceptance of a PTAP with a person
other than Bradley, then, upon the entry into such agreement or the making of
such recommendation or resolution, Mid-America shall pay to Bradley the
Termination Amount, which amount shall be reduced by any monies previously paid
by Mid-America to Bradley pursuant to the previous paragraphs. See "The Merger
Agreement--Termination Amount and Expenses."
DESCRIPTION OF SERIES A PREFERRED STOCK
Upon consummation of the Merger, the shares of Series A Preferred Stock
issued in exchange for the outstanding shares of Mid-America Common Stock will
be validly issued, fully paid and nonassessable. The following summary of
certain terms and provisions of the Series A Preferred Stock does not purport
to be complete and is subject to, and qualified in its entirety by reference
to, the Articles Supplementary to the Bradley Charter (as hereinafter defined)
setting forth the particular terms of the Series A Preferred Stock (the
"Articles Supplementary"), which is attached to this Proxy Statement/Prospectus
as Annex B and which is incorporated by reference herein. See "Description of
Bradley Capital Stock--Series A Preferred Stock."
Ranking..................... The Series A Preferred Stock will rank senior to
the Bradley Common Stock with respect to the
payment of dividends and amounts payable upon the
liquidation, dissolution or winding up.
Dividends................... Cumulative fixed dividend of $0.525 per share
payable quarterly in arrears on the last calendar
day of each March, June, September and December.
The dividends on the Series A Preferred Stock for
the initial dividend period and, if applicable,
for succeeding dividend periods will be reduced
in the aggregate by an amount equal to the Pre-
Merger Dividend (as hereinafter defined), if any,
made by Mid-America on the Mid-America Common
Stock prior to the consummation of the Merger.
See "Federal Income Tax Considerations--Pre-
Merger Dividends."
Liquidation Preference...... $25.00 per share, plus an amount equal to
accumulated, accrued but unpaid dividends.
Conversion Rights........... The Series A Preferred Stock will be convertible,
in whole or in part, at the option of the holder,
at any time after the dividend is no longer
subject to reduction for the Pre-Merger Dividend,
into shares of Bradley Common Stock, at a
conversion price of $24.49 per share of Bradley
Common Stock (equivalent to a conversion rate of
approximately 1.0208 shares of Bradley Common
Stock for each share of Series A Preferred
Stock), subject to adjustment in certain
circumstances (the "Conversion Price").
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Redemption.................. After the fifth anniversary of the Effective
Time, the Series A Preferred Stock will be
redeemable at the option of Bradley for cash at a
redemption price equal to $25.00 per share, plus
any accumulated, accrued and unpaid dividends so
long as the average of the last sale price of the
Bradley Common Stock on the NYSE for the 20
trading days preceding the date on which Bradley
exercises its redemption right equals or exceeds
the Conversion Price. Bradley may only redeem the
Series A Preferred Stock (other than the portion
thereof consisting of accrued and unpaid
dividends) with the proceeds from the sale of
other equity securities of Bradley, which may
include other series of preferred stock, and from
no other source. To exercise its redemption
option for shares of Bradley Common Stock,
Bradley must give written notice to the holders
of Series A Preferred Stock and the redemption
will be effective on the 30th day following the
mailing of such notice.
Voting Rights............... The holders of shares of Series A Preferred Stock
will have the right, with the Bradley
Stockholders and any other equity securities so
authorized, to vote in the election of directors
of Bradley and upon each other matter coming
before any meeting of the holders of Bradley
Common Stock ("the Bradley Stockholders") on
which the Bradley Stockholders are entitled to
vote, on the basis of one vote for each share of
Bradley Common Stock into which the shares of
Series A Preferred Stock held by such holders are
then convertible (rounded to the nearest whole
number of shares).
If dividends on the Series A Preferred Stock or
any Parity Stock (as defined below) are in
arrears for six quarterly dividend periods
(whether or not consecutive), holders of the
Series A Preferred Stock (voting as a single
class with holders of shares of any series of
preferred stock ranking on a parity with the
Series A Preferred Stock with respect to the
payment of dividends and amounts upon
liquidation, dissolution and winding up ("Parity
Stock")) will have the right to elect two
additional directors to serve on the Bradley
Board until such dividend arrearage is
eliminated.
In addition, the approval of holders of two-
thirds of the outstanding shares of Series A
Preferred Stock, voting as a single class will be
required to amend materially and adversely the
terms of the Series A Preferred Stock or to
authorize, create, or increase the authorized
amount of, any class or series of stock ranking
senior to the Series A Preferred Stock.
Ownership Limit............. With certain exceptions, no person may own, or be
deemed to own by virtue of the attribution
provisions of the Code, either (i) more than 9.8%
of the aggregate value of all outstanding capital
stock of Bradley or (ii) shares of Series A
Preferred Stock which, if converted, would result
in such person owning or being deemed to own more
than 9.8% of the total number of outstanding
shares of Bradley Common Stock.
NYSE Listing................ Bradley expects that the shares of Series A
Preferred Stock will be approved for listing on
the NYSE under the symbol "BTRPRA."
9
<PAGE>
COMPARISON OF STOCKHOLDER RIGHTS
At the Effective Time, the holders of Mid-America Common Stock will become
holders of Series A Preferred Stock. Upon conversion of their shares of Series
A Preferred Stock, such holders will become holders of Bradley Common Stock.
Both Bradley and Mid-America are incorporated under and governed by the laws of
the State of Maryland in accordance with the MGCL. Accordingly, the rights of
the stockholders of Mid-America will continue to be governed by the MGCL but
instead of being subject to the Articles of Incorporation, as amended, of Mid-
America (the "Mid-America Charter") and the Bylaws of Mid-America (the "Mid-
America Bylaws"), their rights following the Merger will be governed by the
Articles of Amendment and Restatement of Bradley (the "Bradley Charter"), the
Articles Supplementary and the Bylaws of Bradley (the "Bradley Bylaws").
Certain differences between the rights of the Mid-America Stockholders and
the rights of the holders of Series A Preferred Stock and Bradley Common Stock
include the following: (i) the rights of the holders of Series A Preferred
Stock as to voting, dividends and distributions upon liquidation differ from
those of the Mid-America Stockholders and the Series A Preferred Stock is
subject, upon certain conditions, to redemption at Bradley's option (for a more
detailed description of the terms of the Series A Preferred Stock, see
"Description of Bradley Capital Stock--Series A Preferred Stock"); (ii) the
Bradley Charter provides for three classes of directors, with the term of
office of one class expiring each year, whereas the Mid-America Charter
provides that all of its directors are elected each year at the annual meeting
of stockholders; (iii) the affirmative vote of two-thirds of the outstanding
shares of Mid-America Common Stock is required for an amendment of the Mid-
America Charter which changes the terms or contract rights of Mid-America's
outstanding capital stock or to approve a merger, consolidation, share exchange
or sale of all or substantially all of the assets of Mid-America, whereas the
affirmative vote of a majority of the outstanding shares of Bradley Common
Stock is required for comparable actions involving Bradley; and (iv) the
holders of not less than 10% of the outstanding shares of Mid-America Common
Stock may call a special meeting of the Mid-America Stockholders, whereas the
holders of not less than 25% of the outstanding shares of Bradley Common Stock
may call a special meeting of the Bradley Stockholders. See "Comparison of
Stockholder Rights."
10
<PAGE>
BRADLEY REAL ESTATE, INC.
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following tables set forth financial information for Bradley on a
historical and on a pro forma basis and should be read in conjunction with, and
are qualified in their entirety by, the respective historical financial
statements and notes thereto of Bradley and Mid-America incorporated by
reference into this Proxy Statement/Prospectus. The unaudited pro forma
combined financial information as of and for the three months ended March 31,
1998 and year ended December 31, 1997, give effect, where appropriate, to (i)
the Merger, (ii) the acquisition and disposition of real estate properties by
Bradley, (iii) common stock offerings of Bradley, and (iv) refinancing and debt
issuances of Bradley, as if the transactions had occurred on January 1, 1997
for the Operations Summary, Per Share Data and Other Data information and as of
March 31, 1998 for Financial Position information. Pro forma adjustments made
to arrive at the pro forma amounts set forth below are described in the Bradley
pro forma condensed combined financial statements included elsewhere in this
Proxy Statement/Prospectus. The following information should be read in
conjunction with and is qualified in its entirety by the Bradley and Mid-
America historical financial statements incorporated herein by reference, and
the Bradley pro forma condensed combined financial statements included
elsewhere herein. The unaudited pro forma combined summary information is
intended for informational purposes and is not necessarily indicative of the
future financial position or future results of operations of Bradley or of the
financial position or the results of operations that would have actually
occurred had the noted transactions been completed as of the date or for the
periods presented.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-------------------------------------
HISTORICAL
PRO FORMA ------------------------
1998 1998 1997
------------------------ -----------
(IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C> <C>
OPERATING DATA:
Income:
Rental income......................... $ 35,467 $ 28,736 $ 22,855
Other income.......................... 806 619 326
---------- ----------- -----------
Total revenue....................... 36,273 29,355 23,181
---------- ----------- -----------
Expenses:
Operations, maintenance and
management........................... 5,307 4,333 3,333
Real estate taxes..................... 5,791 5,481 5,068
Mortgage and other interest........... 8,392 5,558 3,650
General and administrative............ 1,624 1,403 1,105
Depreciation and amortization......... 6,561 4,963 3,930
---------- ----------- -----------
Total expenses...................... 27,675 21,738 17,086
---------- ----------- -----------
Income before equity in earnings of
partnership, net gain (provision for
loss) on real estate investment and
minority interest...................... 8,598 7,617 6,095
Equity in earnings of partnership....... 330 -- --
Net gain (provision for loss) on real
estate investments..................... -- (875) 3,073
---------- ----------- -----------
Income before allocation to minority
interest............................... 8,928 6,742 9,168
Income allocated to minority interest... (383) (391) (244)
---------- ----------- -----------
Net income.............................. 8,545 6,351 8,924
Preferred Share distributions........... (1,827) -- --
---------- ----------- -----------
Net income attributable to Common
Shares................................. $ 6,718 $ 6,351 $ 8,924
========== =========== ===========
Net income attributable to Common
Shares:
Basic................................. $ 0.29 $ 0.27 $ 0.41
Diluted............................... $ 0.28 $ 0.27 $ 0.41
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
HISTORICAL
PRO FORMA ----------------------
1998 1998 1997
----------------------- ----------
(IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C> <C>
OTHER DATA:
Funds from operations (1).................. $ 13,460 $ 12,339 $ 9,820
Cash flows provided by (used in):
Operating activities..................... $ 17,429 $ 15,108 $ 7,387
Investing activities..................... $ (37,635) $ (37,520) $ 4,244
Financing activities..................... $ 18,275 $ 20,170 $ (15,897)
Common Share cash distributions paid....... $ 0.35 $ 0.35 $ 0.33
Series A Preferred Share cash
distributions............................. $ 0.525 $ -- $ --
Weighted average Common Shares
outstanding--Basic........................ 23,533 23,302 21,666
Weighted average Common Shares
outstanding--Diluted...................... 25,023 24,791 22,287
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
--------------------
PRO FORMA HISTORICAL
1998 1998
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Net real estate investments................................ $912,270 $615,514
Total assets............................................... $960,045 $704,924
Total debt................................................. $468,036 $329,562
Total liabilities.......................................... $494,405 $357,360
Total share owners' equity................................. $445,837 $328,418
</TABLE>
- --------
(1) FFO, as defined by the National Association of Real Estate Investment
Trusts ("NAREIT") and as followed by Bradley, represents income before
allocation to minority interest (computed in accordance with generally
accepted accounting principles), excluding gains or losses from debt
restructuring and sales of property, plus depreciation and amortization,
and after adjustments for unconsolidated partnerships. Adjustments for
unconsolidated partnerships are calculated to reflect FFO on the same
basis. In computing FFO, Bradley does not add back to net income the
amortization of costs incurred in connection with Bradley's financing
activities or depreciation of non-real estate assets, but does add back to
net income significant non-recurring events that materially distort the
comparative measurement of company performance over time.
12
<PAGE>
BRADLEY REAL ESTATE, INC.
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
HISTORICAL
PRO FORMA -----------------------------------------------
1997 1997 1996 1995 1994 1993
--------- --------- -------- ------- -------- -------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Income:
Rental income.......... $ 138,931 $ 96,115 $ 77,512 $36,405 $ 32,875 $ 22,875
Other income........... 2,419 1,437 1,327 167 112 594
--------- --------- -------- ------- -------- --------
Total income........... 141,350 97,552 78,839 36,572 32,987 23,469
--------- --------- -------- ------- -------- --------
Expenses
Operations, maintenance
and management........ 20,794 14,012 12,949 5,858 5,315 3,731
Real estate taxes...... 22,021 18,398 16,787 8,726 8,070 5,772
Mortgage and other
interest.............. 32,433 16,562 13,404 4,705 4,524 2,947
General and
administrative........ 5,808 5,123 3,532 1,535 2,288 1,920
Non-recurring stock-
based compensation.... 3,415 3,415 -- -- -- --
Other.................. -- -- 753 -- -- --
Depreciation and
amortization.......... 24,182 16,606 13,286 7,317 5,146 3,564
--------- --------- -------- ------- -------- --------
Total expenses......... 108,653 74,116 60,711 28,141 25,343 17,934
--------- --------- -------- ------- -------- --------
Income before net gain
on sale of properties,
equity in earnings of
partnership and
extraordinary item..... 32,697 23,436 18,128 8,431 7,644 5,535
Net gain on sale of
properties............. -- 7,438 9,379 -- 983 --
Equity in earnings of
partnership............ 1,286 -- -- -- -- --
--------- --------- -------- ------- -------- --------
Income before
extraordinary item and
allocation to minority
interest............... 33,983 30,874 27,507 8,431 8,627 5,535
Income allocated to
minority interest...... (1,568) (1,116) (285) -- -- --
--------- --------- -------- ------- -------- --------
Income before
extraordinary item..... 32,415 29,758 27,222 8,431 8,627 5,535
Extraordinary loss on
prepayment of debt, net
of minority interest... -- (4,631) -- -- -- --
--------- --------- -------- ------- -------- --------
Net income.............. 32,415 25,127 27,222 8,431 8,627 5,535
Preferred Share
distributions.......... (7,308) -- -- -- -- --
--------- --------- -------- ------- -------- --------
Net income attributable
to Common Shares....... $ 25,107 $ 25,127 $ 27,222 $ 8,431 $ 8,627 $ 5,535
========= ========= ======== ======= ======== ========
Net income attributable
to Common Shares:
Basic.................. $ 1.09 $ 1.15 $ 1.54 $ 0.85 $ 1.05 $ 0.82
Diluted................ $ 1.09 $ 1.15 $ 1.54 $ 0.85 $ 1.05 $ 0.82
Other Data:
Funds from operations
(1).................... $ 53,671 $ 42,710 $ 30,630 $15,249 $ 12,382 $ 8,914
Cash flows provided by
(used in):
Operating activities... $ 62,826 $ 44,827 $ 31,633 $12,733 $ 10,877 $ 6,532
Investing activities... $(200,832) $(122,649) $(16,715) $(9,953) $(33,653) $(39,451)
Financing activities... $ 143,655 $ 75,107 $ (8,153) $(2,276) $ 22,019 $ 28,237
Common Share cash
distributions ......... $ 1.40(2) $ 1.34 $ 1.32 $ 1.32 $ 1.29 $ 1.22
Series A Preferred Share
cash distributions..... $ 2.10 $ -- $ -- $ -- $ -- $ --
Weighted average Common
Shares outstanding--
Basic.................. $ 22,964 $ 21,776 $ 17,620 $ 9,864 $ 8,192 $ 6,716
Weighted average Common
Shares outstanding--
Diluted................ $ 24,530 $ 22,619 $ 17,886 $ 9,876 $ 8,199 $ 6,725
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------
HISTORICAL
--------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Net real estate investments... $585,673 $459,463 $161,814 $155,554 $120,033
Total assets.................. 668,791 502,284 180,545 166,579 127,931
Total debt.................... 302,710 188,894 39,394 66,748 29,317
Total liabilities............. 327,796 208,399 45,447 72,000 31,547
Total share owners' equity.... 319,825 289,725 135,098 94,579 96,384
</TABLE>
- --------
(1) FFO represents income before allocation to minority interest (computed in
accordance with generally accepted accounting principles), excluding gains
or losses from debt restructuring and sales of property, plus depreciation
and amortization, and after adjustments for unconsolidated partnerships.
Adjustments for unconsolidated partnerships are calculated to reflect FFO
on the same basis. In computing FFO, Bradley does not add back to net
income the amortization of costs incurred in connection with Bradley's
financing activities or depreciation of non-real estate assets, but does
add back to net income significant non-recurring events that materially
distort the comparative measurement of company performance over time.
(2) The pro forma distributions per common share represent the current and
expected annualized quarterly dividend.
14
<PAGE>
MID-AMERICA REALTY INVESTMENTS, INC.
SUMMARY HISTORICAL FINANCIAL DATA
The following table sets forth financial information for Mid-America which
should be read in conjunction with and is qualified in its entirety by, the
historical financial statements and notes thereto of Mid-America incorporated
by reference into this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
---------------- ---------------------------------------------
HISTORICAL HISTORICAL
---------------- ---------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- -------- ------- ------- -------- -------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Income:
Rental income.......... $ 4,333 $ 4,318 $ 17,348 $17,012 $16,564 $ 15,615 $13,336
Reimbursement income... 1,313 1,239 5,130 5,097 4,834 4,366 3,694
Property management and
leasing income........ 41 40 172 194 200 211 222
Other income........... 125 192 615 763 735 960 1,181
------- ------- -------- ------- ------- -------- -------
Total revenue....... 5,812 5,789 23,265 23,066 22,333 21,152 18,433
------- ------- -------- ------- ------- -------- -------
Expenses:
Real estate taxes...... 760 776 2,952 3,076 3,063 2,815 2,424
Other property costs... 788 878 3,813 3,584 3,674 3,651 3,245
Interest expense....... 1,341 1,411 5,539 5,787 5,965 5,389 4,655
Administrative
expenses.............. 403 350 1,370 1,268 1,458 1,540 1,299
Property management and
leasing expenses...... 252 271 1,118 1,062 812 1,277 856
Depreciation and
amortization.......... 1,238 1,245 4,981 5,066 5,125 5,047 4,522
Provision for loss on
real estate........... -- -- -- -- -- 3,150 --
------- ------- -------- ------- ------- -------- -------
Total expenses...... 4,782 4,931 19,773 19,843 20,097 22,869 17,001
------- ------- -------- ------- ------- -------- -------
Income before equity in
earnings of Mid-
America Bethal Limited
Partnership and gain
(loss) on sales of
real estate, net...... 1,030 858 3,492 3,223 2,236 (1,717) 1,432
Equity in earnings of
Mid-America Bethal
Limited Partnership... 265 255 1,026 955 959 899 746
Gain (Loss) on sales of
real estate, net...... -- 130 130 (289) 189 690 18
------- ------- -------- ------- ------- -------- -------
Net income............. $ 1,295 $ 1,243 $ 4,648 $ 3,889 $ 3,384 $ (128) $ 2,196
======= ======= ======== ======= ======= ======== =======
Net income per common
share.................. 0.16 0.15 0.56 0.47 0.41 (0.02) 0.27
Other Data:
Funds from operations.. 2,637 2,453 9,905 9,502 8,631 8,018 7,629
Cash flows provided by
(used in):
Operating activities... 2,010 2,000 9,635 9,426 8,856 7,770 7,688
Investing activities... (115) 370 563 (893) (424) (12,152) (2,241)
Financing activities... (1,895) (2,370) (10,198) (8,533) (8,432) 4,200 (5,916)
Common Share cash
distributions paid.... 0.22 0.22 0.88 0.88 0.88 0.88 0.88
Weighted average Common
Shares outstanding.... 8,285 8,283 8,284 8,282 8,280 8,280 8,092
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
HISTORICAL
HISTORICAL ---------------------------------------------
MARCH 31, 1998 1997 1996 1995 1994 1993
-------------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Net real estate
investments............ $118,555 $119,590 $124,312 $127,765 $ 127,261 $116,439
Total assets............ $139,695 $140,530 $145,840 $150,339 $1 51,442 $147,178
Mortgage and bank notes
payable................ $ 61,450 $ 61,522 $ 64,348 $ 65,592 $ 63,486 $ 51,868
Total liabilities....... $ 63,299 $ 63,617 $ 66,305 $ 67,423 $ 64,629 $ 53,097
Total share owners'
equity................. $ 76,396 $ 76,913 $ 79,535 $ 82,916 $ 86,813 $ 94,081
</TABLE>
15
<PAGE>
SELECTED COMPARATIVE PER SHARE DATA
The following table sets forth the combined historical per share data for
Bradley and Mid-America and the unaudited pro forma per share data (A) for
Bradley giving effect to (i) the acquisition and disposition of real estate
properties, (ii) Common Stock offerings, and (iii) refinancing and debt
issuances, and (B) for Bradley (Post-Merger) giving effect to (i), (ii), (iii)
above and the Merger. The pro forma combined data are not necessarily
indicative of actual financial position or future operating results or that
which would have occurred or will occur upon consummation of the Merger.
The information shown below should be read in conjunction with the
consolidated financial statements and notes thereto of Bradley and Mid-America
incorporated herein by reference, and the pro forma condensed combined
financial statements, including the notes thereto, which are contained in this
Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1997 MARCH 31, 1998
---------------------- -----------------------
PRO PRO
FORMA(2) HISTORICAL FORMA(2) HISTORICAL
----------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Income from Operations
attributable to Common Shares
per share(1)(3):
Bradley...................... $1.03 $1.04 $ 0.26 $ 0.31
Mid-America.................. 0.55 0.55 0.16 0.16
Bradley (Post-Merger)........ 1.09 N/A 0.29 N/A
Cash Distributions/Dividends
per share of Common Stock:
Bradley...................... 1.34 1.34 0.35 0.35
Mid-America.................. 0.88 0.88 0.22 0.22
Bradley (Post-Merger)........ 1.40 N/A 0.35 N/A
Cash Distributions/Dividends
per share of Series A
Preferred Stock:
Bradley (Post-Merger)........ 2.10 N/A 0.525 N/A
Book Value per Common Share:
Bradley...................... N/A 13.91 15.14 13.86
Mid-America.................. N/A 9.28 N/A 9.22
Bradley (Post-Merger)........ N/A N/A 15.14 N/A
</TABLE>
- --------
(1) Historical amounts have been adjusted to exclude from net income: net gains
and provisions for losses on sales of real estate investments and
extraordinary items and their related impact on minority interest.
(2) Presentation of equivalent pro forma per share data for Mid-America is not
applicable because, in the Merger, Bradley will issue shares of Series A
Preferred Stock (rather than shares of Bradley Common Stock) in exchange
for shares of Mid-America Common Stock. In addition, the Series A Preferred
Stock has not been converted into Bradley Common Stock for presentation of
equivalent pro forma per share data because the Conversion Price for the
Series A Preferred Stock ($24.49) is in excess of the current market price
of Bradley Common Stock ($20.375).
(3) The per share amounts reflected in the table above represent basic per
share amounts. Diluted per share amounts are equal to basic per share
amounts, with the exception of the pro forma Income from Operations
attributable to Common Shares per share for Bradley (Post Merger) for the
three months ended March 31, 1998, which is $0.28 per share.
16
<PAGE>
COMPARATIVE MARKET DATA
Each of the Bradley Common Stock (symbol "BTR") and the Mid-America Common
Stock (symbol "MDI") trade on the NYSE. The Series A Preferred Stock is not
currently traded on any market although Bradley expects it will also trade on
the NYSE. The table below sets forth, for the calendar quarters indicated, the
high and low sales prices per share reported by the NYSE Composite Tape, and
per share dividends paid on the Bradley Common Stock and the Mid-America Common
Stock.
<TABLE>
<CAPTION>
BRADLEY MID-AMERICA
COMMON STOCK COMMON STOCK
---------------------------- -----------------------------
PER SHARE PER SHARE
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
---- --- --------- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
1996:
First Quarter......... $15 $12 7/8 $0.33 $ 8 3/8 $ 7 3/4 $0.22
Second Quarter........ $15 $13 7/8 $0.33 $ 8 7/8 $ 8 1/4 $0.22
Third Quarter......... $16 5/8 $13 3/4 $0.33 $ 9 3/8 $ 8 $0.22
Fourth Quarter........ $18 $16 3/8 $0.33 $10 1/8 $ 8 7/8 $0.22
1997:
First Quarter......... $20 3/4 $17 3/8 $0.33 $11 $ 9 1/2 $0.22
Second Quarter........ $20 3/8 $17 1/2 $0.33 $10 $ 9 3/8 $0.22
Third Quarter......... $21 1/4 $18 $0.33 $10 11/16 $ 9 1/2 $0.22
Fourth Quarter........ $21 7/16 $18 $0.35 $10 7/8 $ 9 7/8 $0.22
1998:
First Quarter......... $21 3/4 $19 13/16 $0.35 $11 1/2 $10 1/8 $0.22
Second Quarter
(through June 16,
1998)................ $21 7/8 $20 1/8 $0.35 $10 11/16 $ 9 11/16 $0.22
</TABLE>
The following table sets forth the last reported sales prices per share of
Bradley Common Stock and Mid-America Common Stock (i) on May 29, 1998, the last
trading day preceding public announcement of the terms of the Merger, and (ii)
on June , 1998, the most recent date for which prices were available prior to
printing this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
MID-
BRADLEY AMERICA
COMMON COMMON
STOCK STOCK
------- -------
<S> <C> <C>
May 29, 1998................................................ $20 7/8 $10 9/16
June , 1998................................................ $ $
</TABLE>
MID-AMERICA STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
BRADLEY COMMON STOCK AND MID-AMERICA COMMON STOCK.
17
<PAGE>
BRADLEY'S DISTRIBUTION AND DIVIDEND POLICY
Bradley currently pays a regular quarterly distribution of $0.35 per share of
Bradley Common Stock (which, annualized, equals $1.40 per share). The
distributions for the three months ended March 31, 1998 were approximately 71%
of Bradley's FFO during such period. Based on the unaudited pro forma operating
data for the three months ended March 31, 1998 as set forth in this Proxy
Statement/Prospectus under "--Bradley Real Estate, Inc. Summary Historical and
Unaudited Pro Forma Combined Financial Data" and "Unaudited Pro Forma Combined
Financial Statements," the distributions with respect to the Series A Preferred
Stock and the Bradley Common Stock that would have been made by the combined
company on a pro forma basis would have been approximately 65% of the combined
company's FFO during such period.
The holders of Series A Preferred Stock will be entitled to receive, when, as
and if authorized by the Bradley Board, a fixed quarterly dividend of $0.525
per share (the "Preferred Dividend"). In the event that such Preferred
Dividends are not declared by the Bradley Board or otherwise not paid with
respect to one or more quarters, the unpaid Preferred Dividends will accrue to
the holders and Bradley will be restricted from paying dividends on the Bradley
Common Stock until such accrued but unpaid Preferred Dividends have been paid.
In addition, the Preferred Dividend for the first quarter following the
consummation of the Merger (and such additional quarters as necessary) will be
reduced to the extent of the Pre-Merger Dividend, if any, that is paid by Mid-
America to its stockholders prior to the consummation of the Merger. See
"Federal Income Tax Considerations--Pre-Merger Dividends."
Further distributions by Bradley to the holders of Bradley Common Stock will
be at the discretion of its Board of Directors and will depend on the actual
FFO of Bradley, its financial condition, capital requirements, the annual
distribution requirements under the REIT provisions of the Code and such other
factors as the Bradley Board deems relevant. However, Bradley currently intends
to continue to pay regular quarterly distributions of at least $0.35 per share
of Bradley Common Stock. Management of Bradley believes that, based in part on
unaudited pro forma per share data after giving effect to the Merger, there
will be sufficient cash available to make such distributions. Bradley has paid
147 consecutive quarterly dividend payments to its stockholders.
Bradley anticipates that cash available for distribution will exceed earnings
and profits due to non-cash expenses, primarily depreciation and amortization,
to be incurred by Bradley. Management anticipates that all distributions to the
holders of Series A Preferred Stock will be from Bradley's current earnings and
profits and accordingly, that all such distributions will be taxable to such
stockholders as either capital gain distributions or ordinary dividend income
for federal income tax purposes. Distributions to the holders of Bradley Common
Stock by Bradley to the extent of its remaining current or accumulated earnings
and profits for federal income tax purposes, other than capital gain dividends,
will be taxable to such stockholders as ordinary dividend income. Any dividends
designated by Bradley as capital gain dividends generally will give rise to
capital gain to the recipients of such dividends. Distributions in excess of
Bradley's current or accumulated earnings and profits will be treated as a non-
taxable reduction of a stockholder's basis in its shares of Bradley Common
Stock to the extent thereof, and thereafter as capital gain. Distributions
treated as non-taxable reduction in basis will have the effect of deferring
taxation until the sale of a stockholder's shares of Bradley Common Stock or
future distributions in excess of the stockholder's basis in the shares of
Bradley Common Stock.
In order to maintain its qualification as a REIT, Bradley will be required to
make annual distributions to its stockholders in an amount equal to at least
95% of its taxable income (excluding net capital gains). In the event that cash
available for distribution is insufficient to meet these distribution
requirements, Bradley could be required to borrow the amount of the deficiency
or sell assets to obtain the cash necessary to make the distributions required
to retain REIT status.
Bradley maintains a Dividend Reinvestment and Share Purchase Plan (the "DRSP
Plan") pursuant to which holders of record of Bradley Common Stock may elect to
reinvest cash distributions and to make limited
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additional cash payments (minimum $100, maximum $2,500 per quarter by any one
stockholder of record) to purchase newly issued shares of Bradley Common Stock
at 97% of the current market value. Bradley may suspend or amend the DRSP Plan
at any time. Following the Effective Time, Bradley expects to amend the DRSP
Plan to increase the maximum additional quarterly investment by a stockholder
of record to at least $10,000 and to permit holders of Series A Preferred Stock
to participate in the DRSP Plan. This Proxy Statement/Prospectus does not
constitute an offer of any shares of Bradley Common Stock that may be issued by
Bradley in connection with a distribution reinvestment program, and such shares
may only be purchased pursuant to a separate prospectus contained in an
effective registration statement.
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RISK FACTORS
In considering whether to approve the Merger and the Merger Agreement,
stockholders of Mid-America should consider, in addition to the other
information in this Proxy Statement/Prospectus, the material discussed in this
section.
Any statements in this Proxy Statement/Prospectus, including the documents
that are incorporated by reference as set forth under "Available Information"
and "Incorporation of Documents by Reference," that are not strictly
historical are forward-looking statements within the meaning of the safe
harbor provision of the Private Securities Litigation Reform Act. These
statements include, among other things, statements regarding the intent,
belief or expectations of Bradley and Mid-America and their directors and
officers with respect to, (i) the declaration or payment of distributions by
Bradley, (ii) potential acquisitions or dispositions of properties, assets or
other public or private companies by Bradley, (iii) the policies of Bradley
regarding investments, indebtedness, acquisitions, dispositions, financings,
conflicts of interest and other matters, (iv) Bradley's qualification as a
REIT under the Code, (v) the retail industry and real estate markets in the
Midwest and in general, (vi) the availability of debt and equity financing,
(vii) interest rates, (viii) general economic conditions, and (ix) trends
affecting Bradley's financial condition or results of operations. Stockholders
are cautioned that, while forward-looking statements reflect the respective
companies' good faith beliefs, they are not guarantees of future performance
and involve known and unknown risks and uncertainties, and that actual results
may differ materially from those in the forward-looking statements as a result
of various factors. The accompanying information in this section, as well as
those contained in the documents set forth under "Available Information" and
"Incorporation of Documents by Reference," identify certain factors that could
cause such differences.
STOCK PRICE FLUCTUATIONS
The relative stock prices of Bradley Common Stock and Mid-America Common
Stock at the Effective Time may vary significantly from the prices as of the
date of execution of the Merger Agreement, the date hereof or the date on
which the Mid-America Stockholders vote on the Merger and the Merger
Agreement, due to changes in the business, operations and prospects of Bradley
or Mid-America, market assessments of the likelihood that the Merger will be
consummated and the timing thereof, general market and economic conditions and
other factors such as market perception of REIT stocks, retail stocks and REIT
retail stocks generally. There can be no assurance that the price of Bradley
Common Stock will not decline between the date of this Proxy
Statement/Prospectus and the Effective Time.
The Exchange Ratio was fixed at 0.42 and the Conversion Price of the Series
A Preferred Stock was fixed at $24.49 at the time of execution of the Merger
Agreement by the parties and is not subject to adjustment. Any increase or
decrease of the market price of the Bradley Common Stock may correspondingly
increase or decrease the value of the Series A Preferred Stock to be received
by the Mid-America Stockholders pursuant to the Merger. In considering whether
to approve the Merger and the Merger Agreement, Mid-America Stockholders
should consider the risks associated with a potential change in the price of
Bradley Common Stock between the date of this Proxy Statement/Prospectus and
the Effective Time.
LACK OF MARKET FOR SERIES A PREFERRED STOCK
While Bradley expects that the Series A Preferred Stock will be listed on
the NYSE, there can be no assurance that an active trading market will develop
or be sustained or as to the trading volume or market price of the Series A
Preferred Stock after the Effective Time. Events outside the control of
Bradley which could adversely affect the market value of Bradley's assets, as
well as the market price of the Bradley Common Stock and the Series A
Preferred Stock, may occur after the Effective Time. One of the factors that
may influence the price of the Series A Preferred Stock is the relative annual
yield on the Series A Preferred Stock compared to the market as a whole. Thus,
a continued increase in market interest rates may cause purchasers of the
Series A Preferred Stock to seek a higher annual yield, which could adversely
affect the market price of the Series A
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Preferred Stock. In addition, a change in the business, operations or
prospects of Bradley or in the market price of the Bradley Common Stock may
have an effect on the value of the Series A Preferred Stock due to the
conversion feature of the Series A Preferred Stock.
FAILURE TO EFFECTIVELY MANAGE GROWTH AND INTEGRATE PROPERTIES FOLLOWING THE
MERGER
Bradley has grown aggressively over the past few years and continues to
experience growth. During 1997, Bradley acquired 25 shopping centers
aggregating over 3.1 million square feet of GLA for an aggregate acquisition
price of $189.3 million and, from January 1, 1998 through May 30, 1998,
acquired 11 properties aggregating 1.4 million square feet of GLA for an
aggregate acquisition price of $93.7 million. As of June 1, 1998, Bradley has
entered into contracts to acquire an additional eight shopping centers
(representing approximately 1.1 million square feet of GLA), which it believes
will close. The aggregate purchase price for these properties is estimated to
be approximately $94.8 million. See "The Companies--Bradley." Bradley intends
to aggressively pursue further property acquisitions during the remainder of
1998. See "--Uncertainty of Meeting Acquisition Objectives; Acquired
Properties May Not Meet Management's Expectations." In connection with the
Merger, Bradley will acquire 25 properties in 11 states aggregating over 3.2
million square feet of GLA. As a result of its recent and proposed property
acquisitions and of the Merger, Bradley will be managing an increased number
of properties and will enter certain new geographic markets. The failure to
effectively manage such growth, including the growth resulting from the
Merger, or to successfully integrate Mid-America's operations, could have a
material adverse effect on the operating results and financial condition of
Bradley.
DEBT OBLIGATIONS; EFFECT OF INTEREST RATES
Subsequent to the consummation of the Merger, Bradley is currently expected
to have approximately $468 million of pro forma combined total indebtedness
(approximately $68 million of which will be attributable to the Merger). In
the event that the consent of certain of Mid-America's existing lenders to the
Merger is not obtained, Bradley will repay such indebtedness at the Effective
Time but may incur prepayment penalties in connection therewith. Bradley may
borrow additional amounts from its existing lenders or other lenders in the
future, may assume debt in connection with acquisitions or may issue corporate
debt securities in public or private offerings. The Bradley Charter and the
Bradley Bylaws and the Second Restated Agreement of Limited Partnership of
BOLP (the "BOLP Partnership Agreement") do not contain any limitation on the
amount of indebtedness that Bradley or BOLP may incur. Although management
attempts to maintain a balance between total outstanding indebtedness and the
value of the portfolio of Bradley (i.e., a ratio of debt and preferred stock
to Real Estate Value of 50% or less, with "Real Estate Value" defined as net
operating income divided by 10.00%), there can be no assurance that management
will not alter this balance at any time. Accordingly, Bradley could become
more highly leveraged, resulting in an increase in debt service that could
adversely affect Bradley's ability to make expected distributions to its
stockholders and an increased risk of default on its obligations under any
outstanding indebtedness. Failure to pay its debt obligations when due could
also result in Bradley losing its interest in any properties that secure
indebtedness included within such obligations.
To the extent that Bradley is responsible for floating rate debt (such as
that incurred under its revolving line of credit) and to the extent that its
exposure to increases in interest rates is not eliminated through interest
rate protection or cap agreements, such increases may adversely affect
Bradley's net income and cash available for distribution and may affect the
amount of distributions it can make to its stockholders.
BENEFITS TO CERTAIN MID-AMERICA EXECUTIVE OFFICERS AND EMPLOYEES
In considering the recommendation of the Boards of Directors of Mid-America
to approve the Merger and the Merger Agreement, stockholders should be aware
that certain members of the management of Mid-America have certain interests
in, and will receive benefits from, the Merger that are separate from the
interests of, and benefits to, Mid-America Stockholders generally, and which
may result in conflicts of interest with respect to the Merger. See "The
Merger--Interests of Certain Executive Officers and Employees of Mid-America."
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REAL ESTATE INVESTMENT CONSIDERATIONS
General
Real property investments are subject to varying degrees of risk. Real
estate values are affected by a number of factors, including changes in the
general economic climate, local conditions (such as an oversupply of space or
a reduction in demand for real estate in an area), the quality and philosophy
of management, competition from other available space, the ability of the
owner to provide adequate maintenance and insurance and variable operating
costs. Real estate values are also affected by such factors as government
regulations, interest rate levels, the availability of financing and potential
liability due to changes in environmental and other laws. Since substantially
all of Bradley's and Mid-America's income has been, and substantially all of
Bradley's income will continue to be, derived from rental income from retail
shopping centers, Bradley's income and distributable cash flow would be
adversely affected if a significant number of Bradley's tenants were unable to
meet their obligations to Bradley or if Bradley were unable to lease on
economically favorable terms a significant amount of space in its shopping
centers. In addition, in the event of default by a tenant, Bradley may
experience delays and incur substantial costs in enforcing its rights as
landlord.
Illiquidity of Real Estate
Real estate investments are relatively illiquid and therefore will tend to
limit the ability of Bradley to react promptly in response to changes in
economic or other conditions. In addition, the Code places certain limits on a
REIT's ability to sell properties held for fewer than four years, which may
affect Bradley's ability to sell properties without adversely affecting
returns to stockholders.
Dependence on Midwestern Region and Retail Industry
Substantially all of Bradley's properties will be located in the Midwestern
region of the United States and such properties consist predominantly of
community and neighborhood shopping centers. Bradley's performance therefore
will be linked to economic conditions in the Midwest (which may be adversely
impacted by business layoffs or downsizing, industry slowdowns, changing
demographics and other factors) and in the market for retail space generally.
The market for retail space has been adversely affected by the ongoing
consolidation in the retail sector, the adverse financial condition of certain
large companies in this sector and the excess amount of retail space in
certain markets. To the extent that these conditions impact the market rents
for retail space, they could result in a reduction of net income, FFO and cash
available for distribution and thus affect the amount of distributions Bradley
could make to its stockholders.
In addition, Bradley will predominantly own and operate retail shopping
centers catering to retail tenants. To the extent that the investing public
has a negative perception of the retail sector, the value of shares of Bradley
Common Stock or Series A Preferred Stock may be negatively impacted, thereby
resulting in such shares trading at a discount below the inherent value of the
assets of Bradley as a whole.
Effect of Sale of One North State Property
During the year ended December 31, 1997, more than 10% of the total revenue
of Bradley was derived from rents and expense reimbursements from tenants of
the One North State property, which is a "mixed use" retail/office building
located in downtown Chicago. Because the One North State property does not fit
with Bradley's grocery-anchored community shopping center focus, Bradley has
decided to sell this property. On June 5, 1998, Bradley entered into a
contract with a private institutional buyer to sell this property for
approximately $84.5 million subject to normal and customary closing costs and
adjustments. The closing is anticipated to occur in August, 1998, although
there can be no assurance as to the completion or timing of the sale. Bradley
management intends to reinvest the net proceeds from this sale into the
acquisition of additional shopping center properties, but until such
investment, the net proceeds may be applied to the reduction of borrowings
under Bradley's revolving line of credit. Such temporary investment will not
result in income equivalent to that
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received from One North State, and there is no assurance that the ultimate
reinvestment of the proceeds will result in equivalent income.
Bankruptcy and Financial Condition of Tenants
At any time, a tenant of Bradley's properties may seek the protection of the
bankruptcy laws, which could result in the rejection and termination of the
tenant lease. Such an event could cause a reduction of FFO and thus affect the
amount of distributions Bradley can make to stockholders. No assurance can be
given that any present tenant which has filed for bankruptcy protection will
continue making payments under its lease or that other tenants will not file
for bankruptcy protection in the future or, if any tenants file, that they
will continue to make rental payments in a timely manner. In addition, a
tenant may, from time to time, experience a downturn in its business, which
may weaken its financial condition and result in a reduction or failure to
make rental payments when due. If a lessee or sublessee defaults in its
obligations to Bradley, Bradley may experience delays in enforcing its rights
as lessor or sublessor and may incur substantial costs and experience
significant delays associated with protecting its investment, including costs
incurred in renovating and re-leasing the property.
In addition, retail leases often contain provisions which permit anchor
tenants to "go dark" and/or contain co-tenancy provisions. To the extent
tenants "go dark" or file for bankruptcy protection, the operating income from
the property, including income received from other tenants, may be adversely
affected.
Development Activities
To the extent that Bradley may enter into agreements to acquire newly
developed shopping centers when they are completed, or acquire newly developed
shopping centers, Bradley will be subject to risks inherent in acquiring newly
constructed centers, which could carry a higher level of risk than the
acquisition of existing properties with a proven performance record. These
risks include, among others, the risk that funds will be expended and
management time will be devoted to projects which may not come to fruition;
the risk that occupancy rates and rents at a completed project will be less
than anticipated; and the risk that expenses at a completed development will
be higher than anticipated. These risks may adversely affect Bradley's results
of operations and ability to make distributions to its stockholders.
POSSIBLE ENVIRONMENTAL LIABILITIES
Under various federal, state and local environmental laws, regulations and
ordinances, current or former owners of real estate, as well as certain other
categories of parties, may be required to investigate and clean up hazardous
or toxic chemicals, substances or waste or petroleum product or waste
(collectively, "Hazardous Materials") releases on, under, in or from such
property, and may be held liable to governmental entities or to third parties
for certain damage and for investigation and cleanup costs incurred by such
parties in connection with the release or threatened release of Hazardous
Materials. Such laws typically impose responsibility and liability without
regard to whether the owner knew of or was responsible for the presence of
Hazardous Materials, and the liability under such laws has been interpreted to
be joint and several under certain circumstances.
The costs of investigation and cleanup of Hazardous Materials on, under, in
or from property can be substantial, and the fact that the property has had a
release of Hazardous Materials, even if remediated, may adversely affect the
value of the property and the owner's ability to sell or lease the property or
to borrow using the property as collateral. In addition, some environmental
laws create a lien on a property in favor of the government for damages and
costs it incurs in connection with the release or threatened release of
Hazardous Materials. The presence of Hazardous Materials on a property could
result in a claim by a private party for personal injury or a claim by a
neighboring property owner for property damage. Such costs or liabilities
could exceed the value of the affected real estate.
Other federal, state and local laws and regulations govern the removal or
encapsulation of asbestos-containing material when such material is in poor
condition or in the event of building remodeling, renovation or
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demolition. Still other federal, state and local statutes, regulations and
ordinances may require the removal or upgrading of underground storage tanks
that are out of service or out of compliance. Non-compliance with
environmental or health and safety requirements may also result in the need to
cease or alter operations at a property, which could affect the financial
health of a tenant and its ability to make lease payments. Furthermore, if
there is a violation of such a requirement in connection with a tenant's
operations, it is possible that Bradley, as the owner of the property, could
be held accountable by governmental authorities for such violation and could
be required to correct the violation.
All of the properties of Mid-America and Bradley have been the subject of
Phase I and/or Phase II environmental assessments by independent environmental
consultant and engineering firms. Phase I assessments do not involve
subsurface testing, whereas Phase II assessments involve some degree of soil
and/or groundwater testing. These environmental assessments have not revealed
any environmental conditions that Bradley or Mid-America believes will have a
material adverse effect on Bradley's business, assets or results of
operations, and neither the management of Bradley nor Mid-America is aware of
any other environmental conditions with respect to any of the properties that
management believes would have such a material adverse effect. No assurances
can be given, however, that all potential environmental liabilities have been
identified or that no prior owner, operator or current occupant has created an
environmental condition not known to the management of Bradley or Mid-America.
Moreover, no assurances can be given that (i) future laws, ordinances or
regulations will not impose any material environmental liability or (ii) the
current environmental condition of the properties will not be affected by
tenants and occupants of the properties, by the condition of land or
operations in the vicinity of the properties (such as the presence of
underground storage tanks), or by third parties unrelated to Bradley.
UNCERTAINTY OF MEETING ACQUISITION OBJECTIVES; ACQUIRED PROPERTIES MAY NOT
MEET MANAGEMENT'S EXPECTATIONS
Bradley continually seeks prospective acquisitions of additional shopping
centers and portfolios of shopping centers which management believes can be
purchased at attractive initial yields and/or which demonstrate the potential
for revenue and cash flow growth through implementation of renovation,
expansion, re-tenanting and re-leasing programs similar to those undertaken
with respect to properties in its existing portfolio. There can be no
assurance that Bradley will effect any potential acquisition that it may
evaluate. The evaluation process involves costs which are non-recoverable in
the case of acquisitions which are not consummated. In addition,
notwithstanding Bradley's adherence to its criteria for evaluation and due
diligence regarding potential acquisitions, there can be no assurance that any
acquisition that is consummated will meet management's expectations.
CERTAIN PROVISIONS IN ORGANIZATIONAL DOCUMENTS MAY DISCOURAGE ACQUISITION
PROPOSALS
Certain Provisions of Bradley Charter and Bylaws. Certain provisions
contained in the Bradley Charter and Bradley Bylaws may have the effect of
discouraging a third party from making an acquisition proposal for Bradley and
may thereby inhibit a change in control of Bradley. The provisions in the
Bradley Charter providing for a staggered Board of Directors prevent
stockholders from voting on the election of more than one class of directors
at each annual meeting of stockholders and thus may have the effect of keeping
the members of the Bradley Board in control for a longer period of time. The
staggered Board provisions and the provision in the Bradley Bylaws requiring
holders of at least 25% of the outstanding shares of Bradley Common Stock to
call a special meeting of stockholders may have the effect of making it more
difficult for a third party to acquire control of Bradley without the consent
of its Board of Directors, including certain acquisitions which stockholders
deem to be in their best interest.
To maintain Bradley's qualification as a REIT, not more than 50% in value of
the outstanding shares of Bradley may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code). To minimize the
possibility that Bradley will fail to qualify as a REIT under this test, the
Bradley Charter and the Articles Supplementary contain provisions, designed to
ensure that Bradley remains a qualified REIT, that generally limit
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any holder from owning, or being deemed to own by virtue of the attribution
provisions of the Code, (i) shares of Bradley Common Stock having a value that
is more than 9.8% of the value of all outstanding shares of Bradley Common
Stock, or (ii) shares of Series A Preferred Stock (x) whose value is in excess
of 9.8% of the value of all outstanding shares of capital stock of Bradley, or
(y) which when converted would result in such holder being the beneficial
owner of in excess of 9.8% of the total number of outstanding shares of
Bradley Common Stock, after giving effect to such conversion. The ownership
limits in the Bradley Charter, as well as Bradley's authority to issue
additional classes or series of preferred stock, may also (x) deter certain
tender offers for the shares of Bradley Common Stock which might be attractive
to certain stockholders, or (y) limit the opportunity for stockholders to
receive a premium for their shares of Bradley capital stock that might
otherwise exist if an investor were attempting to assemble a block of shares
in excess of 9.8% of the value of the outstanding shares of Bradley capital
stock or 9.8% of the total value or number of outstanding shares of Bradley
Common Stock or otherwise effect a change in control.
Maryland Business Combination Statute. Under the MGCL, certain "business
combinations" (including mergers, consolidations, share exchanges, certain
asset transfers and certain issuances of equity securities) between a Maryland
corporation and any persons who own 10% or more of the voting power of the
corporation's shares and certain affiliates of the corporation (an "Interested
Stockholder") are prohibited for five years after the most recent date on
which the Interested Stockholder became an Interested Stockholder. Thereafter,
any such business combination must be approved by the affirmative vote of at
least 80% of the votes entitled to be cast by holders of outstanding voting
shares of the corporation and two-thirds of the votes entitled to be cast by
the holders of voting stock other than voting stock held by the Interested
Stockholder with whom the business combination is to be effected, unless,
among other things, the holders of the corporation's shares receive a minimum
price (as defined in the MGCL) for their shares and the consideration is
received in cash or in the same form as previously paid by the Interested
Stockholder for the shares that it owns. However, these provisions of Maryland
law do not apply to "business combinations" with an Interested Stockholder
that are approved or exempted by the board of directors of a corporation
before that Interested Stockholder becomes an Interested Stockholder.
Maryland Control Share Acquisition Statute. Maryland law provides that
"control shares" of a Maryland corporation acquired in a "control share
acquisition" have no voting rights except to the extent approved by a vote of
two-thirds of the votes eligible under the statute to be cast on that matter
exclusive of the "interested shares." "Control Shares" are voting shares that,
if aggregated with all other such shares of stock previously acquired by the
acquiror, would entitle the acquiror to exercise voting power in electing
directors within one of the following ranges of voting power: (i) one-fifth or
more but less than one-third, (ii) one-third or more but less than a majority,
or (iii) a majority of all voting power. Control Shares do not include shares
the acquiring person is then entitled to vote as a result of having previously
obtained stockholder approval. A "control share acquisition" means the
acquisition of Control Shares.
If an acquiring person statement has been delivered on or before the 10th
day after a control share acquisition, or if the acquiring person does not
deliver an acquiring person statement as required by the statute, then,
subject to certain conditions and limitations, the corporation may redeem any
or all of the Control Shares (except those for which voting rights have
previously been approved) for fair value. If voting rights for Control Shares
are approved at a stockholder meeting and the acquiror becomes entitled to
vote a majority of the shares entitled to vote, all other stockholders may
exercise appraisal rights.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT
Bradley (including its predecessor, Bradley Real Estate Trust) believes that
it has operated in a manner that permits it to qualify as a REIT under the
Code for each taxable year since its formation in 1961. Although the
management of Bradley believes that Bradley is organized and is operating in
such a manner, no assurance can be given that Bradley will be able to continue
to operate in a manner so as to qualify or remain so qualified. Qualification
as a REIT involves the application of highly technical and complex Code
provisions for which there are only limited judicial or administrative
interpretations and the determination of various factual matters and
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circumstances not entirely within Bradley's control. For example, in order for
Bradley to qualify as a REIT, at least 95% of Bradley's gross income in any
year must be derived from qualifying sources and Bradley must make
distributions to stockholders aggregating annually at least 95% of its REIT
taxable income (excluding net capital gains). In addition, no assurance can be
given that new legislation, new regulations, administrative interpretations or
court decisions will not change the tax laws with respect to qualification as
a REIT or the federal income tax consequences of such qualification. Bradley,
however, is not aware of any currently pending tax legislation that would
adversely affect its ability to continue to operate as a REIT.
If Bradley fails to qualify as a REIT, Bradley will be subject to federal
income tax (including any applicable alternative minimum tax) on its taxable
income at corporate rates. In addition, unless entitled to relief under
certain statutory provisions, Bradley will also be disqualified from treatment
as a REIT for the four taxable years following the year during which
qualification is lost. This treatment would reduce the net earnings of Bradley
available for investment or distribution to stockholders because of the
additional tax liability to Bradley for the year or years involved. In
addition, distributions would no longer be required to be made. To the extent
that distributions to stockholders would have been made in anticipation of
Bradley's qualifying as a REIT, Bradley might be required to borrow funds or
to liquidate certain of its investments to pay the applicable tax. The failure
to qualify as a REIT would also constitute a default under certain debt
obligations of Bradley.
The failure to qualify as a REIT would have a material adverse effect on an
investment in Bradley as the taxable income of Bradley would be subject to
federal income taxation at corporate rates, and, therefore, the amount of cash
available for distribution to its stockholders would be reduced or eliminated.
DEPENDENCE ON KEY PERSONNEL
Bradley is and will continue to be dependent on the efforts of its executive
officers, particularly Thomas P. D'Arcy, the Chairman, President and Chief
Executive Officer. The loss of their services could have an adverse effect on
the operations of Bradley. Bradley has an employment agreement with Mr. D'Arcy
through December 31, 2000.
COMPETITION
All of the properties owned by Bradley and by Mid-America are located in
developed areas. There are numerous other retail properties and real estate
companies within the market area of each such property which will compete with
Bradley for tenants and development and acquisition opportunities. The number
of competitive retail properties and real estate companies in such areas could
have a material effect on (i) Bradley's ability to rent space at the
properties and the amount of rents currently charged and (ii) development and
acquisition opportunities available to Bradley. Bradley may compete for
tenants and acquisitions with others who may have greater resources than
Bradley.
SUBSTANTIAL EXPENSES AND PAYMENTS IF MERGER FAILS TO OCCUR
No assurance can be given that the Merger will be consummated. If the Merger
is not consummated, Mid-America and Bradley will have incurred substantial
expenses in connection with the transaction. If the Merger Agreement is
terminated under certain circumstances, Mid-America shall be required to pay
Bradley the Termination Amount equal to the sum of $2,500,000 plus Expenses of
up to $875,000. If the Merger Agreement is terminated in certain other
circumstances, Mid-America will be required to reimburse Bradley for its
Expenses of up to $875,000. See "The Merger Agreement--Termination Amount and
Expenses."
SHARES AVAILABLE FOR FUTURE SALE COULD ADVERSELY AFFECT PRICE OF BRADLEY
COMMON STOCK
Except for shares issued to affiliates of Mid-America, all of the shares of
Series A Preferred Stock to be issued to the Mid-America Stockholders in
connection with the Merger (up to approximately 3,570,301 shares)
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will be freely transferable. Sales of a substantial number of shares of Series
A Preferred Stock by current Mid-America Stockholders following the
consummation of the Merger, or the perception that such sales could occur,
could adversely affect the market price for shares of Series A Preferred Stock
after the Merger.
STATUS OF THE MERGER AS A TAX-FREE REORGANIZATION
The Merger is intended to qualify as a tax-free reorganization under Section
368(a) of the Code, such that neither Mid-America nor the Mid-America
Stockholders would recognize taxable gain as a result of the Merger (except in
connection with the receipt of cash in lieu of fractional share interests and
the receipt of any Pre-Merger Dividends as defined below in "Federal Income
Tax Considerations--Pre-Merger Dividends"). However, in the event that the
Merger were not to qualify as a tax-free reorganization under Section 368(a)
of the Code, each Mid-America Stockholder would recognize (i) a deemed
distribution from Mid-America as a result of the gain attributable to the
deemed sale of Mid-America's assets to Bradley, and (ii) additional gain equal
to the amount, if any, by which the value of the Series A Preferred Stock
received by the Mid-America Stockholder in the Merger exceeds the Mid-America
Stockholder's adjusted tax basis in its Mid-America Common Stock.
RISKS RELATING TO YEAR 2000 COMPLIANCE
Many existing computer software programs and operating systems were designed
such that the year 1999 is the maximum date that many computer systems will be
able to process. In the conduct of its own operations, Bradley relies upon
commercial computer software primarily provided by independent software
vendors, and has undertaken an assessment of its vulnerability to the so-
called "Year 2000 issue" with respect to its computer systems. After an
analysis of its potential exposure, Bradley believes that such commercial
software is substantially Year 2000 compliant and that such independent
vendors will be able to complete any additional work to ensure Year 2000
compliance in a timely manner and without any material impact on Bradley's
business, operations or financial condition. The assessment was based upon
formal and informal communications with the software vendors, literature
supplied with the software, literature supplied in connection with maintenance
contracts, and test evaluations of the software. At this time, Bradley is not
aware of any tenant, supplier or any other party with whom Bradley does a
significant amount of business that is anticipating a material Year 2000
compliance issue.
NO DISSENTERS' RIGHTS
Under the MGCL, stockholders of Bradley and Mid-America do not have
dissenters' rights in connection with the Merger.
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THE COMPANIES
BRADLEY
Bradley is a fully-integrated real estate operating company, which owns and
operates community and neighborhood shopping centers located in the Midwest
region of the United States. As of June 1, 1998, Bradley owned 63 properties
in 12 states, aggregating over 11.5 million square feet of GLA. Title to such
properties is held by or for the benefit of BOLP, of which Bradley is the sole
general partner and the owner of approximately 94% of the economic interests.
The limited partnership units of BOLP are exchangeable, subject to certain
limitations imposed to protect Bradley's status as a REIT, into shares of
Bradley Common Stock on a one-for-one basis.
Bradley owns and operates and seeks to acquire grocery-anchored, open-air
community and neighborhood shopping centers located in the Midwest, generally
consisting of the states of Illinois, Indiana, Minnesota, Michigan, Wisconsin,
Ohio, Missouri, Iowa, Kansas, Nebraska, Kentucky North Dakota, and South
Dakota. Bradley currently owns properties in ten states in this region.
Through past experience as well as current research, Bradley believes that
this region is economically strong and diverse thus providing a favorable
environment for the acquisition, ownership and operation of retail properties.
Bradley evaluates prospective acquisitions in certain Midwest markets which,
based upon Bradley's research, demonstrate opportunities for favorable
investment returns and long-term cash flow growth. Bradley favors grocery-
anchored centers because, based on its past experience, such properties offer
strong and predictable daily consumer traffic and are less susceptible to
downturns in the general economy than apparel or leisure anchored shopping
center properties.
As part of its ongoing business, Bradley regularly evaluates, and engages in
discussions with public and private entities regarding possible portfolio or
asset acquisitions or business combinations. During 1997, Bradley acquired 25
shopping centers aggregating over 3.1 million square feet of GLA for an
aggregate acquisition price of $189.3 million and from January 1, 1998 through
May 30, 1998 Bradley acquired 11 properties aggregating 1.4 million square
feet of GLA for an aggregate acquisition price of $93.7 million. As of June 1,
1998, Bradley has entered into contracts to acquire an additional eight
shopping centers (representing approximately 1.1 million square feet of GLA),
which it believes will close (the "Probable Acquisitions"). The aggregate
purchase price for these properties is estimated to be approximately $94.8
million. Bradley intends to fund the Probable Acquisitions through the
assumption of existing mortgage indebtedness and Bradley's line of credit. No
assurance can be given that any of the Probable Acquisitions will be
consummated or that the terms of the transactions or the proposed method of
financings will not change materially from that described herein.
Bradley intends to aggressively pursue further property acquisitions during
the remainder of 1998, although there can be no assurance that further
acquisitions will be made within its target markets or that the acquisitions
that are made will be on as economically advantageous terms to Bradley as
recent acquisitions. In evaluating potential acquisitions, Bradley focuses
principally on community and neighborhood shopping centers in its Midwest
target market that are anchored by strong national, regional and independent
grocery store chains. Bradley seeks to create an income stream diversity
across many Midwest markets in order to insulate Bradley from economic trends
affecting any particular market. See "Risk Factors--Uncertainty of Meeting
Acquisition Objectives; Acquired Properties May Not Meet Management's
Expectations."
On June 5, 1998, Bradley entered into a contract with a private
institutional buyer to sell its One North State property which is a "mixed
use" retail/office building located in downtown Chicago for approximately
$84.5 million subject to normal and customary closing costs and adjustments.
The closing is anticipated to occur in August, 1998, although there can be no
assurance as to the completion or timing of the sale. During the year ended
December 31, 1997, more than 10% of the total revenue of Bradley was derived
from rents and expense reimbursements from tenants of this property. See "Risk
Factors--Real Estate Investment Considerations--Effect of Sale of One North
State Property."
Bradley has elected to qualify as a REIT for federal income tax purposes
since its organization in 1961 and is the nation's oldest continuously
qualified REIT. Originally organized in 1961 as a Massachusetts business trust
under the name Bradley Real Estate Trust, Bradley was reorganized as a
Maryland corporation in October 1994.
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The finance, accounting, leasing, research and administrative functions of
Bradley are handled by a central office staff located in the Northbrook,
Illinois headquarters. Bradley maintains regional property management and
leasing offices at properties located in Chicago, Minneapolis, St. Louis,
Indianapolis, Kansas City, Louisville, Milwaukee and Peoria, in order that as
many properties as practicable have a manager located within a one to two hour
drive. At June 1, 1998, Bradley had 116 employees.
MID-AMERICA
Mid-America is a self-administered REIT which owns, manages and operates
income-producing commercial real estate, primarily community and neighborhood
shopping centers and enclosed malls. As of June 1, 1998, Mid-America owned 18
neighborhood shopping centers and four enclosed malls located in Illinois,
Minnesota, Michigan, Wisconsin, Indiana, Iowa, Nebraska, South Dakota,
Arkansas, Tennessee and Georgia. Additionally, Mid-America is a 50% general
partner in Mid-America Bethal, which owns two neighborhood shopping centers
and one enclosed mall. Mid-America has one subsidiary, MACC, which manages
Mid-America's properties. At June 1, 1998, Mid-America had 97 employees.
Mid-America's investment objectives have been to own and manage income-
producing commercial real estate that will provide cash for distribution to
its stockholders on a quarterly basis and preserve investor capital, while
providing potential for capital appreciation. Mid-America's policy has been to
acquire commercial properties that are capable of generating income through
active management, leasing, re-leasing or development of additional tenant
space.
Mid-America has elected to qualify as a REIT for federal income tax purposes
since its incorporation under the laws of Maryland in 1986.
OPERATIONS OF BRADLEY FOLLOWING THE MERGER
Pursuant to the Merger Agreement, at the Effective Time Mid-America will
merge with and into Bradley and the separate corporate existence of Mid-
America will cease. Bradley will be the surviving corporation and the Mid-
America Stockholders will become holders of Series A Preferred Stock, with all
the rights and privileges attendant thereto. As a result of the Merger,
Bradley will acquire all of Mid-America's properties, assume all of Mid-
America's liabilities, and succeed to Mid-America's general partnership
interest in Mid-America Bethal and its equity interest in MACC.
Properties
In connection with the Merger, Bradley will acquire 22 properties
encompassing approximately 2.7 million square feet of GLA in 11 states,
substantially all of which are located in the Midwest. In addition, the three
properties owned by Mid-America Bethal encompass approximately 538,000 square
feet of GLA. As of June 1, 1998, the combined portfolio resulting from the
Merger was approximately 93% occupied. Title to all of the properties acquired
in the Merger will be owned by or for the benefit of BOLP.
Mid-America's existing portfolio contains four enclosed malls which do not
fit Bradley's focus on grocery-anchored, open-air community and neighborhood
shopping centers and certain other properties which may not fit Bradley's
geographic focus on the Midwest. As a result, Bradley may decide to actively
pursue the disposition of such properties following the Merger. Should Bradley
pursue the disposition of any of Mid-America's properties, however, there can
be no assurance as to the price, timing or other terms of such dispositions or
that such dispositions will occur.
In connection with the Merger, Bradley will succeed to Mid-America's general
partnership interest in Mid-America Bethal, which owns two shopping centers
and one enclosed mall. The limited partnership agreement governing Mid-America
Bethal contains various restrictions on the ability of Bradley, as general
partner, to dispose of these properties. The limited partner in Mid-America
Bethal has consented to the Merger and both parties have agreed to use good
faith efforts to explore the potential disposition of the three properties
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(including a disposition to Bradley or an affiliate) on terms and conditions
which are mutually satisfactory. There can be no assurance, however, as to the
price, timing or other terms of such dispositions or that such dispositions
will occur.
Debt
Subsequent to the Merger, Bradley's obligations for borrowed money are
currently expected to aggregate approximately $468 million on a pro forma
basis, as compared to $400 million on a pro forma basis prior to the Merger.
The ratio of debt to total market capitalization of Bradley will be
approximately 43.9% on a pro forma basis after giving effect to the Merger.
Bradley's unsecured line of credit matures in 2000 and bears interest at a
variable rate, which is currently approximately 6.5%. The balance outstanding
under the line of credit at June 1, 1998, was $130.7 million and Bradley may
increase outstanding borrowings to $200 million. At or immediately following
the Closing Date, Bradley expects to draw down on this line of credit to pay
off Mid-America's existing lines of credit, which had a balance of $12.8
million at June 1, 1998, and to prepay four existing mortgage notes, which
aggregated $13.4 million as of June 1, 1998. In addition, Bradley has issued
$100 million of 7.0% unsecured notes maturing in 2004 and $100 million of 7.2%
unsecured notes maturing in 2008. Subsequent to the Merger and assuming
Bradley prepays the four mortgage notes as contemplated, (excluding mortgage
notes which may be assumed in connection with the purchase of the Probable
Acquisitions) 16 properties will secure an aggregate of approximately $89.0
million of mortgage debt, with balloon maturities of approximately $10.0
million due in September 1998, $2.8 million in 2001, $27.7 million in 2002,
$2.9 million in 2003, $3.6 million in 2004, $10.7 million in 2005, $7.9
million in 2006, $2.1 million in 2007 and $2.9 million in 2016. Bradley
expects to be able to refinance its debt when such debt matures on terms which
it believes to be commercially reasonable.
Management
Under the Merger Agreement, the directors and executive officers of Bradley
will continue to serve in their current positions following the consummation
of the Merger. While no executive officers of Mid-America are expected to
become officers of Bradley, Bradley expects to offer employment to selected
operating personnel of Mid-America. Bradley also expects to open a regional
office in Omaha, Nebraska.
The directors and executive officers of Bradley, their ages, positions and
business experience for at least the past five years are set forth below. The
Bradley Board is divided into three classes, with terms ending in 1999, 2000
and 2001, respectively. Directors elected at future stockholder meetings will
hold office for three years. Executive officers are elected annually by the
Board of Directors for terms ending on the next annual meeting of the Board of
Directors, subject to the right of the Board of Directors to remove any
officer as provided in the Bradley Bylaws.
<TABLE>
<CAPTION>
NAME POSITION WITH BRADLEY
- ---- ---------------------
<S> <C>
Thomas P. D'Arcy........................ Chairman, President and Chief Executive
Officer (term expires in 1999)
William L. Brown........................ Director (term expires in 1999)
Joseph E. Hakim......................... Director (term expires in 1999)
Stephen G. Kasnet....................... Director (term expires in 2000)
Paul G. Kirk, Jr........................ Director (term expires in 2001)
W. Nicholas Thorndike................... Director (term expires in 2001)
A. Robert Towbin........................ Director (term expires in 2000)
Richard L. Heuer........................ Executive Vice President
E. Paul Dunn............................ Executive Vice President
Irving E. Lingo, Jr..................... Executive Vice President,
Chief Financial Officer and Treasurer
Marianne Dunn........................... Senior Vice President
Steven St. Peter........................ Senior Vice President
Frank J. Comber......................... Vice President
</TABLE>
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Thomas P. D'Arcy, age 38, was elected President, Chief Executive Officer and
a Director of Bradley in February 1996 and Chairman of the Board of Directors
in May 1998. Mr. D'Arcy has been an officer of Bradley since 1989, having
served as Executive Vice President from September 1995 to February 1996,
Senior Vice President from June 1992 to September 1995, Vice President from
October 1991 to June 1992 and Investment Manager from September 1989 to
October 1991. Mr. D'Arcy is a member of the International Council of Shopping
Centers and the Building Owners and Managers Association.
William L. Brown, age 76, now retired, was Chairman of the Board of Bank of
Boston Corporation and The First National Bank of Boston from 1983 to 1989,
Chief Executive Officer from 1983 to 1987 and President from 1971 to 1982. He
was a director of both Bank of Boston Corporation and The First National Bank
of Boston until March 1992. He is also a director of GC Companies, Inc.,
Standex International Corporation, and Ionics, Incorporated.
Joseph E. Hakim, age 50, is President and Chief Executive Officer of
Merchandise Mart Properties, Inc. in Chicago, Illinois, which manages
approximately 7.5 million square feet of properties. Mr. Hakim is also
Treasurer of the Joseph P. Kennedy, Jr. Foundation. Mr. Hakim served as
Chairman of the Board of Directors of Bradley from February 1996 until May
1998.
Stephen G. Kasnet, age 52, has served as President of Pioneer Real Estate
Advisors, Inc. and Pioneer Global Institutional Advisors and Vice President of
The Pioneer Group, Inc. since January 1996 and as President of Pioneer Poland
Real Estate Fund since January 1998. He was Managing Director of First
Winthrop Corporation and Winthrop Financial Associates (real estate
development and management companies) from 1991 to September 1995. He is also
Chairman of the Board of Warren Bancorp, Inc. and Warren Five Cents Savings
Bank in Peabody, Massachusetts, a Trustee and Vice President of Pioneer Real
Estate Shares and Pioneer Real Estate Shares (Dublin), and a member of the
Urban Land Institute.
Paul G. Kirk, Jr., age 60, is counsel to, and until 1989 was a partner of,
the law firm of Sullivan & Worcester in Boston, Massachusetts. He is also
Chairman and Treasurer of Kirk and Associates, Inc., a business advisory and
consulting firm. From 1985 to 1989, he served as Chairman of the Democratic
Party of the United States, and from 1983 to 1985 as its Treasurer. Mr. Kirk
is a Director of Hartford Life Insurance, Inc., Hartford Financial Services
Group, Inc., Rayonier Financial Services Group, Inc. and Rayonier, Inc. He is
a trustee of Stonehill College and St. Sebastian's School, Co-Chairman of the
Commission on Presidential Debates, Chairman of the John F. Kennedy Library
Foundation and Chairman of the National Democratic Institute for International
Affairs.
W. Nicholas Thorndike, age 65, serves as a Corporate Director or Trustee of
a number of organizations, including Courier Corporation, Eastern Utility
Associates, Data General Corporation, The Putnam Funds and Cabot Industrial
Trust. He also serves as a Trustee of Massachusetts General Hospital, having
served as Chairman of the Board from 1987 to 1992 and President from 1992 to
1994. Until December 1988, he was Chairman and Managing Partner of Wellington
Management Company (an investment advisor).
A. Robert Towbin, age 63, is a Managing Director of C.E. Unterberg, Towbin,
an investment banking firm. From January 1994 to August 1995, he was President
and Chief Executive Officer of the Russian-American Enterprise Fund and, upon
its merger with the Fund for Large Enterprises in Russia, the Vice Chairman of
the resulting U.S. Russia Investment Fund. From 1987 to 1994, Mr. Towbin was a
Managing Director of Lehman Brothers. Prior to 1987, he was a Director and
Vice Chairman of L.F. Rothchild, Unterberg, Towbin Holdings, Inc. Mr. Towbin
serves as a Director of the Columbus New Millenium Fund (London), Gerber
Scientific, Inc., Globalstar Telecommunications Limited, Globecomm Systems,
Inc. and K&F Industries Inc.
Richard L. Heuer, age 46, has served as Executive Vice President of Bradley
since September 1995, having previously served as Senior Vice President of
Bradley since late 1994. Prior to joining Bradley, Mr. Heuer was employed by
the Welsh Companies from September 1993, and Towle Real Estate Company from
1988, the independent property management companies that were managing
Bradley's Minnesota properties.
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<PAGE>
E. Paul Dunn, age 51, has held the position of Executive Vice President of
Bradley since March 1996. Prior to joining Bradley, Mr. Dunn was Executive
Vice President of the Welsh Companies in Minneapolis, Minnesota since 1983.
Mr. Dunn is a certified property manager and a member of the Institute for
Real Estate Management as well as the International Council of Shopping
Centers.
Irving E. Lingo, Jr., age 46, joined Bradley as Chief Financial Officer in
September 1995 and was elected an Executive Vice President in May 1998. Mr.
Lingo was previously employed as Chief Financial Officer of Lingerfelt
Industrial Properties, a division of the Liberty Property Trust from 1993 to
1995. From 1991 to 1992, Mr. Lingo served as Vice President-Finance of CSX
Realty, a division of CSX Corporation. From 1983 to 1990, Mr. Lingo was
Executive Vice President of Goodman Segar Hogan, Inc., a diversified
Southeastern real estate firm. Prior to joining Goodman Segar Hogan, Mr. Lingo
was associated with Ernst & Young for eight years. Mr. Lingo is a certified
public accountant and a member of the American Institute of Certified Public
Accountants.
Marianne Dunn, age 39, has been Senior Vice President of Bradley since
September 1995, having served as Vice President of Bradley since 1993 and as
Investment Manager since 1990. Prior to joining Bradley, Ms. Dunn was employed
by a lending institution as an Assistant Treasurer in the consumer lending
department. Ms. Dunn is a member of the International Council of Shopping
Centers.
Steven St. Peter, age 46, has held the position of Senior Vice President,
Leasing since May 1998, having previously held the title of Vice President,
Leasing since August 1996. Previously, Mr. St. Peter served as National
Director of Real Estate for Bally's Total Fitness from 1995 to 1996, Midwest
Manager of Real Estate for TJX Corporation from 1993 to 1995 and Director of
Leasing for H.S.S. Development from 1990 to 1993.
Frank J. Comber, age 58, has held the position of Vice President,
Construction since August 1996. Prior to joining Bradley, Mr. Comber served as
Vice President of Construction Services for Merchandise Mart Properties from
1989 to 1996 and First Vice President for Homart Development Company from 1973
to 1988.
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<PAGE>
THE MERGER
GENERAL
This Proxy Statement/Prospectus provides a summary of the material terms of
the Merger Agreement and the transactions contemplated thereby. The discussion
and description of the material terms of the Merger Agreement in this Proxy
Statement/Prospectus are subject to and qualified in their entirety by
reference to the Merger Agreement, a copy of which is attached to this Proxy
Statement/Prospectus as Annex A and which is incorporated herein by reference.
The Boards of Directors of each of Bradley and Mid-America have approved the
Merger and the Merger Agreement, pursuant to which, upon fulfillment (or
waiver) of the conditions set forth therein, (i) Mid-America will be merged
with and into Bradley, with Bradley being the surviving corporation in the
Merger, and (ii) each issued and outstanding share of Mid-America Common Stock
will be converted into the right to receive forty-two hundredths (0.42) of a
share of Series A Preferred Stock.
As a result of the Merger and without any action on the part of the holder
thereof, at the Effective Time all shares of Mid-America Common Stock will
cease to be outstanding, will be canceled and retired and will cease to exist.
Each holder of a Certificate will thereafter cease to have any rights with
respect to such shares of Mid-America Common Stock, except the right to
receive shares of Series A Preferred Stock and cash in lieu of fractional
shares of Series A Preferred Stock upon the surrender of such Certificate.
Promptly after the Effective Time, the Exchange Agent will mail a letter of
transmittal and instructions to each holder of a Certificate as of the
Effective Time for use in effecting the surrender of the Certificate in
exchange for certificates representing shares of Series A Preferred Stock and
cash in lieu of fractional shares. See "The Merger Agreement--Exchange of Mid-
America Stock Certificates."
BACKGROUND OF THE MERGER
In January 1995, after discussion by the Mid-America Board with its
management as to Mid-America's financial and stock performance and growth
prospects, the Mid-America Board determined to explore strategic alternatives
for Mid-America, including a sale or merger involving Mid-America. In April
1995, Mid-America retained SBCWDR, then named Dillon, Read & Co. Inc., as its
financial advisor, to assist Mid-America in connection with its strategic
alternatives and any potential transactions. Beginning in April 1995,
discussions were initiated with a number of parties to solicit such parties'
interest in a possible transaction with Mid-America. During the period from
April 1995 to April 1998, over 50 parties reviewed public information
concerning Mid-America and over 20 companies, including Bradley, signed
confidentiality agreements and were provided with certain non-public
information relating to Mid-America. In addition, during that period, SBCWDR
provided periodic updates to the Mid-America Board with respect to SBCWDR's
discussions with various parties.
In April 1997, management of Mid-America called management of Bradley to
inquire if Bradley had any interest in entering into merger discussions with
Mid-America. Management of Bradley indicated uncertainty as to whether Bradley
would be interested in such discussions at that time. During August 1997,
management of Bradley advised management of Mid-America that Bradley would
tour Mid-America's properties to determine if Bradley had an interest in
entering into discussions with Mid-America.
On October 1, 1997, the Mid-America Board met to review, among other things,
the indications of interest received by Mid-America from certain parties,
including Bradley, and a report from SBCWDR on the status of its discussions
with such parties. In addition, the chief executive officers of three
potential bidders, including Bradley, delivered presentations about their
companies' businesses and financial condition and outlined the terms of
potential business combinations involving Mid-America. Bradley at that time
indicated a possible exchange ratio in a merger transaction of 0.5 shares of
Bradley Common Stock for one share of Mid-America Common Stock. SBCWDR
provided the Mid-America Board with a background report on the bidders making
presentations on October 1.
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<PAGE>
Following the October 1 meeting, the Mid-America Board authorized SBCWDR to
seek the best proposal from those companies who had expressed an interest in
effecting a merger with Mid-America. The Mid-America Board directed SBCWDR to
request two of the bidders, including Bradley, to refine their proposals by
October 3. At a meeting by telephone on October 6, 1997, SBCWDR provided the
Mid-America Board with further information on the terms of merger proposals by
another public company ("Bidder A") and by Bradley and advised the Mid-America
Board that at that time Bidder A's proposal offered the highest value to the
Mid-America stockholders. The Mid-America Board authorized its representatives
to proceed with negotiations with Bidder A.
Between October 6 and November 21, 1997, representatives of Mid-America and
Bidder A and their respective financial advisors and legal counsel were in
frequent contact to negotiate the terms of a definitive merger agreement,
including the exchange ratio for Bidder A stock to be exchanged for the Mid-
America Common Stock, price protection for Mid-America, and the fee payable to
Bidder A if a third party acquired Mid-America after signing the merger
agreement with Bidder A. Each party's legal, accounting and financial advisors
also conducted their due diligence investigations of the other party during
that period.
Between October 9 and October 28, 1997, the Mid-America Board held four
meetings by telephone at which SBCWDR summarized the status of the
negotiations with Bidder A. The Mid-America Board was advised of the material
unresolved issues between the parties. The Mid-America Board directed its
representatives to continue negotiations with Bidder A to determine if terms
more acceptable to Mid-America were possible.
On November 17 and November 21, 1997, the Mid-America Board held meetings by
telephone with Mid-America's management, SBCWDR and Mid-America's legal
counsel. During these meetings Mid-America's management advised the Mid-
America Board of its concern as to whether Bidder A and Mid-America would be
able to negotiate and complete an acceptable merger transaction. Mid-America
management further advised the Mid-America Board of the status of the
negotiations and that considerable differences existed between the parties.
The Mid-America Board requested that Mid-America management and SBCWDR
continue the negotiations. However, negotiations between Mid-America and
Bidder A terminated on November 21 as a result of the parties inability to
agree on terms of a possible merger.
On December 5, 1997, at the invitation of the chief executive officer of
Bidder A, Mid-America's chief executive officer advised Bidder A of the
substantive terms which would be necessary for Mid-America to enter into a
merger transaction and for negotiations to resume.
In mid-December, management of Bradley called management of Mid-America to
ascertain the status of Mid-America's potential transaction with Bidder A. On
January 12, 1998, management of Mid-America met with management of Bradley in
Bradley's offices to discuss opening merger discussions.
During the week of January 26, 1998, representatives of Bidder A contacted
SBCWDR and expressed a desire to continue discussions of a possible business
combination with Mid-America. On February 18, SBCWDR and representatives of
Bidder A discussed by telephone the issues addressed on December 5th. Bidder A
again indicated interest in resuming merger discussions and submitted a
revised draft of the merger agreement for review by Mid-America.
On February 19, 1998, Bradley sent Mid-America a draft of an exclusivity
agreement and a term sheet outlining Bradley's proposed exchange of Series A
Preferred Stock for Mid-America Common Stock. The Bradley proposal, among
other things, provided that the holders of Mid-America Common Stock would
receive 0.42 shares of Series A Preferred Stock in exchange for their shares
of Mid-America Common Stock.
On February 23, 1998, the Mid-America Board, Mid-America's management,
SBCWDR and Mid-America's accountants and legal counsel held a meeting by
telephone at which SBCWDR described the renewed interest by Bidder A and
interest by Bradley in negotiating an acquisition of Mid-America. At the
February 23 meeting, the Mid-America Board was advised that the revised merger
agreement draft presented by Bidder A contained many of the terms previously
unacceptable to Mid-America.
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<PAGE>
SBCWDR advised the Mid-America Board during the February 23 meeting that the
price per share of common stock of Bidder A had declined resulting in a $9.50
value per share of Mid-America Common Stock. The Bradley proposal involved the
exchange of a newly issued Bradley preferred stock for the Mid-America Common
Stock and, subject to conversion terms, would result at that time in a $10.50
value per share of Mid-America Common Stock (based on the $25.00 liquidation
preference of the Series A Preferred Stock). SBCWDR also advised the Mid-
America Board that Bradley would not commence a significant due diligence
review of Mid-America unless Mid-America executed an exclusivity agreement
with Bradley and agreed to reimburse Bradley under certain conditions for its
expenses.
The Mid-America Board directed Mid-America management and SBCWDR to continue
discussions with Bidder A and with Bradley and to advise Bidder A that it
would have to improve the exchange ratio for its offer to be competitive.
Further, the Mid-America Board directed that Mid-America not enter into an
exclusivity arrangement with either Bidder A or Bradley at that time.
On February 27, March 6 and March 17, 1998, the Mid-America Board, Mid-
America's management, SBCWDR and Mid-America's legal counsel met by telephone
to discuss the status of negotiations with Bidder A and with Bradley. On March
17, SBCWDR reported that Bidder A had improved the exchange ratio, and that
based on the most recent closing price of Bidder A's common stock the improved
exchange ratio resulted in a value per share of Mid-America Common Stock of
$10.17. Contrary to Mid-America's request that a vote against a transaction by
the Mid-America shareholders would not result in a termination fee, Bidder A
refused and increased the requested termination fee in such an event from an
initial proposal from Bidder A of $500,000 to $1,000,000. SBCWDR also reported
that the terms of the Bradley preferred stock requested by Mid-America were
acceptable to Bradley, and that the value per share to be received by each
holder of Mid-America Common Stock, based on the exchange ratio, was at that
time $10.50. Further, Bradley had provided Mid-America with a preliminary
draft of its proposed merger agreement. After discussion, the Mid-America
Board directed Mid-America management to execute an exclusivity agreement with
Bradley.
After further discussions with Bradley, Mid-America management executed an
exclusivity agreement with Bradley on March 23 providing that Mid-America
would not enter into an agreement or negotiations with third parties with
respect to an acquisition of Mid-America on or before April 7. Bradley
commenced additional due diligence and the parties continued discussions on
the draft merger agreement previously provided by Bradley.
On March 27 and 28, 1998, management of Mid-America and SBCWDR met at
Bradley's offices in Chicago with respect to Mid-America's due diligence
review of Bradley. Bradley substantially completed its due diligence of Mid-
America by April 7; however, at that date, Bradley had not completed its
environmental due diligence review of Mid-America's properties. Bradley
requested an extension of the exclusivity period, in order to complete the
environmental due diligence review.
On April 8, 1998, the Bradley Board met by telephone to consider the
proposed merger with Mid-America. Members of the Bradley Board and management
had discussed the possible acquisition of Mid-America as a part of Bradley's
ongoing program to acquire Midwestern shopping centers on various occasions
prior to this meeting, and on September 12, 1997, the Bradley Board had
authorized the retention of BT Alex. Brown Incorporated ("BT Alex. Brown") as
financial advisor to advise Bradley as to the terms of a possible business
combination proposal to Mid-America.
At the April 8, 1998 meeting of the Bradley Board, Bradley's senior
management, together with its legal and financial advisors made a presentation
to the Bradley Board with respect to the current operations and properties of
Mid-America, the background of the proposed merger, a summary of its due
diligence findings on Mid-America's properties, including environmental due
diligence, and certain financial and valuation analyses of the transaction.
Bradley's senior management also discussed the strategic rationale for the
transaction and the potential benefits of the Merger to Bradley and its
stockholders. BT Alex. Brown also made a presentation to the Board concerning
the terms of the proposed Series A Preferred Stock. Bradley's legal advisors
then concluded with a discussion of the directors' fiduciary duties and the
likely timing for the signing of the Merger and closing of the transaction.
The Bradley Board then authorized management to continue its environmental due
diligence
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review and to proceed with the negotiation of a definitive merger agreement
and definitive terms of the Series A Preferred Stock.
On April 9, 1998, the Mid-America Board and Mid-America's management met by
telephone with SBCWDR and Mid-America's legal counsel to consider Bradley's
request to extend the exclusivity period. At the meeting, Mid-America
management advised the Mid-America Board that Mid-America received a letter to
Mid-America outlining a possible cash proposal of $13.00 per share for Mid-
America Common Stock from an individual on April 6. SBCWDR had contacted the
individual and had a series of discussions with him and a discussion with a
company designated by the individual as a source of financing for the
individual. SBCWDR also reviewed the individual's experience in property
transactions and noted that he reported no experience in an acquisition
transaction similar to an acquisition of Mid-America. SBCWDR and Mid-America
management advised the Mid-America Board that Bradley had suspended
discussions until Mid-America was willing to continue discussions only on an
exclusive basis. After discussion, the Mid-America Board directed Mid-America
management and SBCWDR to develop more background on the individual and enter
into discussions to determine the credibility of his proposal. The Mid-America
Board further directed Mid-America management and SBCWDR to complete these
discussions as soon as possible in order not to lose the Bradley proposal in
the event the individual's proposal was not attainable.
On April 10, 1998, after further discussions between SBCWDR and the
individual, the individual and his designated financing source executed
confidentiality agreements with Mid-America and received certain non-public
information related to Mid-America. The individual and representatives from
the prospective financing company traveled to Mid-America offices on April 14
for additional review of non-public information and documents. During the
course of the visit, Mid-America management and SBCWDR held discussions with
the prospective financing company representatives to determine the certainty
of the financing.
On April 16, 1998, the Mid-America Board and Mid-America's management met by
telephone with SBCWDR and Mid-America's legal counsel. The Mid-America Board
considered the proposal by the individual and was advised by SBCWDR and Mid-
America management that (i) neither the individual nor the company the
individual designated as a source of financing had ever consummated an
acquisition of a REIT or any public company, nor any transaction nearly as
large as the acquisition of Mid-America, (ii) the individual refused to
furnish any evidence of his financial capabilities, (iii) the financing source
had been in operation for less than one year, (iv) the $13.00 proposal was
predicated upon assumptions by the individual that appraisals of Mid-America's
properties would aggregate a minimum of $170 million, a valuation level which
was significantly higher than the levels indicated by any potential purchaser
or lender during the time that SBCWDR had been engaged by Mid-America, (v) the
significant difference in the assumed property appraisal called into question
the ability of the individual to obtain appraisals supporting the valuation,
(vi) the proposal was based on a number of contingencies and did not include
the assumption of any "contingent liabilities", and (vii) the individual and
his financing source had failed to provide a coherent, consistent and credible
financing structure.
At the same meeting, SBCWDR and Mid-America's management advised the Mid-
America Board that in the judgment of SBCWDR and Mid-America's management,
Bradley was likely to withdraw its proposal if Mid-America did not extend the
exclusivity agreement and proceed with negotiations. SBCWDR recommended that
Mid-America extend the exclusivity agreement with Bradley and after discussion
the Mid-America Board concluded that Mid-America should not lose the
reasonable certainty of a merger agreement with Bradley in order to pursue the
individual's conditional and uncertain proposal. The exclusivity agreement was
extended through April 27, and the individual was notified of Mid-America's
actions.
On April 22, 1998, the Mid-America Board held its regularly scheduled annual
meeting. At the meeting, SBCWDR and Mid-America's legal counsel provided an
update on the status of negotiations with Bradley and on the status of the
environmental due diligence. Management advised the Mid-America Board that
further environmental testing was required at Mid-America's Thunderbird Mall
and that in order to reasonably complete the environmental testing and
conclude negotiations, the exclusivity period should be extended to May 27.
The Mid-America Board authorized an extension of the exclusivity agreement to
May 27.
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On May 27, 1998, the Mid-America Board met with Mid-America management,
SBCWDR and Mid-America's legal counsel. The proposed transaction with Bradley
was reviewed in detail with the Mid-America Board. The presentations and
discussions at the meeting were wide-ranging and detailed and included, among
other things, (i) a presentation by management regarding events since the
April 16 meeting of the Mid-America Board, (ii) a description by Mid-America's
legal counsel of the material terms of the Merger Agreement and related
documents, including the preferred stock provisions, (iii) a presentation by
Mid-America legal counsel regarding the duties of directors, and (iv) a
presentation by SBCWDR regarding the fairness of the transaction with Bradley
from a financial point of view. The Mid-America Board was advised of the
issues remaining unresolved with respect to the transaction, including the
status of environmental due diligence which was expected to be completed by
May 29. The Mid-America Board authorized management and its advisors to
proceed with the proposed transaction with Bradley and approved an extension
of the exclusivity agreement through May 30, 1998.
At a telephonic meeting on May 27, 1998, the Bradley Board reviewed, among
other things, the status of the negotiations with Mid-America, the strategic
rationale for the Merger and its potential benefits to Bradley's stockholders
and the results of Bradley's environmental due diligence review of Mid-
America. During such meeting, the Bradley Board reviewed the terms of the
Merger Agreement and the Series A Preferred Stock. BT Alex. Brown also made a
presentation to the Board concerning its financial analyses of the proposed
transaction and stated that it believed it would be able to provide its
opinion to the Bradley Board that the Exchange Ratio would be fair to Bradley
and its stockholders from a financial point of view, based upon the
transaction as then negotiated and upon the facts and circumstances as they
existed at the time, subject to certain assumptions, factors and limitations.
Thereafter the Bradley Board unanimously approved the form of the Merger
Agreement and authorized management to complete negotiations of, and execute,
the Merger Agreement, subject to written confirmation as the date of the
execution of the Merger Agreement of such a fairness opinion from BT Alex.
Brown.
On May 30, 1998, the Mid-America Board met by telephone with Mid-America
management, SBCWDR and Mid-America's legal counsel. The Mid-America Board was
advised that the environmental due diligence had been completed and that all
issues with respect to the Merger Agreement had been resolved. Mid-America's
legal counsel described the final terms of the Merger Agreement and related
documents, and SBCWDR provided its opinion that the consideration to be
received by the Mid-America Stockholders in the Merger (the "Merger
Consideration") was fair from a financial point of view to the Mid-America
Stockholders. Thereafter, following discussion, the Mid-America Board, by
unanimous vote, approved the Merger and the Merger Agreement and related
documents. Subsequently, the parties executed the Merger Agreement and
publicly announced the transaction.
RECOMMENDATION OF THE MID-AMERICA BOARD; REASONS FOR THE MERGER
At its May 30, 1998 meeting, the Mid-America Board determined that the
Merger was fair to and in the best interests of Mid-America and its
stockholders. Accordingly, at such meeting, the Mid-America Board approved the
Merger and the Merger Agreement and directed that the Merger Agreement be
submitted to the holders of shares of Mid-America Common Stock for approval
and adoption.
The determination of the Mid-America Board to approve the Merger Agreement
was based upon consideration of a number of factors. The following list
includes the material factors considered by the Mid-America Board in their
evaluation of the Merger and the Merger Agreement:
. The opportunity for the Mid-America Stockholders to participate as
holders of Series A Preferred Stock, in a larger, more diversified
company, and to participate in the value that may be generated through
the combination of the two companies through their status as
stockholders of Bradley.
. The Exchange Ratio negotiated with Bradley under the Merger Agreement in
addition to the terms of the Series A Preferred Stock, which included a
2.20% dividend yield advantage to Bradley Common Stock.
. The fact that the Mid-America Stockholders will receive a slightly
higher pre-tax dollar value of dividend income from the Series A
Preferred Stock than the Mid-America Common Stock.
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. The strategic and financial alternatives available to Mid-America,
including remaining an independent company, and other indications of
interest received by Mid-America.
. The historical market prices of Mid-America Common Stock and Bradley
Common Stock and the historical market prices of shares of Mid-America
Common Stock compared to Bradley's acquisition price per share of Mid-
America Common Stock based on the Exchange Ratio.
. Certain publicly-available information with respect to the financial
condition and results of operations of Bradley.
. The financial presentation and written opinion, dated May 30, 1998, of
SBCWDR to the effect that, as of such date and based upon and subject to
certain matters stated in such opinion, the Merger Consideration was
fair from a financial point of view to the holders of Mid-America Common
Stock. See "--Opinion of Mid-America's Financial Advisor."
. The fact that the Merger was designed to be tax-free to the Mid-America
Stockholders.
. The fact that, to the extent required by the fiduciary obligations of
the Mid-America Board, as determined by the Mid-America Board after
consultation with and based upon the advice of its outside legal
counsel, the Mid-America Board may withdraw its recommendation and Mid-
America may terminate the Merger Agreement, subject, in certain
circumstances, to the payment of a termination fee.
The Mid-America Board also considered certain potentially negative factors
which could arise in connection with the Merger. These included (i) the
transaction costs involved in connection with consummating the Merger, (ii)
the substantial management time and effort required to effectuate the Merger,
(iii) the risk that Bradley may be unable to integrate the operating practices
of Mid-America and Bradley successfully, and (iv) the potential obligation of
Mid-America to pay a termination fee and reimburse certain expenses to Bradley
under certain circumstances if the Merger is not consummated. The Mid-America
Board did not believe that the negative factors were sufficient, either
individually or collectively, to outweigh the potential advantages of the
Merger.
The foregoing discussion of the information and factors considered by the
Mid-America Board is not intended to be exhaustive, but includes the material
factors considered by the Mid-America Board. The Mid-America Board did not
assign relative weights to these factors or determine that any factor was of
greater importance than another. A determination of the various weightings
would, in the view of the Mid-America Board, be impractical. The Mid-America
Board viewed its position and recommendations as being based on the totality
of the information presented to and considered by it.
THE MID-AMERICA BOARD RECOMMENDS THAT THE HOLDERS OF MID-AMERICA COMMON
STOCK VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AND THE MERGER AGREEMENT.
OPINION OF MID-AMERICA'S FINANCIAL ADVISOR
On May 30, 1998, the Mid-America Board received SBCWDR's oral opinion, later
confirmed in writing dated May 30, 1998, which provided that, as of such date,
the Merger Consideration to be received by the Mid-America Stockholders
pursuant to the terms of the Merger Agreement, was fair to the Mid-America
Stockholders from a financial point of view. A copy of SBCWDR's written
opinion is attached as Annex C hereto and should be read in its entirety for a
description of the procedures followed, matters considered, assumptions made
and methods employed by SBCWDR.
In arriving at its opinion, SBCWDR, among other things:
(i) reviewed the Merger Agreement and certain business and
financial information relating to Mid-America, including
certain financial forecasts provided by Mid-America;
(ii) reviewed and discussed the business and prospects of Mid-
America with Mid-America management;
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(iii) considered the financial terms of indications of interests and
proposals made to Mid-America either directly or through
SBCWDR, since Mid-America engaged SBCWDR in 1995;
(iv) considered certain financial and stock market data related to
Mid-America and its common stock and compared that information
to similar data for publicly held companies in businesses
generally comparable to that of Mid-America;
(v) reviewed and analyzed certain publicly available business and
financial information relating to Bradley and discussed the
business and prospects of Bradley with Bradley's management;
(vi) considered the financial terms of certain other transactions,
including business combinations, which have recently been
effected;
(vii) reviewed and analyzed the terms of the convertible preferred
stock to be issued by Bradley and compared such terms to
certain other similar securities issued by companies in
businesses generally comparable to that of Bradley; and
(viii) considered such other information, financial studies and
analyses, and financial, economic and market criteria as
SBCWDR deemed relevant.
In connection with its review, SBCWDR did not assume any responsibility for
independent verification of any of the foregoing information and, with Mid-
America's consent, relied on such information as being complete and accurate
in all material respects. In addition, SBCWDR did not make any evaluation or
appraisal of any of the assets or liabilities (contingent or otherwise) of
Mid-America and Bradley. With respect to the financial forecasts referred to
above, SBCWDR assumed, with Mid-America's consent, that the Mid-America
company financial forecasts were prepared reasonably on a basis reflecting the
best currently available estimates and judgments of the management of Mid-
America as to the future financial performance of Mid-America. SBCWDR's
opinion was based on economic, monetary, and market conditions existing on May
30, 1998. No other limits were placed on SBCWDR with respect to the
investigations made or procedures followed by SBCWDR in rendering its opinion.
In arriving at its opinion, SBCWDR did not assign any particular weight to
any analysis or factor considered by it, but rather made qualitative judgments
based on its experience in rendering such opinions and on then existing
economic, monetary and market conditions as to the significance and relevance
of each analysis and factor. Accordingly, SBCWDR believes that its analyses
must be considered as a whole and that selecting portions of its analyses and
the factors considered, without considering all analyses and factors, could
create a misleading or incomplete view of the processes underlying such
analyses and its opinion. In its analyses, SBCWDR made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond Mid-America's and Bradley's
control. Any estimates contained in SBCWDR's analyses are not necessarily
indicative of actual values or predictive of future results therein. In
addition, analyses relating to the value of a business or securities do not
purport to be appraisals or to reflect the actual prices at which businesses
or securities might be sold.
The following summarizes the material quantitative analyses relating to Mid-
America and Bradley performed by SBCWDR in arriving at the opinion dated May
30, 1998 presented to the Mid-America Board.
Historical Stock Performance and Relative Valuation. SBCWDR compared the
trading price of the shares of Mid-America Common Stock and Bradley Common
Stock for a five-year period. Over the five-year period, the trading price of
Bradley Common Stock grew at a greater rate than the trading price of Mid-
America Common Stock; the share price of Mid-America Common Stock
underperformed the retail REIT share price index and the share price of
Bradley Common Stock frequently traded relatively close to the REIT index.
Bradley has also provided a greater total return (defined as stock price
appreciation plus dividends received) for its stockholders than Mid-America
has for its stockholders over the prior six months, one year, two years, three
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years, four years and five years. The Exchange Ratio of 0.42 results in an
assumed valuation of $10.50 per share of Mid-America Common Stock, a price
which is generally above Mid-America's share price since early 1994.
Going Concern Valuation. SBCWDR considered the going concern value of Mid-
America, with an analysis of the market multiples and discounted dividend and
future stock price.
The market multiples analysis was performed by reviewing the market
multiples at which the common stock traded for a peer group of selected REITs
with investments that are primarily comprised of community centers and with
market values of equity below $500 million. The average multiples for the peer
group were 9.9x, 11.8x and 8.6% respectively of FFO (defined as Net Income
adjusted for non-cash items in the income statement), Earnings Before
Interest, Taxes, Depreciation and Amortization ("EBITDA") and dividend yield,
with an FFO multiple range of 6.6-13.1x, an EBITDA multiple range of 10.0-
13.7x and a dividend yield range of 10.7-7.4%, compared to implied multiples
for the Merger (based on an assumed valuation of Mid-America Common Stock of
$10.50 per share) of 8.3x, 9.6x and 8.4%.
The discounted dividend and future stock price valuation analysis was based
on cash flow distributions as projected by Mid-America, assuming that all
properties are held through a five-year period ending December 31, 2002. The
value at the end of the projection period was based on an assumed multiple of
adjusted FFO at the end of the period. The present value of the projected
dividend distributions and of the terminal value was calculated based on
discount rates ranging from 12% to 14%. Projections of cash flow were
performed by Mid-America for each property, based on Dynalease lease-by-lease
analysis and projections of cash flow from income producing assets and
overhead cost. Key assumptions in the Mid-America model included: rental rates
and recoveries based on current market terms for each Mid-America property; a
3% growth in market rental, expenses and sales volume; 0.5% credit loss;
lease-up of all significant vacancies within six to 12 months; 95% stabilized
occupancy; refinancings as debt matures with interest rates at 8.5% to 9.5%
per annum and 25-year amortization; and a per share Mid-America Common Stock
dividend of $0.88. The terminal value at the end of the five-year period was
calculated based on a 8.0x to 10.0x FFO multiple. The value of the Mid-America
Common Stock based on this analysis ranges between $8.93 to $11.24 per share.
Liquidation Valuation. In SBCWDR's opinion, a broad and active market exists
to acquire unencumbered fee simple interest in community centers and regional
shopping malls. SBCWDR examined the break-up value of Mid-America assuming
that each Mid-America property was sold and Mid-America was liquidated. SBCWDR
utilized a capitalization rate methodology to value the individual properties.
Estimates of capitalization rates were based on SBCWDR's experience and on
discussions with Mid-America's management. Gross property values were
estimated by dividing 1997 net cash flow for each property, as estimated by
Mid-America, by a capitalization rate for community centers ranging between
10% to 12% and for regional malls ranging between 10.25% to 12%. Variations in
capitalization rates were based on property and market attributes which
include location, competition, market demographics, proportion of income from
"credit" tenants, near-term rental increase potential, lease-up potential and
re-leasing risk, property dominance in the market place, maintenance history
and expansion potential. Selling expenses were assumed to be 3.0% of the sale
proceeds. The value of other assets, such as out-lot parcels, were estimated
on a property-by-property basis. Receivables were assumed to be collectible
and liabilities were assumed to be paid from sales proceeds. Proceeds from the
sale of joint venture properties were assumed to be distributed to each of the
partners based on the respective partnership interest in the partnership. The
net liquidation proceeds were estimated to equal a range of $79.0 to $85.7
million or a value ranging from $9.53 to $10.34 per share of Mid-America
Common Stock.
SBCWDR also performed a portfolio liquidation valuation analysis by
utilizing cash flow projections provided by Mid-America. Lease-by-lease inputs
were assumed to be accurate. The terminal value of the properties at the end
of the five-year holding period were calculated by using a capitalization rate
ranging for the entire portfolio of 10.5% to 11.5% which reflected
approximately a 50-basis point premium to going-in capitalization rate
estimates. Out-lot parcel sales were projected annually. Annual cash flows and
terminal values were discounted back to present values using discount rates
ranging from 11% to 13%. After adjusting for balance sheet assets and
liabilities, the net present value of equity was calculated with a value
ranging from $8.79 to $10.96 per share of Mid-America Common Stock.
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Acquisition Precedents. Although there have been few acquisitions of REITs
that are comparable to Mid-America, SBCWDR reviewed certain REIT merger
transactions. The majority of the transactions reviewed were primarily
community centers with equity values of less than $300 million. Recent REIT
merger transactions have occurred at a wide range of multiples and premiums,
and some transactions have resulted in discounts to market prices. Some of the
higher multiples reflect the anticipation of strong future growth for a
particular target. Such REIT merger transactions produced FFO multiples,
EBITDA multiples and premiums paid averaging 11.3x, 12.6x and 10.5%,
respectively, with an FFO multiple range of 7.0-15.2x, an EBITDA multiple
range of 9.6-15.5x and a premium range of (6.5)-33.0%, compared to the Merger
Consideration (based on an assumed Mid-America stock valuation of $10.50 per
share) of 8.3x, 9.6x and 5.7%, respectively.
Comparable Convertible Analysis. SBCWDR reviewed the dividend yield
advantage and conversion premium of convertible preferred stock issued by a
number of other REITs. The REIT group consisted of Developers Diversified
Realty, Merry Land & Investment, Security Capital Industrial, Redwood Trust,
Vornado Realty Trust and Equity Residential Properties. The yield advantage,
which consists of the difference between the dividend yield on the convertible
preferred stock and the underlying common stock, ranged from .90% to 3.48% for
the group, with an average of 2.04%. The dividend yield for the Series A
Preferred Stock is 8.4% and for the Bradley Common Stock is 6.20%, resulting
in a dividend yield advantage of the Series A Preferred Stock over the Bradley
Common Stock of 2.20%. The conversion premium, which consists of the
conversion price to exercise the convertible preferred stock for the
underlying common stock divided by the price of the underlying common stock on
the date of the issuance of the convertible preferred stock, ranged from 5.41%
to 25.00% for the group, with an average of 13.13%. The conversion premium for
the Series A Preferred Stock was calculated as a 16% premium to the average
closing price of Bradley Common Stock for the 20 trading days prior to the
signing of the Merger Agreement. SBCWDR believes that there is a strong
correlation between an increase in yield advantage and an increase in the
conversion premium and the Series A Preferred Stock was consistent with the
data resulting from a regression analysis. As such, a conversion premium
between 12% and 18% was deemed likely to result in the Series A Preferred
Stock trading at $25.00 par assuming current market conditions.
SBCWDR has acted as financial advisor to Mid-America in connection with the
Merger. SBCWDR will receive a fee of $1,153,518 upon consummation of the
Merger, which will be reduced by a fee of $200,000 received by SBCWDR for
delivery of its opinion and a $100,000 retainer fee received at the inception
of its engagement by Mid-America. Mid-America has also agreed to reimburse
SBCWDR for reasonable expenses in connection with the Merger and to indemnify
SBCWDR, its affiliates and their respective directors, officers, employees,
agents and controlling persons against certain liabilities, including
liabilities under federal securities laws.
SBCWDR is an investment banking firm and, as a part of its investing banking
business, is regularly engaged in the valuation of businesses and securities
in connection with mergers and acquisitions, negotiated underwritings,
competitive bids, secondary distributions of listed and unlisted securities,
private placements and valuations for state, corporate and other purposes.
SBCWDR has performed various investment banking services for Mid-America in
the past and has received customary fees for such services. In the ordinary
course of business, SBCWDR and its affiliates actively trade in the equity
securities of Mid-America and Bradley for their own accounts and the accounts
of their customers and, accordingly, may at any time hold long or short
positions in such securities.
INTERESTS OF CERTAIN EXECUTIVE OFFICERS AND EMPLOYEES OF MID-AMERICA
In considering the recommendation of the Board of Directors of Mid-America
to approve the Merger and the Merger Agreement, stockholders should be aware
that certain executive officers and other employees of Mid-America have
certain interests in, and will receive benefits from, the Merger that are
separate from the interests of, and benefits to, Mid-America Stockholders
generally.
Executive Change in Control Payments
Mid-America has an employment agreement with each of Jerome L. Heinrichs
(who is also a director of Mid-America) and Dennis G. Gethmann (the
"Executives"), which provides for a change in control severance
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payment (the "Change in Control Severance Payment") equal to 200% of his then
current base salary following a termination within twelve months following the
Merger. In addition, each Executive would be entitled to receive any fringe
benefits which were being provided on the date of his termination for up to
twenty-four (24) months following termination or until such Executive secures
alternative employment providing similar fringe benefits.
Termination of Outstanding Options
At the Effective Time, all of the outstanding options to purchase Mid-
America Common Stock will be cancelled and the holders thereof will be
entitled to receive cash equal to the difference between the fair market value
of the underlying Mid-America Common Stock and the exercise price of the
options. Assuming a fair market value of $10.50 per share of Mid-America
Common Stock, Messrs. Heinrichs and Gethmann will each be entitled to receive
$125,000 at the Effective Time in exchange for the cancellation of their
options. No other optionholders would be entitled to a termination payment at
such an assumed value.
Employee Stay Bonuses/Change in Control Payments
In addition to the employment agreements with Messrs. Heinrichs and
Gethmann, Mid-America has entered into Stay Bonus/Change in Control Agreements
with nineteen other employees pursuant to which each such employee will be
entitled to a fixed severance payment following an involuntary termination
within twelve months after the Merger. The total amount which may be payable
under these agreements is $299,536.
1998 Bonus Program
The Board of Directors of Mid-America adopted a bonus program pursuant to
which certain employees are eligible to receive bonuses from an aggregate
bonus pool of $125,000 contingent upon Mid-America achieving certain financial
objectives during 1998. Fifty percent of the bonus pool has been reserved for
Messrs. Heinrich and Gethmann and the remaining fifty percent is allocable
among the remaining eligible employees. Pursuant to the terms of the program,
a portion of the bonus pool will be distributed at the Effective Time if Mid-
America is on target to meet the specified financial objective at such time.
Assuming a closing date for the Merger of August 1, 1998, Bradley estimates
that approximately $72,917 would be paid pursuant to the program, of which
approximately $36,458 will be distributed to Messrs. Heinrichs and Gethmann.
Severance Pay Policy
Historically, Mid-America also has maintained a severance pay policy
applicable to all of its full time and certain of its part-time employees
(except officers and directors) pursuant to which eligible employees may be
entitled to receive upon termination a severance payment equal to two weeks of
pay for every year of service completed prior to termination, up to a maximum
of 20 weeks. The maximum aggregate amount which may be payable under the
policy is $251,708.
Summary of Amounts Payable upon Merger
The following table sets forth the calculation of the amounts for each
Executive and for the rest of the employees as a group.
<TABLE>
<CAPTION>
ESTIMATED VALUE OPTION TOTAL VALUE
CHANGE IN CONTROL OF FRINGE BENEFITS TERMINATION 1998 BONUS OF PAYMENTS
SEVERANCE PAYMENTS (24 MONTHS) PAYMENTS PAYMENTS UPON MERGER
------------------ ------------------ ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Jerome L. Heinrichs..... $316,500 $61,952 $125,000 $18,229 $521,681
Dennis G. Gethmann...... $284,850 $57,126 $125,000 $18,229 $485,205
All Other Employees..... $551,244(1) N/A N/A $36,459 $587,703
</TABLE>
- --------
(1) Includes maximum amount payable under the Stay Bonus/Change in Control
Agreements, the 1998 Bonus Program and the Severance Pay Policy.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
For a description of certain federal income tax considerations relating to
the Merger, see "Federal Income Tax Considerations--Tax Consequences of the
Merger."
ACCOUNTING TREATMENT
Bradley will account for the Merger as a purchase in accordance with
Accounting Principles Board Opinion No. 16. Purchase accounting for a
combination is similar to the accounting treatment used in the acquisition of
any asset group. The fair market value of the consideration (cash, stock, debt
securities, etc.) given by the acquiring firm is used as the valuation basis
for the combination. The assets and liabilities of the acquired firm are
revalued to their respective fair market values at the combination date. The
financial statements of the acquiring company reflect the combined operations
from the date of combination.
REGULATORY APPROVAL
Mid-America and Bradley believe that the Merger may be consummated without
notification being given or certain information being furnished to the Federal
Trade Commission (the "FTC") or the Antitrust Division of the Department of
Justice (the "Antitrust Division") pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and that no waiting
period requirements under the HSR Act are applicable to the Merger. However,
there can be no assurance that the consummation of the Merger will not be
delayed by reason of the HSR Act. At any time before or after consummation of
the Merger, the Antitrust Division or the FTC could take such action under the
antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the consummation of the Merger or seeking
divestiture of substantial assets of Bradley or Mid-America. At any time
before or after the Effective Time, any state could take such action under its
own antitrust laws as it deems necessary or desirable. Such action could
include seeking to enjoin the consummation of the Merger or seeking
divestiture of Mid-America or assets of Bradley or Mid-America by Bradley.
Private parties may also seek to take legal action under antitrust laws under
certain circumstances.
CERTAIN RESALE RESTRICTIONS
All shares of Series A Preferred Stock received by the Mid-America
Stockholders in the Merger will be freely transferable, except that shares of
Series A Preferred Stock received by persons (and the shares of Bradley Common
Stock issuable upon conversion thereof) who are deemed to be "affiliates" (as
such term is defined under the Securities Act) of Mid-America at the time of
the Mid-America Special Meeting may be resold by them only in transactions
permitted by the resale provision of Rule 145 promulgated under the Securities
Act (or Rule 144 in the case of such persons who become affiliates of Bradley)
or as otherwise permitted under the Securities Act. Persons who may be deemed
to be affiliates of Bradley or Mid-America generally include individuals or
entities that control, are controlled by, or are under common control with,
such party and may include certain officers and directors of such party as
well as principal stockholders of such party. The Merger Agreement requires
Mid-America to exercise its reasonable best efforts to cause each of its
affiliates to execute a written agreement to the effect that such person will
not offer to sell, transfer or otherwise dispose of any of the Series A
Preferred Stock issued to such person in or pursuant to the Merger unless (i)
such sale, transfer or other disposition has been registered under the
Securities Act; (ii) such sale, transfer or other disposition is made in
conformity with Rule 145 under the Securities Act; or (iii) in the opinion of
counsel, which opinion and counsel shall be reasonably satisfactory to
Bradley, such sale, transfer or other disposition is exempt from registration
under the Securities Act.
NEW YORK STOCK EXCHANGE LISTING
It is a condition to Mid-America's and Bradley's obligations to consummate
the Merger that Bradley obtain approval from the NYSE for the listing on the
NYSE of the shares of Series A Preferred Stock to be issued in the Merger and
the Bradley Common Stock issuable upon conversion of the Series A Preferred
Stock, subject to official notice of issuance. See "The Merger Agreement--
Conditions to the Merger."
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REASONS FOR BRADLEY BOARD APPROVAL OF MERGER; NO REQUIREMENT FOR APPROVAL BY
HOLDERS OF BRADLEY COMMON STOCK
The Bradley Board approved the Merger because it fits with its stated
acquisition plan to acquire community and neighborhood shopping centers in the
Midwest that are anchored by strong national, regional and independent grocery
chains. See "The Companies--Bradley." In connection with the Merger, Bradley
will acquire additional assets in existing markets such as Minnesota,
Wisconsin and Indiana as well as acquiring assets in new Midwest target
markets such as Omaha, Nebraska. See "The Companies--Bradley Following the
Merger." Another factor considered by the Bradley Board in approving the
transaction is that the Merger will be accretive to Bradley's net income per
share and FFO per share. See "Summary--Summary Historical and Unaudited Pro
Forma Combined Financial Data" and "Pro Forma Condensed Combined Financial
Statements."
Having been approved by the Bradley Board, the Merger does not also require
approval by the holders of Bradley Common Stock under the MGCL, inasmuch as
the Bradley Charter already contains authority for the Bradley Board to issue
preferred stock and to designate and establish the Series A Preferred Stock
and the number of shares of Bradley Common Stock that are issuable upon full
conversion of the Series A Preferred Stock is less than 20% of the number of
shares of Bradley Common Stock to be outstanding immediately before the
Effective Time of the Merger.
DISSENTERS' RIGHTS
Under the MGCL, stockholders of Mid-America and Bradley are not entitled to
dissenters' rights in connection with the Merger.
FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain material United States federal
income tax consequences of the Merger to Bradley and Mid-America and their
respective U.S. Stockholders (as defined below in "--Taxation of Taxable U.S.
Stockholders") as well as certain other tax considerations for U.S. holders of
Bradley stock. The following discussion is based upon current provisions of
the Code, existing temporary and final regulations thereunder and current
administrative rulings and court decisions, all of which are subject to
change, possibly on a retroactive basis. No attempt has been made to comment
on all United States federal income tax consequences of the Merger that may be
relevant to stockholders of Bradley and Mid-America. The tax discussion set
forth below is included for general information only. It is not intended to
be, nor should it be construed to be, legal or tax advice to a particular
stockholder of Bradley or Mid-America.
TAX CONSEQUENCES OF THE MERGER
It is a condition to consummation of the Merger that prior to the Closing,
Goodwin, Procter & Hoar LLP, counsel to Bradley, will deliver an opinion to
Bradley and Mid-America to the effect that, based on representations of
Bradley and Mid-America and on assumptions and conditions set forth in such
opinion, the Merger will be treated for United States federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
and the following discussion assumes the Merger is so treated.
As a consequence of reorganization treatment, neither Bradley nor Mid-
America will recognize gain or loss as a result of the Merger. Stockholders of
Mid-America who exchange all of their Mid-America Common Stock solely for
Series A Preferred Stock pursuant to the Merger will not recognize gain or
loss (except with respect to cash received in lieu of a fractional share
interest in Series A Preferred Stock). The aggregate tax basis of the Series A
Preferred Stock received by stockholders who exchange all of their Mid-America
Common Stock solely for Series A Preferred Stock in the Merger will be the
same as the aggregate tax basis of the Mid-America Common Stock surrendered
(reduced by any amount allocable to a fractional share interest for which cash
is received). Provided the shares of Mid-America Common Stock were held as a
capital asset at the Effective Time, the holding period for shares of Series A
Preferred Stock received by a stockholder in exchange will include the period
that such shares of Mid-America Common Stock were held. The Bradley
Stockholders will not recognize gain or loss as a result of the Merger.
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Cash received in lieu of fractional shares of Series A Preferred Stock will
be treated as received in redemption for such fractional interests, and gain
or loss will be recognized, measured by the difference between the amount of
cash received and the portion of the basis of the shares of Series A Preferred
Stock allocable to such fractional shares. Such gain or loss will constitute
capital gain or loss from the sale of stock if the stockholder holds its Mid-
America Common Stock as a capital asset at the Effective Time.
Under a recently enacted provision of the Code, "nonqualified preferred
stock" may be treated as taxable "boot" in a reorganization. In the opinion of
Goodwin, Procter & Hoar LLP, the Series A Preferred Stock is not nonqualified
preferred stock within the meaning of this provision; nonetheless, the
provision is new, implementing regulations have not yet been promulgated, and
the Internal Revenue Service ("IRS") could challenge this determination. If
such a challenge were successful, the former holders of Mid-America Common
Stock would recognize gain (but not loss) on the receipt of the Series A
Preferred Stock, in an amount equal to the difference between the fair market
value of the Series A Preferred Stock received and the adjusted tax basis of
the Mid-America Common Stock surrendered in exchange.
PRE-MERGER DIVIDENDS
Pursuant to the Merger Agreement, Mid-America will be required to distribute
to the holders of Mid-America Common Stock immediately prior to the Merger an
amount at least equal to any undistributed "real estate investment trust
taxable income" of Mid-America for Mid-America's short taxable year ending
with the Effective Time of the Merger plus any additional amount required to
reduce its current and accumulated earnings and profits (as described in
Section 312 of the Code) to zero (the "Pre-Merger Dividend"). The Pre-Merger
Dividend made to Mid-America's taxable U.S. Stockholders will be taxable to
such U.S. Stockholders as ordinary income (or capital gain in the case of any
portion properly designated as a capital gain dividend) to the extent it is
made out of current or accumulated earnings and profits, and will not be
eligible for the dividends received deduction generally available for
corporations. See "--Taxation of Taxable U.S. Stockholders."
REIT QUALIFICATION
Under the Code, if certain requirements are met in a taxable year, a REIT
generally will not be subject to federal income tax with respect to income
that it distributes to its stockholders. Prior to the consummation of the
Merger, each of Bradley and Mid-America has been and will continue to be
operated in a manner intended to allow it to qualify as a REIT. It is intended
that Bradley will operate following the Merger in a manner so that it will
continue to qualify as a REIT. If Bradley fails to qualify as a REIT in any
taxable year, Bradley will be subject to federal income taxation as if it were
a domestic corporation, and its stockholders will be taxed in the same manner
as stockholders of ordinary corporations. In this event, Bradley could be
subject to potentially significant tax liabilities, and the amount of cash
available for distribution to stockholders would be reduced and possibly
eliminated. Unless entitled to relief under certain Code provisions, Bradley
also would be disqualified from re-electing REIT status for the four taxable
years following the year during which qualification was lost. Failure of
either Bradley or Mid-America to have qualified as a REIT prior to the Merger
could disqualify Bradley as a REIT and/or subject it to significant tax
liabilities. See "Risk Factors--Adverse Consequences of Failure to Qualify as
a REIT."
To qualify as a REIT, a company must comply with a number of annual
requirements regarding its income, assets and distributions. These
requirements impose a number of restrictions on the company's operations. For
example, a REIT may not lease property if the lease has the effect of giving
the company a share of the net income of the lessee. The amount of personal
property that may be included under a lease may not exceed a defined, low
level, and the company may not provide services to its tenants, other than
customary services and de minimis non-customary services. A REIT's ability to
acquire non-real estate assets is restricted, and a 100% tax is imposed on any
gain that a REIT realizes from sales of property to customers in the ordinary
course of business (other than property acquired by reason of certain
foreclosures), effectively preventing REITs from participating directly in
condominium projects and other projects involving the development of property
for resale. Minimum distribution requirements also generally require REITs to
distribute at least 95% of their taxable income each year (excluding any net
capital gain).
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Prior to the Closing, Goodwin, Procter & Hoar LLP will render an opinion to
Bradley and to Mid-America to the effect that following the Closing, Bradley
will be organized in conformity with the requirements for qualification as a
REIT and the proposed manner of operations of Bradley will enable Bradley to
continue to qualify as a REIT. This opinion will be based on representations
from Bradley regarding its compliance with the requirements for REIT
qualification and on the opinion of Deloitte & Touche LLP, with respect to
Mid-America described below, and is not binding on the IRS. In addition, the
opinion of Goodwin, Procter & Hoar LLP will be based on current law, and
changes in applicable law could adversely affect Bradley's ability to qualify
as a REIT. With respect to the REIT qualification of Mid-America prior to the
Merger, Deloitte & Touche LLP, accountants for Mid-America, will render an
opinion to the effect that Mid-America has qualified as a REIT under the Code
from January 1, 1990, through the date of the opinion. This opinion will be
based on certain representations from Mid-America, certain assumptions
regarding Mid-America and a review of certain enumerated agreements and
documents, in each case as set forth in the opinion, and is not binding on the
IRS.
Each of Bradley's and Mid-America's qualification as a REIT depends on its
having met or meeting, as the case may be, through actual operating results,
the various requirements for qualification as a REIT under the Code. Goodwin,
Procter & Hoar LLP has not verified and will not verify the companies'
compliance with those tests. Moreover, qualification as a REIT involves the
application of highly technical and complex Code provisions for which there
are only limited judicial or administrative interpretations and involves the
determination of various factual matters and circumstances not entirely within
the companies' control. Accordingly, no assurance can be given that Bradley
will satisfy such tests on a continuing basis following the Merger and no
assurance can be given that the IRS will not challenge the status of Bradley
or Mid-America as a REIT prior to the Merger or the status of Bradley as a
REIT following the Merger.
TAXATION OF TAXABLE U.S. STOCKHOLDERS
As used herein, the term "U.S. Stockholder" means a holder of Series A
Preferred Stock or Bradley Common Stock that for United States federal income
tax purposes (A) is (i) a citizen or resident of the United States, (ii) a
corporation, partnership, or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, (iii) an
estate, the income of which is subject to United States federal income
taxation regardless of its source or (iv) a trust, if a court within the
United States is able to exercise primary supervision over the administration
of the trust and one or more United States persons have the authority to
control all substantial decisions of the trust, and (B) is not an entity that
has a special status under the Code (such as a tax-exempt organization or a
dealer in securities).
Dividends and Other Distributions. As long as Bradley qualifies as a REIT,
distributions made to Bradley's U.S. Stockholders out of current or
accumulated earnings and profits (and not designated as capital gain
dividends) will be taken into account by them as ordinary income and will not
be eligible for the dividends received deduction for corporations. For
purposes of determining whether distributions on Bradley stock are out of
current or accumulated earnings and profits, the earnings and profits of
Bradley will be allocated first to the outstanding Series A Preferred Stock,
and then allocated to Bradley's Common Stock. See "Summary--Bradley's
Distribution and Dividend Policy." Distributions that are designated as
capital gain dividends will be taxed as long-term capital gains (to the extent
they do not exceed Bradley's actual net capital gain for the taxable year and
subject to the discussion below regarding the Taxpayer Relief Act of 1997)
without regard to the period for which the holder has held its capital stock.
However, corporate holders may be required to treat up to 20% of certain
capital gain dividends as ordinary income. Distributions in excess of current
and accumulated earnings and profits will not be taxable to a holder to the
extent that they do not exceed the adjusted tax basis of the holder's shares,
but rather will reduce the adjusted basis of such shares. To the extent that
such distributions exceed the adjusted basis of a holder's shares they will be
included in income as long-term capital gain (or as mid-term capital gain if
the holder is an individual, estate or trust and the shares have been held for
fewer than 18 months but more than one year, and as short-term capital gain if
the shares have been held for one year or less) assuming the shares are a
capital asset in the hands of the holder. In addition, any dividend declared
by Bradley in October, November or December of any year payable to a
stockholder of record on a specified date
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in any such month will be treated as both paid by Bradley and received by the
stockholder on December 31 of such year, provided that the dividend is
actually paid by Bradley during January of the following calendar year.
Stockholders may not include in their individual income tax returns any net
operating losses or capital losses of Bradley.
Bradley may elect to retain and pay income tax on its net long-term capital
gains recognized during the taxable year. Under the Taxpayer Relief Act of
1997 (the "Relief Act"), if Bradley so elects for a taxable year, its
stockholders would include in income as capital gain their proportionate share
of such portion of Bradley's net capital gains as Bradley may designate. Such
retained capital gains may be further designated by Bradley as 20% rate gain,
unrecaptured Section 1250 gain, or 28% rate gain, as discussed below.
Stockholders must account for their share of such retained capital gains in
accordance with such further designation; if no further designation is made,
the retained capital gains are treated as 28% rate gain. A stockholder would
be deemed to have paid its share of the tax paid by Bradley, which would be
credited or refunded to the stockholder. The stockholder's basis in its shares
of Series A Preferred Stock or Bradley Common Stock, as applicable, would be
increased by the amount of undistributed capital gains (less the capital gains
tax paid by Bradley) included in the stockholder's capital gains.
The Relief Act altered the taxation of capital gain income. Under the Relief
Act, individuals, trusts and estates that hold certain investments for more
than 18 months may be taxed at a maximum long-term capital gain rate of 20% on
the sale or exchange of those investments. Individuals, trusts and estates
that hold certain assets for more than one year but not more than 18 months
may be taxed at a maximum mid-term capital gain rate of 28% on the sale or
exchange of those investments. The Relief Act also provides a maximum rate of
25% for "unrecaptured Section 1250 gain" for individuals, trusts and estates,
special rules for "qualified 5-year gain," as well as other changes to prior
law. The Relief Act allows the IRS to prescribe regulations on how the Relief
Act's new capital gain rates will apply to sales of assets by, and sales of
interests in, "pass-through entities," which include REITs such as Bradley.
IRS Notice 97-64 (the "Notice") sets forth guidance regarding sales of assets
by REITs pending the release of regulations and provides, among other things,
that a REIT may designate a capital gains dividend as a 20% rate gain
distribution, an unrecaptured Section 1250 gain distribution or a 28% rate
gain distribution. Absent any such designation, a capital gains dividend will
be treated as a 28% rate gain distribution. In general, the Notice provides
that a REIT must determine the maximum amounts that may be designated in each
class of capital gain dividends as if the REIT were an individual whose
ordinary income is subject to a marginal tax rate of at least 28 percent.
Similar rules will apply in the case of designated retained capital gains (see
discussion above). Bradley will notify stockholders after the close of
Bradley's taxable year as to the portions of the distributions attributable to
that year that constitute ordinary income, return of capital, and capital gain
(and, with respect to capital gain dividends, the portions constituting 20%
rate gain distributions, unrecaptured Section 1250 gain distributions, and 28%
rate gain distributions), as well as the amounts of any designated retained
capital gains (including the amounts thereof constituting 20% rate gain,
unrecaptured Section 1250 gain, and 28% rate gain) and Bradley's taxes with
respect to any designated retained capital gains. Final regulations when
issued may alter the rules of the Notice. In addition, the IRS has not
prescribed regulations or other guidance regarding the application of the new
rates to sales of interests in REITs such as Bradley, and it remains unclear
how the new rules will affect such sales (if at all). Investors are urged to
consult their own tax advisors with respect to the new rules contained in the
Relief Act.
Sale of Series A Preferred Stock or Bradley Common Stock. On the sale of
shares of Series A Preferred Stock or Bradley Common Stock, gain or loss will
be recognized by the holder in an amount equal to the difference between (i)
the amount of cash and fair market value of any property received on such
sale, and (ii) the holder's adjusted basis in the Series A Preferred Stock or
Bradley Common Stock, as applicable. Such gain or loss will be capital gain or
loss if the shares of Series A Preferred Stock or Bradley Common Stock, as
applicable, are held as capital assets, and will be treated as long-term, mid-
term or short-term gain or loss under the provisions discussed above. In
general, and subject to the discussion of the Relief Act, above, any loss upon
a sale or exchange of shares by a holder who has held such shares for six
months or less (after applying certain holding period rules), will be treated
as a long-term capital loss to the extent of distributions from Bradley
required to be treated by such holder as long-term capital gain.
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Conversion of Series A Preferred Stock to Bradley Common Stock. No gain or
loss generally will be recognized upon conversion of Series A Preferred Stock
into Bradley Common Stock except with respect to any cash paid in lieu of
fractional shares of Bradley Common Stock. The tax basis of the Bradley Common
Stock received upon such conversion will be equal to the tax basis of the
Series A Preferred Stock converted, and, provided the Series A Preferred Stock
is held as a capital asset, the holding period of the Bradley Common Stock
will include the holding period of the Series A Preferred Stock converted.
Additionally, if a conversion takes place when there is a dividend arrearage
on the Series A Preferred Stock and the fair market value of the Bradley
Common Stock exceeds the issue price of the Series A Preferred Stock, a
portion of the Bradley Common Stock received might be treated as a dividend
distribution taxable as ordinary income.
Adjustment of Conversion Price. When the conversion price of convertible
preferred stock is adjusted to reflect certain taxable distributions with
respect to the stock into which it is convertible, regulations under Section
305 of the Code treat the adjustment as a constructive distribution by the
issuer, taxable as a dividend to the extent of the issuer's current or
accumulated earnings and profits. Accordingly, under certain circumstances, an
adjustment to the conversion price of the Series A Preferred Stock may give
rise to a deemed taxable dividend to the holders of such stock, whether or not
they exercise their conversion privilege. In addition, the failure to fully
adjust the conversion price of the Series A Preferred Stock under some
circumstances may give rise to a deemed taxable dividend to the holders of
Bradley Common Stock.
Redemption of Series A Preferred Stock. A redemption of Series A Preferred
Stock will be treated under Section 302 of the Code as a distribution that is
taxable at ordinary income tax rates as a dividend (to the extent of Bradley's
current or accumulated earnings and profits), unless the redemption satisfies
certain tests set forth in Section 302(b) of the Code enabling the redemption
to be treated as a sale of Series A Preferred Stock. The redemption will
satisfy such tests if it (i) is "substantially disproportionate" with respect
to the holder, (ii) results in a "complete termination" of the holder's stock
interest in Bradley, or (iii) is "not essentially equivalent to a dividend"
with respect to the holder, all within the meaning of Section 302(b) of the
Code. In determining whether any of these tests have been met, shares
considered to be owned by the holder by reason of certain constructive
ownership rules set forth in the Code, as well as shares actually owned, must
generally be taken into account. Because the determination as to whether any
of the alternative tests of Section 302(b) of the Code will be satisfied with
respect to any particular holder of Series A Preferred Stock depends upon the
facts and circumstances at the time that the determination must be made,
prospective investors are advised to consult their own tax advisors to
determine such tax treatment.
If a redemption of the Series A Preferred Stock is treated as a distribution
that is taxable as a dividend, the amount of the distribution will be measured
by the amount of cash and the fair market value of any property received by
the stockholders. The stockholder's adjusted tax basis in such redeemed Series
A Preferred Stock will be transferred to the holder's remaining stockholdings
in Bradley. If, however, the stockholder has no remaining stockholdings in
Bradley, such basis could be transferred to a related person or it may be
lost.
Section 306 Stock. If, at the time of the Merger, a holder of Mid-America
Common Stock also holds Bradley Common Stock, either directly, or by the
application of certain constructive ownership rules, it is possible, although
the matter is unclear, that the Series A Preferred Stock received by that
stockholder could be treated as "Section 306 stock." Such treatment would not
cause receipt of the Series A Preferred Stock in the Merger to be taxable to
the stockholder, but could cause all or part of the amount realized by the
stockholder on a subsequent sale or redemption of the Series A Preferred Stock
to be treated as ordinary income. Bradley Common Stock received on conversion
of Series A Preferred Stock will not, however, be treated as Section 306
stock. Due to the complexity of the foregoing rules, holders of Mid-America
Common Stock to whom this discussion may apply are encouraged to consult their
tax advisors.
BACKUP WITHHOLDING
Bradley will report to its domestic stockholders and the IRS the amount of
dividends paid during each calendar year, and the amount of tax withheld, if
any. Under the backup withholding rules, a stockholder may be
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subject to backup withholding at the rate of 31% with respect to dividends
paid and redemptions unless such holder (a) is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact, or
(b) provides a taxpayer identification number, certifies that the holder is
not subject to backup withholding, and otherwise complies with applicable
requirements of the backup withholding rules. A stockholder that does not
provide Bradley with his correct taxpayer identification number may also be
subject to penalties imposed by the IRS. In addition, Bradley may be required
to withhold a portion of capital gain distributions to any stockholders who
fail to certify their nonforeign status to Bradley. Any amount paid as backup
withholding will be creditable against the stockholder's income tax liability.
TAXATION OF CERTAIN TAX-EXEMPT STOCKHOLDERS
Generally, a tax-exempt investor that is exempt from tax on its investment
income, such as an individual retirement account ("IRA") or a Section 401(k)
plan, that holds Bradley's stock as an investment will not be subject to tax
on dividends paid by Bradley. However, if such tax-exempt investor is treated
as having purchased its stock with borrowed funds, some or all of its
dividends will be subject to tax. Furthermore, social clubs, voluntary
employee benefit associations, supplemental unemployment benefit trusts, and
qualified group legal services plans that are exempt from taxation under
paragraphs (7), (9), (17), and (20), respectively, of Section 501(c) of the
Code are subject to different rules, which generally will require them to
characterize distributions from the Bradley as taxable. Because of the limit
on the ownership of Bradley capital stock described under "Description of
Bradley Capital Stock--Bradley Excess Stock," this paragraph does not discuss
the possible taxation of dividends received by a pension fund that owns more
than 10% of the value of the capital stock of a company such as Bradley.
OTHER TAX CONSEQUENCES
Bradley and its stockholders may be subject to state or local taxation in
various state or local jurisdictions, including those in which it or they own
property, transact business or reside. The state and local tax treatment of
Bradley and its stockholders may not conform to the federal income tax
consequences discussed above. Consequently, prospective stockholders should
consult their own tax advisors regarding the effect of state and local tax
laws on an investment in Bradley.
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MID-AMERICA SPECIAL MEETING OF STOCKHOLDERS
The Mid-America Special Meeting will be held at , Omaha, Nebraska,
on July , 1998, at 9:00 a.m., local time. At the Mid-America Special
Meeting, holders of Mid-America Common Stock will consider and vote upon a
proposal to approve the Merger and the Merger Agreement. This proposal must be
approved by the affirmative vote of the holders of two-thirds of the
outstanding shares of Mid-America Common Stock entitled to vote thereon.
Holders of Mid-America Common Stock are entitled to one vote per share.
The Mid-America Board of Directors has fixed the close of business on June
, 1998 as the Mid-America Record Date for determining holders entitled to
notice of and to vote at the Mid-America Special Meeting. Only holders of Mid-
America Common Stock at the close of business on the Mid-America Record Date
will be entitled to notice of and to vote at the Mid-America Special Meeting.
As of the Mid-America Record Date, there were 8,285,715 shares of Mid-America
Common Stock issued and outstanding, of which 53,996 shares (representing
approximately 0.65% of the outstanding shares of Mid-America Common Stock)
were owned beneficially by directors and executive officers of Mid-America and
their affiliates. As of the date of the Merger Agreement, all of the directors
and executive officers of Mid-America indicated that they currently intend to
vote all shares of Mid-America Common Stock which they own to approve the
Merger and the Merger Agreement.
All shares of Mid-America Common Stock represented by properly executed
proxies will, unless such proxies have been previously revoked, be voted in
accordance with the instructions indicated in such proxies. IF NO INSTRUCTIONS
ARE INDICATED, SUCH SHARES OF MID-AMERICA COMMON STOCK WILL BE VOTED IN FAVOR
OF THE MERGER AND THE MERGER AGREEMENT. A stockholder who has given a proxy
may revoke it at any time prior to its exercise by giving written notice
thereof to the Secretary of Mid-America, by signing and returning a later-
dated proxy or by voting in person at the Mid-America Special Meeting;
however, mere attendance at the Mid-America Special Meeting will not in and of
itself have the effect of revoking the proxy.
Votes cast by proxy or in person at the Mid-America Special Meeting will be
tabulated by the inspector(s) of election appointed for the meeting and will
determine whether or not a quorum is present. The presence in person or by
properly executed proxy of the holders of a majority of the issued and
outstanding shares of Mid-America Common Stock entitled to vote at the Mid-
America Special Meeting is necessary to constitute a quorum at the Mid-America
Special Meeting. Abstentions and broker non-votes will be treated as shares
that are present at the Mid-America Special Meeting for purposes of
determining whether a quorum exists. In order to be approved, the Merger and
the Merger Agreement must receive the affirmative vote of the holders of two-
thirds of the issued and outstanding shares of Mid-America Common Stock
entitled to vote on the Merger and the Merger Agreement. Abstentions and
broker non-votes will have the effect of votes against the approval of the
Merger and the Merger Agreement.
Mid-America will bear its own cost of solicitation of proxies. Brokerage
firms, fiduciaries, nominees and others will be reimbursed for their out-of-
pocket expenses in forwarding proxy materials to beneficial owners of shares
of Mid-America Common Stock held in their names. In addition to the use of the
mails, proxies may be solicited by directors, officers and regular employees
of Mid-America, who will not be specifically compensated for such services, by
means of personal calls upon, or telephonic or telegraphic communications
with, stockholders or their representatives. In addition, DF King & Co., Inc.,
has been engaged by Mid-America to act as proxy solicitors and will receive a
fee of $9,000 plus reimbursement for out-of-pocket expenses.
THE BOARD OF DIRECTORS OF MID-AMERICA HAS UNANIMOUSLY APPROVED THE MERGER
AND THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT MID-AMERICA
STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER AND THE MERGER AGREEMENT. SEE
"THE MERGER--BACKGROUND OF THE MERGER" AND "THE MERGER--RECOMMENDATION OF THE
BOARD OF DIRECTORS OF MID-AMERICA; REASONS FOR THE MERGER."
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THE MERGER AGREEMENT
GENERAL
The Merger Agreement provides for a business combination between Bradley and
Mid-America in which Mid-America would be merged with and into Bradley and the
holders of Mid-America Common Stock would be issued shares of Series A
Preferred Stock in a transaction intended to qualify as a purchase for
accounting purposes and as a tax-free reorganization for federal income tax
purposes. The discussion in this Proxy Statement/Prospectus of the Merger
Agreement and the description of the principal terms of the Merger Agreement
are subject to and qualified in their entirety by reference to the Merger
Agreement, a copy of which is attached to this Proxy Statement/Prospectus as
Annex A and which is incorporated herein by reference.
EFFECTIVE TIME OF THE MERGER
In accordance with the MGCL, the Merger will become effective upon the
acceptance for record of the Articles of Merger by the State Department of
Assessments and Taxation of Maryland. Subject to the fulfillment (or waiver)
of the other conditions to the obligations of Bradley and Mid-America to
consummate the Merger, it is currently expected that the Merger will be
consummated as soon as practicable following the approval by the stockholders
of Mid-America of the Merger and the Merger Agreement at its Special Meeting
of Stockholders.
EXCHANGE OF MID-AMERICA STOCK CERTIFICATES
Promptly after the Effective Time, Bradley will cause the Exchange Agent to
mail to each holder of record of a Certificate or Certificates (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to the Certificate shall pass, only upon delivery of the
Certificates to the Exchange Agent and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for certificates representing
shares of Series A Preferred Stock and cash in lieu of fractional shares. All
of the shares of Series A Preferred Stock and cash in lieu of fractional
shares to be exchanged for shares of Mid-America Common Stock are referred to
herein as the "Exchange Fund." Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly executed and completed in accordance with the instructions thereto, the
holder of such Certificate will be entitled to receive in exchange therefor
(x) a certificate representing the number of whole shares of Series A
Preferred Stock to which such holder shall be entitled, and (y) a check
representing the amount of cash in lieu of fractional shares, if any, plus the
amount of any dividends or distributions, if any, pursuant to the following
paragraph after giving effect to any required withholding tax. Any Certificate
so surrendered will be canceled. MID-AMERICA STOCKHOLDERS SHOULD NOT SEND IN
THEIR CERTIFICATES UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL.
No dividends or other distributions on Series A Preferred Stock will be paid
with respect to any shares of Mid-America Common Stock represented by a
Certificate to the holder of such Certificate until such Certificate is
surrendered for exchange as provided above, and until such time, the Exchange
Agent shall hold the amount of such dividends or distributions as part of the
Exchange Fund; provided, however, that subject to the effect of applicable
laws, following surrender of any such Certificate, there will be paid to the
holder of certificates representing whole shares of Series A Preferred Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore payable with respect to such whole shares
of Series A Preferred Stock and not paid, less the amount of any applicable
withholding taxes which may be required thereon, and (ii) at the appropriate
payment date, the amount of any dividends or other distributions with a record
date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Series A
Preferred Stock, less the amount of any applicable withholding taxes which may
be required thereon.
No fractional shares of Series A Preferred Stock will be issued in
connection with the Merger. Each holder of Mid-America Common Stock otherwise
entitled to a fractional share of Series A Preferred Stock will be paid, in
lieu thereof, upon surrender of a Certificate, an amount in cash (without
interest), rounded to the nearest cent,
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determined by multiplying $25.00 by the fraction of a share of Series A
Preferred Stock which such holder would otherwise be entitled.
At and after the Effective Time, there will be no transfers on the stock
transfer books of Mid-America of the shares of Mid-America Common Stock which
were outstanding immediately prior to the Effective Time. Certificates
presented to Bradley after the Effective Time will be canceled and exchanged
for certificates for shares of Series A Preferred Stock and cash in lieu of
fractional shares, if any, in accordance with the terms of the Merger
Agreement.
Any portion of the Exchange Fund (including the proceeds of any investments
thereof and any dividends or distributions paid with respect thereto) that is
unclaimed by the former stockholders of Mid-America one year after the
Effective Time will be delivered to Bradley. Any former stockholders of Mid-
America who have not complied with the exchange procedures described above
within one year after the Effective Time shall thereafter look only to Bradley
for payment of their shares of Series A Preferred Stock and cash in lieu of
fractional shares (plus dividends and distributions to the extent set forth in
the Merger Agreement), as determined pursuant to the Merger Agreement, without
any interest thereon. None of Mid-America, Bradley, the Exchange Agent or any
other person will be liable to any former holder of shares of Mid-America
Common Stock for any amount properly delivered to a public official pursuant
to applicable abandoned property, escheat or similar laws.
No interest will be paid or accrued on cash in lieu of fractional shares or
on any dividend or distribution, payable to holders of Certificates.
In the event any Certificate has been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such Certificate to
be lost, stolen or destroyed and, if required by Bradley, the posting by such
person of a bond in such reasonable amount as Bradley may direct as indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent or Bradley will issue in exchange for such
lost, stolen or destroyed Certificate the shares of Series A Preferred Stock
and cash in lieu of fractional shares (plus, to the extent applicable,
dividends and distributions payable pursuant to the terms of the Merger
Agreement).
Each outstanding option to acquire Mid-America Common Stock (the "Existing
Mid-America Options") which has not been exercised by the Effective Time
shall, at the Effective Time, be canceled. The holders of such options shall
be entitled to receive, as consideration therefor, an amount in cash equal to
the excess, if any, of the Option Consideration (as defined below) over the
per share exercise price of such stock option, without interest thereon. Prior
to the Closing Date, Mid-America must obtain an Option Termination Agreement
(an "Option Termination") from each holder of its options terminating all of
such holder's Existing Mid-America Options and releasing any and all rights of
such holder in such options. "Option Consideration" shall mean the average
last sale price (or bid price for days on which there were no sales) per share
of Mid-America Common Stock on the NYSE for the ten trading days preceding the
fifth day prior to the Closing Date.
CONDITIONS TO THE MERGER
The respective obligations of Bradley and Mid-America to effect the Merger
and the other transactions contemplated in the Merger Agreement are subject to
the fulfillment or waiver (to the extent permitted by law) of each of the
following conditions at or prior to the Effective Time: (i) the Merger and the
Merger Agreement shall have been approved by the requisite vote of
stockholders of Mid-America; (ii) the waiting period applicable to the
consummation of the Merger under the HSR Act, if applicable, shall have
expired or been terminated; (iii) neither Bradley nor Mid-America shall be
subject to any order, ruling or injunction of a court of competent
jurisdiction which prohibits the consummation of the transactions contemplated
by the Merger Agreement; (iv) the Registration Statement shall have been
declared effective by the Commission under the Securities Act, and no stop
order suspending the effectiveness of the Registration Statement shall have
been issued by the Commission and no proceedings for that purpose shall have
been initiated or, to the knowledge of Bradley or Mid-America, threatened by
the Commission and upon the occurence of any such event, each of Bradley and
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Mid-America have agreed to use its best efforts to have any such order,
ruling, injunction or other prohibition lifted, stayed or reversed; (v)
Bradley shall have obtained approval for the listing of the shares of Series A
Preferred Stock issuable in the Merger on the NYSE, subject to official notice
of issuance; (vi) Bradley shall have received all state securities or "blue
sky" permits and other authorizations necessary to issue the Series A
Preferred Stock; and (vii) Bradley and Mid-America shall have received the
opinion of Goodwin, Procter & Hoar LLP, or another nationally recognized law
firm selected by Bradley, dated not less than five business days prior to the
date the Registration Statement is declared effective by the Commission, to
the effect that the Merger will be treated for federal income tax purposes as
a tax-free reorganization qualifying under the provisions of Sections 368(a)
of the Code, which opinion shall not have been withdrawn or modified in any
material respect.
The obligations of each of Mid-America and Bradley to effect the Merger are
also subject to the fulfillment or waiver by the other party, at or prior to
the Closing Date, of the following conditions: (i) the representations and
warranties of the other party contained in the Merger Agreement shall be true
and correct in all material respects as of the Effective Time; and (ii) the
other party shall have performed or complied in all material respects with all
agreements and covenants required by the Merger Agreement to be performed or
complied with by it on or prior to the Effective Time.
The obligation of Mid-America to effect the Merger and the other
transactions contemplated therein is also subject to the fulfillment or waiver
of the following conditions at or prior to the Effective Time: (i) from the
date of the Merger Agreement through the Effective Time, there shall not have
occurred any change concerning Bradley or any of its subsidiaries that has had
or could be reasonably likely to have a material adverse effect on the
business, results of operations or financial condition of Bradley and its
subsidiaries taken as a whole (a "Bradley Material Adverse Effect"); and (ii)
all consents, authorizations, orders and approvals of (or filings or
registrations with) any governmental commission, board, other regulatory body
or third party required to be made or obtained by Bradley and its subsidiaries
and affiliated entities in connection with the execution, delivery and
performance of the Merger Agreement and the ancillary agreements shall have
been obtained or made, except where the failure to have obtained or made any
such consent, authorization, order, approval, filing or registration, would
not have a Bradley Material Adverse Effect.
The obligation of Bradley to effect the Merger is also subject to the
fulfillment or waiver at or prior to the Closing Date of the following
conditions: (a) at the closing of the Merger, Bradley shall have received the
opinion of Deloitte & Touche LLP, or another nationally recognized law firm or
accounting firm selected by Mid-America in the form attached to the Merger
Agreement as an exhibit to the effect that, among other things, for the
taxable years ended December 31, 1995, December 31, 1996 and December 31, 1997
and for the short taxable year ending on the Closing Date, Mid-America has
qualified to be taxed as a REIT under Sections 856 through 860 of the Code;
(b) from the date of the Merger Agreement through the Effective Time, there
shall not have occurred any change concerning Mid-America or any of its
subsidiaries, that has had or could be reasonably likely to have a material
adverse effect on the business, results of operations or financial condition
of Mid-America and its subsidiaries taken as a whole (a "Mid-America Material
Adverse Effect"); (c) Mid-America shall have obtained and delivered to Bradley
estoppel certificates, dated no earlier than 60 days prior to the Effective
Time, with respect to (i) 90% of the rented space represented by certain
leases and agreements set forth in a schedule to the Merger Agreement and (ii)
leases representing a total of 50% of the total rented space of each Mid-
America property, other than rented space represented by the leases listed in
the schedule referred to in (c)(i) above; (d) Mid-America shall have obtained
and delivered to Bradley (i) the consents set forth in a schedule to the
Merger Agreement, and (ii) all other consents, authorizations, orders and
approvals of (or filings or registrations with) any governmental commission,
board, other regulatory body or third party required to be made or obtained by
Mid-America and its subsidiaries and affiliated entities in connection with
the execution, delivery and performance of the Merger Agreement and the
ancillary agreements, except where the failure to have obtained or made any
such consent, authorization, order, approval, filing or registration, would
not have a Mid-America Material Adverse Effect; and (e) Bradley shall have
received Option Terminations relating to each of the Existing Mid-America
Options and shall have received an Acknowledgment of Severance Obligation from
each of Dennis G. Gethmann and Jerome L. Heinrichs pursuant to which each of
them acknowledge that they are not entitled to receive any amounts from Mid-
America pursuant to its severance pay policy.
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REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties
relating to, among other things: (i) the due organization, power, authority
and standing of Bradley and Mid-America and similar corporate matters; (ii)
the authorization, execution, delivery and enforceability of the Merger
Agreement; (iii) the capital structure of Bradley and Mid-America; (iv)
subsidiaries of Bradley and Mid-America; (v) investment interests of Bradley
and Mid-America; (vi) conflicts under charters or bylaws, violations of any
instruments and required consents or approvals; (vii) certain documents filed
by each of Bradley and Mid-America with the Commission and the accuracy of
information contained therein; (viii) litigation; (ix) conduct of business in
the ordinary course and the absence of certain changes or material adverse
effects; (x) taxes; (xi) books and records; (xii) Mid-America's properties;
(xiii) Mid-America's leases; (xiv) Mid-America's rents; (xv) environmental
matters; (xvi) employee benefit plans; (xvii) labor matters; (xviii) brokers'
and finders' fees with respect to the Merger; (xix) receipt of fairness
opinions; (xx) ownership of the capital stock in the other company; (xxi) Mid-
America's related party transactions; (xxii) Mid-America's contracts and
commitments; (xxiii) Bradley's issuance of shares of Series A Preferred Stock
in the Merger; (xxiv) Mid-America's development rights; (xxv) Mid-America's
payments as a result of the Merger; (xxvi) Mid-America's tenant improvements;
(xxvii) the status of Mid-America's options to purchase real property; and
(xxviii) the status of Mid-America's relationships with certain related
parties.
CERTAIN COVENANTS
Except as specifically permitted by the Merger Agreement or upon written
consent of the other party, Bradley and Mid-America have each agreed, among
other things, that it will, prior to the Effective Time: (i) use its
reasonable best efforts, and cause its subsidiaries to use their reasonable
best efforts, to preserve intact its business organization and goodwill and
keep available the services of its officers and employees; (ii) confer on a
regular basis with one or more representatives of the other to report
operational matters of materiality, and subject to certain exceptions, any
proposals to engage in material transactions; (iii) promptly notify the other
of any material emergency or other material change in the condition (financial
or otherwise), business, properties, assets, liabilities, prospects or the
normal course of its business or in the operation of its properties, any
material governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or the breach in
any material respect of any representation or warranty contained in the Merger
Agreement; and (iv) promptly deliver to the other true and correct copies of
any report, statement or schedule filed with the Commission subsequent to the
date of the Merger Agreement.
Bradley and Mid-America have agreed to cooperate and coordinate with each
other so that (i) the record date for each regularly quarterly dividend and
distribution prior to the Effective Time will occur on the same date, (ii) the
payment date for each such regular quarterly dividend and distribution will be
on the last business day of each applicable quarter, and (iii) the amount of
each regularly quarterly dividend and distribution will not exceed $.22 per
quarter for Mid-America and $.35 per quarter for Bradley.
Unless Bradley has consented as provided in the Merger Agreement, Mid-
America has agreed that, among other things, prior to the Effective Time, it
(i) shall, and shall cause each of its subsidiaries to, conduct its operations
according to its usual, regular and ordinary course in substantially the same
manner as previously conducted, subject to clauses (ii)-(xv) below; (ii) shall
not, and shall cause each of its subsidiaries not to, acquire, enter into an
option to acquire or exercise an option or contract to acquire additional real
property, incur additional indebtedness (including, without limitation, any
indebtedness relating to Imperial Mall), encumber assets or commence
construction of, or enter into any agreement or commitment to develop or
construct, shopping centers or any other type of real estate projects, except
that, (A) Mid-America may incur additional indebtedness under its existing
lines of credit and (B) Mid-America may engage in the construction of Imperial
Mall in accordance with the budget included in Mid-America's disclosure
letter; (iii) shall not amend the Mid-America Charter or the Mid-America
Bylaws, and shall cause each of its subsidiaries not to amend its charter,
bylaws, joint venture documents, partnership agreements or equivalent
documents except as contemplated by the Merger Agreement; (iv) shall not (A)
except pursuant to the exercise of options, warrants, conversion rights and
other contractual rights existing on the date of the Merger Agreement and
disclosed pursuant to the Merger
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Agreement, issue any shares of its capital stock, effect any stock split,
reverse stock split, stock dividend, recapitalization or other similar
transaction, (B) grant, confer or award any option, warrant, conversion right
or other right not existing on the date of the Merger Agreement to acquire any
shares of its capital stock, (C) increase any compensation or enter into or
amend any employment agreement with any of its present or future officers or
directors, or (D) adopt any new employee benefit plan, or amend any existing
employee benefit plan in any material respect, except for changes which are
less favorable to participants in such plans; (v) shall not (A) declare, set
aside or pay any dividend or make any other distribution or payment with
respect to any shares of its capital stock, except a regular quarterly
dividend, which Mid-America and Bradley shall coordinate and cooperate with
respect to, not to exceed $.22 per share of Mid-America Common Stock for the
first quarter of 1998 and thereafter until the Effective Time and payment of
the Pre-Merger Dividend, if necessary, or (B) directly or indirectly redeem,
purchase or otherwise acquire any shares of its capital stock or capital stock
of any of its subsidiaries, or make any commitment for any such action; (vi)
shall not, and shall not permit any of its subsidiaries to, sell, lease or
otherwise dispose of (A) any Mid-America properties or any portion thereof or
any of the capital stock of or partnership or other interests in any of its
subsidiaries or (B) except in the ordinary course of business, any of its
other assets; provided, however, that, subject to the approval of a committee
composed of two individuals selected by Bradley and two individuals selected
by Mid-America, Mid-America may lease any Mid-America properties or portion
thereof in the ordinary course of business (except that approval of such
committee shall not be required for leases of less than 5,000 square feet,
which are on market rates, terms and conditions and do not violate any
exclusives or restrictions) and solicit purchase bids for the properties
located at Town West, Macon County and Imperial Mall; (vii) shall not, and
shall not permit any of its subsidiaries to, make any loans, advances or
capital contributions to, or investments in, any other person; (viii) shall
not, and shall not permit any of its subsidiaries to, pay, discharge or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past practice
or in accordance with their terms, of liabilities reflected or reserved
against in, or contemplated by, the most recent consolidated financial
statements (or the notes thereto) of Mid-America included in Mid-America's
filings with the Commission as of the date of the Merger Agreement or incurred
in the ordinary course of business consistent with past practice; (ix) shall
not, and shall not permit any of its subsidiaries, subject to certain
exceptions set forth in the Merger Agreement, to enter into any material
commitment, contractual obligation, borrowing, capital expenditure or
transaction (each, a "Commitment") which may result in total payments or
liability by or to it in excess of $25,000 except for certain insurance
renewals; (x) shall not, and shall not permit any of its subsidiaries to,
enter into any Commitment with any officer, director, consultant or affiliate
of Mid-America or any of its subsidiaries; (xi) shall provide Bradley with a
reasonable opportunity to review and comment on any federal income tax returns
filed by Mid-America or any of its subsidiaries prior to the Effective Time;
(xii) shall not, without prior notification and consultation with Bradley,
terminate any employee under circumstances which would result in severance
payments to such employee or pay any severance benefits to any employee;
(xiii) shall maintain its properties in substantially the same condition as
the same are on the date of the Merger Agreement, subject only to reasonable
use and wear and casualty; (xiv) shall maintain in full force and effect fire
and extended coverage casualty insurance on its properties in accordance with
its past business practice; and (xv) shall take all actions necessary to
terminate its dividend reinvestment plan as soon as possible following the
execution of the Merger Agreement and in any event prior to the distribution
of any Pre-Merger Dividend.
Bradley and Mid-America have agreed that between the date of the Merger
Agreement and the Effective Time, (i) Bradley and its subsidiaries may enter
into leases with respect to all or any portion of Bradley's properties,
acquire, lease, enter into an option to acquire or lease, or exercise an
option or contract to acquire or lease, additional real property, incur
additional indebtedness, encumber assets or commence construction of, or enter
into any agreement or commitment to develop, construct or renovate, shopping
centers or other real estate projects, (ii) Bradley may issue directly or
indirectly in a public or private transaction any kind of securities,
including without limitation shares of any class or series of common,
preferred or other type of capital stock, and may cause BOLP to issue in a
public or private transaction any kind of securities, including, without
limitation, partnership units or debt securities, (iii) Bradley may acquire,
or agree to acquire any business or any corporation, partnership, limited
liability company or other business organization by merger, consolidation or
by
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purchasing substantially all of the assets, capital stock or partnership or
membership interests of such entity, or by any other manner, (iv) Bradley may
sell or agree to sell all or substantially all of its assets or to issue or
sell any amount of its outstanding capital stock or units of BOLP to a person
or group of persons or an entity, and may merge or consolidate with another
entity regardless of whether Bradley is the surviving entity in such
transaction (but see "--Termination" below), (v) Bradley may amend and/or
restate its Charter and Bylaws and the other partners of BOLP may amend and/or
restate the BOLP Partnership Agreement, and (vi) Bradley and its subsidiaries
may take any action necessary or advisable to effectuate any of the foregoing
clauses.
Mid-America and Bradley have agreed (a) to use all reasonable best efforts
to cooperate with one another in (i) determining which filings are required to
be made prior to the Effective Time with, and which consents, approvals,
permits or authorizations are required to be obtained prior to the Effective
Time from, governmental or regulatory authorities of the United States, the
several states and foreign jurisdictions and any third parties in connection
with the execution and delivery of the Merger Agreement, the ancillary
agreements to the Merger Agreement and the consummation of the transactions
contemplated thereby and (ii) timely making all such filings and timely
seeking all such consents, approvals, permits or authorizations; (b) to use
all reasonable best efforts to obtain in writing any consents required from
third parties to effectuate the Merger, such consents to be in reasonably
satisfactory form to Mid-America and Bradley; and (c) to use all reasonable
efforts to take, or cause to be taken, all other action and do, or cause to be
done, all other things necessary, proper or appropriate to consummate and make
effective the transactions contemplated by the Merger Agreement and the
ancillary agreements.
Mid-America has agreed to have remedied any violations of any laws
applicable to its properties including, without limitation, fire safety
standards, of which it has been notified by any governmental authority to the
satisfaction of and within the time periods required by such governmental
authority.
Mid-America has also agreed to obtain updated or new surveys of each of its
properties in accordance with certain criteria set forth in the Merger
Agreement. Mid-America has agreed to use its reasonable best efforts to
deliver or cause to be delivered to Bradley, prior to the Closing Date,
certain letters from "affiliates," as defined under Rule 145 promulgated under
the Securities Act. See "The Merger--Certain Resale Restrictions." Bradley has
agreed to file the reports required to be filed by it under the Exchange Act
and the rules and regulations adopted by the Commission thereunder, and to
take such further action as any affiliate of Mid-America may reasonably
request, all to the extent required from time to time to enable such affiliate
to sell shares of Series A Preferred Stock received by such affiliate in the
Merger without registration under the Securities Act pursuant to Rule
145(d)(1) or any successor rule or regulation subsequently adopted by the
Commission.
Mid-America and Bradley have agreed that, from and after the date of the
Merger Agreement until the Effective Time, neither Mid-America nor Bradley,
nor any of their respective subsidiaries or other affiliates will (i)
knowingly take any action, or knowingly fail to take any action, that would
jeopardize the qualification of the Merger as a reorganization within the
meaning of Section 368(a) of the Code or (ii) enter into any contract,
agreement, commitment or arrangement with respect to the foregoing. Following
the Effective Time, Bradley has agreed to use its best efforts to conduct its
business in a manner that would not jeopardize the characterization of the
Merger as a reorganization within the meaning of Section 368(a) of the Code.
Except for normal increases in the ordinary course of business that are
consistent with past practices and cost increases of third party providers
necessary to maintain benefits at current levels that, in the aggregate, do
not result in a material increase in benefits or compensation expense to Mid-
America or any of the Mid-America Subsidiaries or as set forth in Mid-
America's disclosure letter, Mid-America has agreed not, and will not permit
any of the Mid-America Subsidiaries to, adopt or amend (except as may be
required by law) any bonus, profit sharing, compensation, severance,
termination, stock option, pension, retirement, deferred compensation,
employment or other employee benefit agreements, trusts, plans, funds or other
arrangements for the benefit or welfare of any director, officer or employee
that increase in any manner the compensation, retirement, welfare or fringe
benefits of any director, officer or employee or pay any benefit not required
by any existing plan or
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arrangement (including without limitation the granting of stock options) or
take any action or grant any benefit not expressly required under the terms of
any existing agreements, trusts, plans, funds or other such arrangements to
enter into any contract, agreement, commitment or arrangement to any of the
foregoing.
Mid-America and Bradley have agreed to cooperate and keep each other
informed in a timely manner regarding any communications to or filings with
any state environmental regulatory authorities regarding Mid-America's
properties, and Mid-America has agreed that it shall not submit any written
communication or filing to any such state environmental authority without the
prior written consent of Bradley, which consent Bradley has agreed shall not
be unreasonably withheld.
TERMINATION
The Merger Agreement may be terminated and abandoned at any time prior to
the Effective Time, whether before or after approval of the Merger and the
Merger Agreement, by the stockholders of Mid-America, in a number of
circumstances, including, among others: (a) by the mutual written consent of
Mid-America and Bradley; (b) by either Mid-America or Bradley if (i) any
United States federal or state court of competent jurisdiction or other
governmental entity shall have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
Merger and such order, decree, ruling or other action shall have become final
and nonappealable, provided that the party seeking to terminate shall have
used its best efforts to appeal such order, decree, ruling or other action,
(ii) the Merger Agreement and the transactions contemplated thereby shall have
failed to receive the requisite vote for approval by the stockholders of Mid-
America upon the holding of a duly convened stockholder meeting, or (iii) the
Merger shall not have been consummated on or before September 30, 1998 (other
than due to the failure of the party seeking to terminate the Merger Agreement
to perform its obligations under the Merger Agreement required to be performed
by it at or prior to the Effective Time); (c) by Mid-America if (i) any
representation, warranty, covenant or agreement of Bradley set forth in the
Merger Agreement has been breached or become untrue, as the case may be, such
that certain conditions of the Merger would be incapable of being satisfied by
September 30, 1998, provided, however, that, in any case, a willful breach
shall be deemed to be incapable of being satisfied for the purposes of this
provision (c)(i), (ii) Bradley enters into a definitive agreement pursuant to
which Bradley agrees (A) to sell all or substantially all of its assets or (B)
to merge or consolidate with another person if consummation of such merger or
consolidation would result in the voting securities of Bradley outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
person) less than 50% of the combined voting power of the voting securities of
Bradley or such surviving person outstanding immediately after such merger or
consolidation, but only if Mid-America terminates the Merger Agreement under
this provision (c)(ii) prior to the seventh (7th) day after receipt of notice
of Bradley's having entered into such definitive agreement, or (iii) the Board
of Directors of Mid-America recommends to Mid-America's stockholders approval
or acceptance of an Acquisition Proposal (as defined below in "--No
Solicitation of Transactions") by a person other than Bradley, but only in the
event that the Board of Directors of Mid-America, after consultation with and
based upon the advice of McGrath, North, Mullin & Kratz, P.C. or another
nationally recognized law firm, has determined in good faith that such action
is necessary for the Board of Directors of Mid-America to comply with its
fiduciary duties to its stockholders under applicable law; or (d) by Bradley
if (i) any representation, warranty, covenant or agreement of Mid-America set
forth in the Merger Agreement has been breached or become untrue, as the case
may be, such that certain conditions of the Merger would be incapable of being
satisfied by September 30, 1998, provided, however, that, in any case, a
willful breach of certain covenants shall be deemed to cause such conditions
to be incapable of being satisfied for the purposes of this provision (d)(i),
(ii) the Board of Directors of Mid-America fails to make, withdraws, amends,
modifies or changes its approval or recommendation of the Merger Agreement or
any of the transactions contemplated thereby, (iii) Mid-America fails as soon
as practicable to mail this Proxy Statement/Prospectus to its stockholders or
to include the recommendation of its Board of Directors of the Merger
Agreement and the transactions contemplated thereby in this Proxy
Statement/Prospectus, (iv) the Board of Directors of Mid-America shall have
recommended that stockholders of Mid-America accept or approve an Acquisition
Proposal by a person other than Bradley, or (v) Mid-America or its Board of
Directors shall have resolved to do any of
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the events set forth in (d)(ii), (d)(iii) or (d)(iv) above. As used herein and
in the Merger Agreement, the word "person" means an individual, a corporation,
a partnership, an association, a joint stock company, a trust, a limited
liability company, any unincorporated organization or any other entity.
TERMINATION AMOUNT AND EXPENSES
If (a) Bradley terminates the Merger Agreement because (i) the Board of
Directors of Mid-America has recommended that stockholders of Mid-America
accept or approve an Acquisition Proposal by a person other than Bradley (or
Mid-America or its Board has resolved to do such), or (ii) any representation,
warranty, covenant or agreement on the part of Mid-America set forth in
certain sections of the Merger Agreement has been willfully breached; or (b)
Mid-America terminates the Merger Agreement because the Board of Directors of
Mid-America, after consultation with and based upon the advice of McGrath,
North, Mullin & Kratz, P.C. or another nationally recognized law firm, has
determined in good faith that its fiduciary duties to its stockholders under
applicable law require it to recommend to its stockholders approval or
acceptance of an Acquisition Proposal by a person other than Bradley, then
Mid-America shall pay to Bradley an amount in cash equal to the sum of (i)
$2,500,000 plus (ii) Bradley's out-of-pocket costs and expenses in connection
with the Merger Agreement and the transactions contemplated thereby,
including, without limitation, fees and disbursements of accountants,
attorneys and investment bankers, up to $875,000 (clauses (i) and (ii)
collectively, the "Termination Amount").
If Bradley terminates the Merger Agreement because (i) the Board of
Directors of Mid-America has failed to make, or has withdrawn, amended,
modified or changed its approval or recommendation of the Merger Agreement or
any of the transactions contemplated thereby; (ii) Mid-America has failed as
soon as practicable to mail this Proxy Statement/Prospectus to its
stockholders or to include the recommendation of its Board of Directors of the
Merger Agreement and the transactions contemplated thereby in this Proxy
Statement/Prospectus; (iii) Mid-America or its Board of Directors has resolved
to do either (i) or (ii) above; or (iv) any representation, warranty, covenant
or agreement on the part of Mid-America set forth in the Merger Agreement has
been breached or become untrue, as the case may be, and is incapable of being
satisfied by September 30, 1998 (except for a termination because of a willful
breach by Mid-America in which case the previous paragraph will apply), Mid-
America shall pay all of Bradley's out-of-pocket costs and expenses in
connection with the Merger Agreement and the transactions contemplated
thereby, including, without limitation, fees and disbursements of accountants,
attorneys and investment bankers, (collectively, "Expenses") up to $875,000.
If Bradley or Mid-America terminates the Merger Agreement because the Merger
Agreement and the transactions contemplated thereby failed to receive the
requisite vote for approval by the stockholders of Mid-America upon the
holding of a duly convened stockholder meeting, then Mid-America shall pay all
of Bradley's Expenses in connection with the Merger Agreement and the
transactions contemplated thereby, up to $500,000.
If at any time prior to or within one year after termination of the Merger
Agreement, unless such termination was (i) pursuant to mutual written consent
of Bradley and Mid-America; (ii) by either Bradley or Mid-America because of a
United States federal or state court of competent jurisdiction or other
governmental entity issuing a final and nonappealable order, decree or ruling
or taking any other final and nonappealable action permanently enjoining,
restraining or otherwise prohibiting the Merger (provided that the party
seeking to terminate shall have used its best efforts to appeal such order,
decree, ruling or other action); (iii) by Mid-America because any
representation, warranty, covenant or agreement of Bradley set forth in the
Merger Agreement has been breached or become untrue, as the case may be, and
certain conditions to the Merger are incapable of being satisfied by September
30, 1998; (iv) by either Bradley or Mid-America because the Merger Agreement
and the transactions contemplated thereby failed to receive the requisite vote
for approval by the Mid-America Stockholders upon the holding of a duly
convened stockholder meeting; (v) by either Mid-America or Bradley because the
Merger was not consummated on or before September 30, 1998 (other than due to
the failure of the party seeking to terminate the Merger Agreement to perform
its obligations under the Merger Agreement required to be performed by it at
or prior to the Effective Time), Mid-America enters into an agreement relating
to a post-
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termination acquisition proposal (a "PTAP") with a person other than Bradley
or Mid-America's Board of Directors recommends or resolves to recommend to the
Mid-America Stockholders' approval or acceptance of a PTAP with a person other
than Bradley, then, upon the entry into such agreement or the making of such
recommendation or resolution, Mid-America shall pay to Bradley the Termination
Amount, which amount shall be reduced by any monies previously paid by Mid-
America to Bradley pursuant to the previous paragraphs. A PTAP is defined to
mean any proposal or offer (including, without limitation, any proposal or
offer to its stockholders) with respect to a merger, acquisition, tender
offer, exchange offer, consolidation or similar transaction involving, or any
purchase of, 20% or more of the assets or any equity securities of, Mid-
America or any of its subsidiaries, other than the transactions contemplated
by the Merger Agreement; provided, however, that a PTAP is defined to not
include any transaction involving the partnership interests or assets of Mid-
America Bethal.
If (A) prior to the Mid-America Special Meeting, a PTAP has been received by
Mid-America or a person has publicly disclosed a PTAP or an intent to make a
PTAP and (B) if at any time prior to or within one year after termination of
the Merger Agreement because the Merger Agreement and the transactions
contemplated thereby failed to receive the requisite vote for approval by the
stockholders of Mid-America upon the holding of a duly convened stockholder
meeting, Mid-America enters into an agreement relating to a PTAP with a person
other than Bradley, or Mid-America's Board of Directors recommends or resolves
to recommend to Mid-America's stockholders approval or acceptance of a PTAP
with a person other than Bradley, then upon the entry into such agreement or
the making of such recommendation or resolution, Mid-America shall pay to
Bradley the Termination Amount which amount shall be reduced by any monies
previously paid by Mid-America to Bradley pursuant to the previous paragraphs.
The Merger Agreement provides that Mid-America shall not, at any time prior
to or within one year after termination of the Merger Agreement, enter into
any agreement relating to a PTAP with a person other than Bradley unless such
agreement provides that such person shall, upon the execution of such
agreement, pay any Termination Amount due Bradley under the Merger Agreement.
The Merger Agreement also provides that Bradley's right to payment of the
Expenses and/or Termination Amount shall constitute liquidated damages with
respect to any claim for damages or any other claim to which Bradley may be
entitled to assert against Mid-America and shall constitute Bradley's sole and
exclusive remedy. In the event there is a judicial determination that the
Termination Amount is invalid, illegal or unenforceable in any respect for any
reason, in whole or in part, or in the event that there is a judicial
determination that Mid-America's obligation to pay the Termination Amount is
invalid, illegal or unenforceable, in whole or in part, the validity, legality
and enforceability of the Merger Agreement shall not in any way be impaired
thereby and Bradley shall be entitled to enforce all of its rights and
privileges to the fullest extent of the law, including, without limitation,
its right to pursue a claim for monetary damages or equitable relief against
Mid-America; provided that in no circumstances will the amount of monetary
damages (exclusive of costs and expenses incurred in collecting such amounts)
exceed the sum of (i) $500,000 in connection with the termination of the
Merger Agreement because the Merger Agreement and the transactions
contemplated thereby failed to receive the required vote for approval by the
stockholders of Mid-America, or $875,000 in connection with any other expense
award described in this section for recovery of fees and disbursements of
accountants, attorneys and investment bankers, and (ii) $2,500,000 for events
for which a Termination Amount would otherwise be payable to Bradley as
described in this section.
Except as otherwise provided in the Merger Agreement, Bradley and Mid-
America have agreed that all costs and expenses incurred in connection with
the Merger Agreement and the transactions contemplated thereby shall be paid
by the party incurring such expenses, except that (i) the filing fee in
connection with the HSR Act filing, if any; (ii) the filing fee in connection
with the filing of this Proxy Statement/Prospectus or the Registration
Statement with the Commission; and (iii) the expenses incurred for printing
and mailing this Proxy Statement/Prospectus shall be shared equally by Mid-
America and Bradley. Bradley and Mid-America have also agreed that all costs
and expenses for professional services rendered pursuant to the transactions
contemplated
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by the Merger Agreement including, but not limited to, investment banking and
legal services, will be paid by each party incurring such services.
REDUCTION OF TERMINATION AMOUNT OR EXPENSES
In general, under the REIT provisions of the Code at least 75% of a REIT's
gross income for each taxable year must consist of defined types of income
derived directly or indirectly from investments relating to real property (the
"75% income test"), and at least 95% of the REIT's gross income for each
taxable year must be derived from such real property investments and from
certain categories of investment income (the "95% income test"). The Merger
Agreement provides in effect for a reduction in the Termination Amount and/or
Expenses payable to Bradley if necessary to prevent such amounts from causing
Bradley to fail these REIT income requirements. Specifically, the Merger
Agreement provides that, notwithstanding anything to the contrary set forth in
the Merger Agreement, in the event that Mid-America is obligated to pay
Bradley the Termination Amount and/or Expenses, Mid-America (or any other
person to the extent provided in the Merger Agreement) shall pay to Bradley
from the applicable Termination Amount and/or Expenses, as the case may be, an
amount equal to the lesser of (x) the Termination Amount and/or Expenses, as
the case may be, and (y) the sum of (1) the maximum amount that can be paid to
Bradley without causing Bradley to fail to meet the requirements of the 75%
and 95% income tests determined as if the Termination Amount did not
constitute qualifying income for purposes of the 75% and 95% income tests
("Qualifying Income"), plus (2) in the event Bradley receives either a ruling
from the IRS or an opinion from Bradley's counsel that the Termination Amount
and/or Expenses would constitute Qualifying Income or would be excluded from
gross income for purposes of the 75% and 95% income tests, an amount equal to
the Termination Amount and/or Expenses, as the case may be, less the amount
payable under clause (1) above.
NO SOLICITATION OF TRANSACTIONS
Unless and until the Merger Agreement has been terminated in accordance with
its terms, Mid-America has agreed and covenanted that neither it nor any of
its subsidiaries will, and each of them will direct and use its best efforts
to cause its respective officers, directors, employees, agents and
representatives not to, directly or indirectly, initiate, solicit or encourage
any inquiries or the making or implementation of any proposal or offer
(including, without limitation, any proposal or offer to its stockholders)
with respect to a merger, acquisition, tender offer, exchange offer,
consolidation or similar transaction involving, or any purchase of 10% or more
of the assets or any equity securities or partnership interests (including,
without limitation, partnership interests of Mid-America Bethal) of, Mid-
America or any of its subsidiaries, other than the transactions contemplated
by the Merger Agreement (any such proposal or offer being herein referred to
as an "Acquisition Proposal") or engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions with,
any person relating to an Acquisition Proposal, or otherwise facilitate any
effort or attempt to make or implement an Acquisition Proposal. In connection
with the Merger Agreement, Mid-America agreed to immediately cease and cause
to be terminated any existing activities, discussions or negotiations with any
parties conducted prior to the date of the Merger Agreement with respect to
any of the foregoing and to take the necessary steps to inform the individuals
or entities referred to above of these obligations. Mid-America has also
agreed to notify Bradley immediately if any such inquiries or proposals are
received by, any such information is requested from, or any such negotiations
or discussions are sought to be initiated or continued with it; provided,
however, that the Board of Directors of Mid-America may (a) furnish
information to or enter into discussions or negotiations with, any person or
entity that makes an unsolicited bona fide Acquisition Proposal, if, and only
to the extent that, (i) the Board of Directors of Mid-America, after
consultation with and based upon the advice of McGrath, North, Mullin & Kratz,
P.C. or another nationally recognized law firm, determines in good faith that
such action is required for the Board of Directors to comply with its
fiduciary duties to stockholders under applicable law, (ii) prior to
furnishing such information to, or entering into discussions or negotiations
with, such person or entity, Mid-America provides written notice to Bradley to
the effect that it is furnishing information to, or entering into discussions
or negotiations with, such person or entity, and (iii) Mid-America keeps
Bradley informed of the status of any such discussions or negotiations
including, without limitation, promptly informing Bradley (in any
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case within 24 hours) of all material developments relating thereto; and (b)
to the extent applicable, complies with Rule 14e-2 and Rule 14a-9 promulgated
under the Exchange Act with regard to an Acquisition Proposal.
INDEMNIFICATION
Bradley has agreed that all rights to indemnification or exculpation
existing in favor of the directors, officers, employees, advisors and agents
of Mid-America and each of its subsidiaries as provided in their respective
charters or bylaws in effect as of the date of the Merger Agreement with
respect to matters occurring at or prior to the Effective Time will survive
the Merger and will continue in full force and effect. For a period of six
years after the Effective Time, Bradley has agreed not to amend, repeal or
otherwise modify the provisions in the Bradley Charter and the Bradley Bylaws
providing for exculpation of director liability and indemnification in any
manner that would materially and adversely affect the rights thereunder of
individuals who at any time prior to the Effective Time were directors,
officers, employees, advisors or agents of Mid-America with respect to actions
or omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by the Merger Agreement), unless
such modification is required by law; provided, however, that in the event any
claim or claims are asserted or made either prior to the Effective Time or
within such six year period, all rights to indemnification in respect of any
such claim or claims will continue until disposition of any and all such
claims.
In addition to the rights provided above, in the event of any threatened or
actual claim, action, suit, proceeding or investigation, whether civil,
criminal or administrative, including, without limitation, any action by or on
behalf of any or all security holders of Mid-America or Bradley or by or in
the right of Mid-America or Bradley or any claim, action, suit, proceeding or
investigation in which any person who is now, or has been, at any time prior
to the date hereof, or who becomes prior to the Effective Time, a director of
Mid-America (the "Indemnified Parties"), is, or is threatened to be, made a
party based in whole or in part on, or arising in whole or in part out of, or
pertaining to (i) the fact that he is or was a director of Mid-America or any
of the subsidiaries of Mid-America or any action or omission by such person in
his capacity as a director or (ii) the Merger Agreement or the transactions
contemplated by the Merger Agreement, whether in any case asserted or arising
before or after the Effective Time, Bradley, on the one hand, and the
Indemnified Parties, on the other hand, have agreed to cooperate and use their
reasonable best efforts to defend against and respond thereto. Bradley has
agreed that, after the Effective Time, it will indemnify and hold harmless, as
and to the full extent permitted by applicable law, each Indemnified Party
against any losses, claims, liabilities, expenses (including reasonable
attorneys' fees and expenses), judgments, fines and amounts paid in settlement
in connection with any such threatened or actual claim, action, suit,
proceeding or investigation. In addition, after the Effective Time, in the
event of any such threatened or actual claim, action, suit, proceeding or
investigation, Bradley has agreed to promptly pay and advance expenses and
costs incurred by each Indemnified Person as they become due and payable in
advance of the final disposition of any claim, action, suit, proceeding or
investigation to the fullest extent and in the manner permitted by law.
Bradley has also agreed to purchase, at or prior to the Effective Time,
liability insurance coverage for Mid-America's directors and executive
officers for a period of six years which will provide the directors and
executive officers with coverage on substantially similar terms as currently
provided by Mid-America to such directors and executive officers, but for
which Bradley will only be required to pay up to $50,000 in the aggregate. In
addition, in the event that Bradley or any of its successors or assigns
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger
or Bradley transfers or conveys all or substantially all of its assets and
properties, to any person, then, in each such case, Bradley has agreed that
proper provisions shall be made so that the successors or assigns of Bradley
assume the indemnification obligations described in this paragraph.
AMENDMENTS
Bradley and Mid-America may amend the Merger Agreement by written agreement
at any time before or after approval of matters presented in connection with
the Merger by the stockholders of Mid-America, but after
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any such stockholder approval, no amendment shall be made which by law
requires the further approval of stockholders without obtaining such further
approval.
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The following table sets forth the historical ratios of earnings to combined
fixed charges and preferred stock dividends of Bradley for the periods
indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
----------------------------------------------------------------
1993 1994 1995 1996 1997 1998
------ ------ ------ ------ ------ ----
<S> <C> <C> <C> <C> <C>
2.72:1 2.70:1 2.55:1 2.92:1 2.79:1 2.17:1
</TABLE>
For purposes of computing these ratios, earnings have been calculated by
adding fixed charges (excluding capitalized interest) to income before income
taxes and extraordinary items. Fixed charges consist of interest costs,
whether expensed or capitalized, the interest component of rental expense, if
any, and amortization of debt discounts and issue costs, whether expensed or
capitalized.
DESCRIPTION OF BRADLEY CAPITAL STOCK
The description of the Bradley's capital stock set forth below does not
purport to be complete and is qualified in its entirety by reference to the
Bradley Charter and Bradley Bylaws, each as amended and restated, copies of
which are exhibits to the registration statement of which this Proxy
Statement/Prospectus is a part and the Articles Supplementary relating to the
Series A Preferred Stock, which is attached as Annex B. For a discussion of
certain terms of the Bradley Charter applicable to all classes of Bradley
stock, see "Comparison of Stockholder Rights."
GENERAL
Under the Bradley Charter, Bradley has authority to issue up to 150 million
shares of stock, consisting of 20,000,000 shares of preferred stock, par value
$.01 per share (the "Bradley Preferred Stock"), 80,000,000 shares of Bradley
Common Stock, par value $.01 per share, and 50,000,000 shares of "Excess
Stock" (as described below), par value $.01 per share ("Excess Stock"). As of
June 1, 1998, there are 23,701,762 shares of Bradley Common Stock issued and
outstanding and no shares of Bradley Preferred Stock issued or outstanding. In
addition, there are approximately 1,381,242 limited partnership units of BOLP
outstanding (other than those held directly by Bradley); such units may be
exchanged for shares of Bradley Common Stock on a one-for-one basis at the
option of Bradley when tendered to BOLP for redemption, subject to certain
limitations imposed to protect Bradley's status as a REIT.
BRADLEY PREFERRED STOCK
Shares of Bradley Preferred Stock may be issued from time to time, in one or
more series, as authorized by the Board of Directors of Bradley. Prior to
issuance of shares of each series, the Board of Directors is required by the
MGCL and the Bradley Charter to fix for each series, subject to the provisions
of the Bradley Charter regarding Excess Stock, the terms, preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications and/or terms or conditions of
redemption, as are permitted by the MGCL. The Bradley Preferred Stock will,
when issued, be fully paid and nonassessable and will have no preemptive
rights, other than as determined by the Board of Directors. The Board of
Directors could authorize the issuance of shares of Bradley Preferred Stock
with terms and conditions that could have the effect of discouraging a
takeover or other transaction that holders of Bradley Common Stock might
believe to be in their best interests or in which holders of some, or a
majority, of Bradley Common Stock might receive a premium for their shares
over the then-current market price of such shares of Bradley Common Stock.
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Although no shares of Bradley Preferred Stock are currently outstanding,
Bradley will issue up to approximately 3,570,301 shares of Bradley Preferred
Stock as 8.4% Series A Convertible Preferred Stock (the "Series A Preferred
Stock") in exchange for all of the issued and outstanding shares of Mid-
America Common Stock at the Effective Time.
SERIES A PREFERRED STOCK
When issued at the Effective Time, the Series A Preferred Stock will be
validly issued, fully paid and nonassessable. The holders of the Series A
Preferred Stock will have no preemptive rights with respect to any shares of
capital stock of Bradley or any other securities of Bradley convertible into
or carrying rights or options to purchase any such shares. The Series A
Preferred Stock will not be subject to any sinking fund or other obligation of
Bradley to redeem or retire the Series A Preferred Stock. Unless converted or
redeemed, the Series A Preferred Stock will have a perpetual term, with no
maturity. Bradley expects that the shares of Series A Preferred Stock will be
approved for listing on the NYSE, subject to official notice of issuance,
under the symbol "BTRPRA."
Ranking
The Series A Preferred Stock will rank senior to the Bradley Common Stock
with respect to the payment of dividends and amounts upon liquidation,
dissolution or winding up of Bradley. The Series A Preferred Stock will, with
respect to dividend rights and rights upon liquidation, dissolution or winding
up of Bradley, rank (a) senior to all classes or series of Bradley Common
Stock and to all equity securities the terms of which specifically provide
that such equity securities rank junior to such Series A Preferred Stock; (b)
on parity with all equity securities issued by Bradley the terms of which
specifically provide that such equity securities rank on a parity with the
Series A Preferred Stock; and (c) junior to all other equity securities issued
by Bradley. The term "equity securities" does not include convertible debt
securities.
While any shares of Series A Preferred Stock are outstanding, Bradley may
not authorize, create or increase the authorized amount of any shares of any
class or series of stock or securities convertible into shares of any class or
series of stock that expressly ranks senior to the Series A Preferred Stock
with respect to the payment of dividends or amounts upon liquidation,
dissolution or winding up without the consent of the holders of two-thirds of
the outstanding shares of Series A Preferred Stock voting as a single class.
However, Bradley may increase or decrease the authorized number of shares of
any class or series of equity securities of Bradley or create a new class or
series of stock ranking junior to or on a parity with the Series A Preferred
Stock with respect, in each case, to the payment of dividends and amounts upon
liquidation, dissolution and winding up without the consent of any holder of
Series A Preferred Stock. See "--Voting Rights" below.
Dividends
Holders of shares of Series A Preferred Stock will be entitled to receive,
when, as and if declared by the Bradley Board, out of funds of Bradley legally
available for payment, cumulative cash dividends payable quarterly in arrears
at the rate of 8.4% of the $25.00 liquidation preference per annum (equivalent
to a fixed quarterly amount of $0.525 per share). Dividends on the Series A
Preferred Stock will be payable on or before the last calendar day of each
March, June, September and December following the original issuance of the
Series A Preferred Stock at the Effective Time (each, a "Dividend Payment
Date"). Each such dividend will be payable to holders of record as they appear
on the stock records of Bradley at the close of business on the applicable
record date, which will be the same as the record date for any dividend
payable on the Bradley Common Stock with respect to the same period or, if no
such dividend is payable on the Bradley Common Stock, then the record date for
such Dividend Payment Date shall be the 20th day of the calendar month in
which the applicable Dividend Payment Date falls or on such earlier date
designated on at least 10 days notice by the Board of Directors of Bradley as
the record date for such Dividend Payment Date (each, a "Dividend Record
Date"). Dividends will accrue to the holders thereof whether or not in any
dividend period or periods Bradley is prohibited from paying any dividends or
has earnings or funds legally available for the payment of such dividends and
whether or not such dividends are declared by the Bradley Board of Directors.
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Under the terms of the Series A Preferred Stock, no dividends may be
authorized or paid or set apart for payment by Bradley at any time that the
terms and provisions of any agreement to which Bradley is subject, including
any agreement relating to indebtedness, prohibits such authorization, payment
or setting apart for payment or provides that such authorization, payment or
setting apart for payment would constitute a default or breach thereunder, or
to the extent that such actions would be restricted or prohibited by law.
Amounts that would be needed, if Bradley were to be dissolved at the time of
such distribution, to satisfy the preferential rights upon dissolution of
holders of shares of Series A Preferred Stock will not be added to Bradley's
total liabilities for the purposes of determining whether a dividend or
distribution is permitted under the MGCL.
Unless all dividends then required to be paid on the Series A Preferred
Stock have been or contemporaneously are declared and paid, or declared and a
sum sufficient for the payment thereof is set apart for payment, Bradley will
not (i) declare, pay or set apart for payment, any dividend or other
distribution with respect to any Junior Stock (as defined below) (other than
dividends paid in shares of such Junior Stock) or (ii) redeem, purchase or
otherwise acquire for consideration any Junior Stock, through a sinking fund
or otherwise (other than a purchase or redemption made by issue or delivery of
such Junior Stock).
As used herein, (i) the term "Junior Stock" means Bradley Common Stock and
any other class of capital stock of Bradley now or hereafter issued and
outstanding that expressly ranks junior to the Series A Preferred Stock as to
the payment of dividends or amounts upon liquidation, dissolution or winding
up of Bradley and (ii) the term "Parity Stock", means any other class or
series of capital stock that Bradley may issue which expressly ranks equally
with the Series A Preferred Stock as to the payment of dividends and amounts
upon liquidation, dissolution or winding up of Bradley.
Reduction of Dividends
The dividends on the Series A Preferred Stock for the initial dividend
period (and, if applicable, for succeeding dividend periods) will be reduced
in the aggregate by an amount equal to the amount of the Pre-Merger Dividend,
if any, made by Mid-America on the Mid-America Common Stock prior to the
consummation of the Merger. See "Federal Income Tax Considerations--Pre-Merger
Dividends."
Liquidation Preference
Subject to the rights of any class or series of Bradley capital stock
expressly ranking senior to the Series A Preferred Stock, the holders of
shares of Series A Preferred Stock will be entitled to receive, out of the
assets of Bradley legally available therefor, in the event of any liquidation,
dissolution or winding up of Bradley, whether voluntary or involuntary, a
liquidation preference of $25.00 per share of Series A Preferred Stock plus an
amount equal to all dividends accrued and unpaid thereon to the date of final
distribution to such holders ("Liquidation Preference"), and no more.
Until the holders of the Series A Preferred Stock have been paid the
Liquidation Preference in full, no payment will be made to any holder of
Junior Stock upon the liquidation, dissolution or winding up of Bradley. If,
upon any liquidation, dissolution or winding up of Bradley, the assets of
Bradley, or proceeds thereof, distributable among the holders of the shares of
Series A Preferred Stock and any Parity Stock are insufficient to pay in full
the Liquidation Preference and the liquidation preference applicable with
respect to any such Parity Stock, then such assets, or the proceeds thereof,
subject to any prior rights of any class or series of stock, will be
distributed among the holders of shares of Series A Preferred Stock and any
such Parity Stock, ratably, in accordance with the respective amounts which
would be payable on such shares of Series A Preferred Stock and any such
Parity Stock if all amounts payable thereon were to be paid in full. Neither a
consolidation or merger of Bradley with another corporation or other entity, a
statutory share exchange by Bradley nor a sale, lease or transfer of all of
substantially all of Bradley's assets will be considered a liquidation,
dissolution or winding up of Bradley.
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Conversion Rights
At any time after the quarterly dividends are no longer subject to reduction
as a result of the Pre-Merger Dividend, if any, shares of Series A Preferred
Stock will be convertible, in whole or in part at the option of the holders
thereof, into shares of Bradley Common Stock at a conversion price of $24.49
per share of Bradley Common Stock (equivalent to a conversion rate of
approximately 1.0208 shares of Bradley Common Stock for each share of Series A
Preferred Stock), subject to adjustment as described below ("--Conversion
Price Adjustments"). No holder may convert its shares, however, if, following
such conversion, such holder would be in violation of the Ownership Limit
contained in the Bradley Charter. For a more detailed description of the
Ownership Limit, see "Description of Bradley Capital Stock--Excess Stock." The
right to convert shares of Series A Preferred Stock called for redemption will
terminate at the close of business on the Redemption Date (as defined below).
For information as to notices of redemption, see "--Redemption" below.
Conversion of shares of Series A Preferred Stock, or a specified portion
thereof, may be effected by delivering a certificate or certificates
evidencing such shares, together with written notice of conversion and a
proper assignment of such certificate or certificates to Bradley or in blank,
to the office of any transfer agent for the Series A Preferred Stock or, if
there is no transfer agent, at the principal offices of Bradley. Initially,
such office will be the principal corporate trust office of BankBoston, N.A.
located at c/o Boston EquiServe, P.O. Box 8040, Boston, MA 02266.
Each conversion will be deemed to have been effected immediately prior to
the close of business on the date on which the certificates for shares of
Series A Preferred Stock shall have been surrendered and notice shall have
been received by Bradley and the conversion shall be at the Conversion Price
in effect at such time and on such date.
Holders of shares of Series A Preferred Stock at the close of business on a
Dividend Record Date shall be entitled to receive the dividend payable on such
shares on the corresponding Dividend Payment Date, notwithstanding the
conversion of such shares following such Dividend Record Date and prior to
such Dividend Payment Date. Except as provided above, Bradley will make no
payment or allowance for unpaid dividends, whether or not in arrears, on
converted shares or for dividends on the shares of Bradley Common Stock issued
upon such conversion.
Fractional shares of Bradley Common Stock are not to be issued upon
conversion but, in lieu thereof, Bradley will pay a cash adjustment based on
the current market price of the Bradley Common Stock on the day prior to the
conversion date.
Conversion Price Adjustments
The Conversion Price is subject to adjustment upon certain events, including
(i) dividends (and other distributions) payable to the holders of Bradley
Common Stock in Bradley Common Stock, (ii) subdivisions and combinations of
Bradley Common Stock, (iii) the issuance to all holders of Bradley Common
Stock of certain rights or warrants entitling them to subscribe for or
purchase Bradley Common Stock (within 45 days) at a price per share less than
the fair market value per share of Bradley Common Stock, and (iv)
distributions to all holders of Bradley Common Stock of rights or warrants
entitling them to subscribe for or purchase securities of Bradley, evidences
of indebtedness of Bradley or assets (including securities, but excluding
those dividends, rights, warrants and distributions referred to above for
which an adjustment previously has been made and excluding cash dividends or
distributions in an amount not in excess of the greater of either (x) with
respect to all cash dividends or distributions paid on Bradley Common Stock
after December 31, 1997, the cumulative amount of funds from operations
reported for Bradley after December 31, 1997, or (y) with respect to cash
dividends or distributions paid on Bradley Common Stock for any fiscal year,
the taxable income as reflected on Bradley's federal income tax return on Form
1120 REIT (or successor form) for such fiscal year). In addition to the
foregoing adjustments, Bradley will be permitted to make such reductions in
the Conversion Price as it considers advisable in order that any dividend of
stock or stock rights, subdivision, reclassification or distribution to the
Bradley Stockholders will not be taxable to such Bradley Stockholders.
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In case Bradley shall be a party to any transaction (including, without
limitation, a merger, consolidation, statutory share exchange, or sale of all
or substantially all of Bradley's assets), in each case as a result of which
shares of Bradley Common Stock will be converted into the right to receive
stock, securities or other property of another person (including cash or any
combination thereof), the terms of the agreement for such transaction will
provide in connection with such transaction, that each share of Series A
Preferred Stock will be converted into the number and kind of shares of stock,
securities or other property receivable upon such transaction by a holder of
the number of shares of Bradley Common Stock issuable upon conversion of such
share of Series A Preferred Stock immediately prior to such transaction.
Bradley may not become a party to any such transaction unless the terms
thereof are consistent with the foregoing.
No adjustment of the Conversion Price will be required to be made in any
case until cumulative adjustments amount to 1% or more of the Conversion
Price. Any adjustments not so required to be made will be carried forward and
taken into account in subsequent adjustments. Notwithstanding any of the
foregoing adjustments, no adjustment will be made as a result of the issuance
of Bradley Common Stock pursuant to any dividend reinvestment plan (including
any optional cash purchase feature of such a plan), or, except under certain
conditions, in connection with any shareholder rights plan or similar plan.
Redemption
Shares of Series A Preferred Stock will not be redeemable by Bradley prior
to the fifth anniversary of the Effective Time. On and after such date, the
shares of Series A Preferred Stock will be redeemable at the option of
Bradley, for cash in an amount equal to $25.00 per share of Series A Preferred
Stock plus all accrued but unpaid dividends, if any, so long as the average of
the last sale price (or bid price for days on which there were no sales) per
share of the Bradley Common Stock on the NYSE for 20 trading days preceding
the date on which Bradley exercises the redemption right equals or exceeds the
Conversion Price, as adjusted in certain circumstances. Bradley may only
redeem the Series A Preferred Stock (other than the portion thereof consisting
of accrued and unpaid dividends) with the proceeds from the sale of other
equity securities of Bradley, which may include other series of preferred
stock, and from no other source.
Bradley may exercise its redemption right by giving notice of redemption by
first-class mail to the holders of the Series A Preferred Stock, and the
redemption will be effective on the 30th day following mailing of such notice
(the "Redemption Date").
On the Redemption Date, Bradley must pay $25.00 plus all accrued and unpaid
dividends for each share of Series A Preferred Stock to be redeemed.
Voting Rights
The holders of shares of Series A Preferred Stock will have the right, with
the holders of Bradley Common Stock and any other equity securities so
authorized, to vote in the election of directors of Bradley and upon each
other matter coming before any meeting of the stockholders on which the
holders of Bradley Common Stock are entitled to vote, on the basis of one vote
for each share of Bradley Common Stock into which the shares of Series A
Preferred Stock held by such holders are then convertible (rounded to the
nearest whole number of shares). The holders of Series A Preferred Stock and
Bradley Common Stock will vote together as one class except as otherwise set
forth in the Articles Supplementary and summarized below.
If six quarterly dividends (whether or not consecutive) payable on the
Series A Preferred Stock, or any Parity Stock, are in arrears, the number of
directors then constituting the Board of Directors of Bradley will be
automatically increased by two, and the holders of shares of Series A
Preferred Stock and any such other Parity Stock, voting together as a single
class (together, "Voting Preferred Stock"), will have the right to elect two
additional directors to serve on Bradley's Board of Directors at an annual
meeting of shareholders or a properly called special meeting of the holders of
the Voting Preferred Stock and at each subsequent annual meeting of
shareholders until all such dividends, together with the dividends for the
then current quarterly period, on the Voting Preferred Stock have been paid or
declared and set aside for payment.
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The approval of holders of two-thirds of the outstanding shares of Series A
Preferred Stock, voting as a single class, will be required in order to amend
the terms of the Series A Preferred Stock to affect materially and adversely
the rights, preferences, privileges or voting power of shares of Series A
Preferred Stock, or to authorize, create, or increase the authorized amount
of, any class or series of stock expressly ranking senior to the Series A
Preferred Stock with respect to the payment of dividends or amounts upon the
liquidation, dissolution or winding up of Bradley. However, Bradley may
increase or decrease the authorized number of shares of any class or series of
equity securities of Bradley or create a new class or series of Parity Stock
or Junior Stock without the consent of any holder of Series A Preferred Stock.
In addition, the Series A Preferred Stock has no right to vote as a class on
any transaction (including, without limitation, a merger, consolidation,
statutory share exchange or sale of all or substantially all of Bradley's
assets), regardless of whether Bradley is the surviving corporation in such
transaction, or on any other matter not expressly provided for in the terms of
the Series A Preferred Stock.
Ownership Limit
With certain exceptions, no person may own, or be deemed to own by virtue of
the attribution provisions of the Code, either (i) more than 9.8% of the
aggregate value of all outstanding capital stock of Bradley or (ii) shares of
Series A Preferred Stock which, if converted, would result in such person
owning or being deemed to own more than 9.8% of the total number of shares of
Bradley Common Stock. For a more detailed description of the Ownership Limit
applicable to all classes of Bradley stock, see "--Bradley Excess Stock"
below.
Stock Exchange Listing; Transfer Agent
Bradley expects that the shares of Series A Preferred Stock will be approved
for listing on the NYSE under the symbol "BTRPRA." The transfer agent and
registrar for the Series A Preferred Stock will be BankBoston, N.A., c/o
Boston EquiServe, P.O. Box 8040, Boston, MA 02266.
BRADLEY COMMON STOCK
Subject to the preferential rights of the Series A Preferred Stock and any
other class or series of stock and to the provisions of the Bradley Charter
regarding Excess Stock, holders of shares of Bradley Common Stock are entitled
to receive dividends on shares of Bradley Common Stock if, as and when
authorized and declared by the Board of Directors of Bradley out of assets
legally available therefor and to share ratably in the assets of Bradley
legally available for distribution to its stockholders in the event of its
liquidation, dissolution or winding-up after payment of, or adequate provision
for, all known debts and liabilities of Bradley. Holders of Bradley Common
Stock have no conversion, sinking fund or redemption rights, or preemptive
rights to subscribe for any securities of Bradley. When issued upon conversion
of the Series A Preferred Stock in accordance with the terms of the Series A
Preferred Stock, all shares of Bradley Common Stock offered hereby will be
duly authorized, validly issued, fully paid and nonassessable.
Subject to the provisions of the Bradley Charter regarding Excess Stock,
each outstanding share of Bradley Common Stock entitles the holder to one vote
on all matters submitted to a vote of stockholders, including the election of
directors. Following the Merger, except as otherwise required by law or except
as provided with respect to any other class or series of stock, the holders of
Bradley Common Stock and the Series A Preferred Stock will possess exclusive
voting power, with the Series A Preferred Stock voting on an as-converted
basis. There is no cumulative voting in the election of directors, which means
that the stockholders possessing a majority of votes entitled to be cast in
the election can elect all of the directors then standing for election, and
the remaining stockholders will not be able to elect any directors.
See "--Bradley Excess Stock" below for a description of certain provisions
of the Bradley Charter designed to preserve the status of Bradley as a
qualified REIT that limit the transfer of, and provide Bradley with a right to
redeem, shares of Bradley capital stock (including shares of Bradley Common
Stock) and that also provide for the conversion of such stock to Excess Stock,
in certain circumstances.
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Pursuant to the MGCL and the Bradley Charter, Bradley generally cannot
dissolve, amend the Bradley Charter, merge, sell all or substantially all of
its assets, engage in a share exchange or engage in similar transactions
outside the ordinary course of business unless approved by the affirmative
vote of holders of a majority of all the shares of capital stock entitled to
be cast.
The transfer agent and registrar for the Bradley Common Stock is BankBoston,
N.A., c/o Boston EquiServe, P.O. Box 8040, Boston, MA 02266.
BRADLEY EXCESS STOCK
For a company to qualify as a REIT under the Code, among other things, not
more than 50% in value of its outstanding capital stock may be owned, directly
or indirectly, by five or fewer individuals (defined in the Code to include
certain entities) during the last half of a taxable year (other than the first
year), and such capital stock must be beneficially owned by 100 or more
persons during at least 335 days of a taxable year of 12 months (other than
the first year) or during a proportionate part of a shorter taxable year. The
Bradley Charter and the Articles Supplementary contain provisions, designed to
ensure that Bradley remains a qualified REIT, that generally limit any holder
from owning, or being deemed to own by virtue of the attribution provisions of
the Code, (i) shares of Bradley Common Stock having a value that is more than
9.8% of the value of all outstanding shares of Bradley stock, or (ii) shares
of Series A Preferred Stock (x) whose value is in excess of 9.8% of the value
of all outstanding shares of stock of Bradley, or (y) which when converted
would result in such holder being the beneficial owner of in excess of 9.8% of
the total number of outstanding shares of Bradley Common Stock, after giving
effect to such conversion (the "Ownership Limit"). The Bradley Charter
provides that each person (which includes natural persons, corporations,
trusts, partnerships and other entities) shall be deemed to own stock that
such person (i) actually owns, (ii) constructively owns after applying
attribution rules specified in the Code, and (iii) has the right to acquire
upon exercise of any rights, options or warrants or upon conversion of any
convertible securities held by such person. The fact that certain affiliated
entities, such as separate mutual funds advised by the same investment
adviser, may own more than 9.8% of the value of all outstanding capital stock
in the aggregate will not of itself result in the Ownership Limit being
exceeded, merely because a single person may be considered to be the
"beneficial owner" of such stock for purposes of Section 13(g) of the Exchange
Act. The Bradley Board may waive the Ownership Limit if evidence satisfactory
to the Board of Directors and Bradley's tax counsel is presented that the
changes in ownership will not then or in the future jeopardize Bradley's
status as a REIT and the Bradley Board otherwise decides that such action is
in the best interests of the corporation.
The Bradley Charter provides that any transfer of Bradley capital stock that
would create direct or indirect ownership of capital stock in excess of the
Ownership Limit or that would result in the disqualification of Bradley as a
REIT, including any transfer that results in Bradley being "closely held"
within the meaning of Section 856(h) of the Code, shall be null and void, and
the intended transferee ( the "Prohibited Transferee") will acquire no rights
to the capital stock. Shares of capital stock owned, or deemed to be owned, or
transferred to a stockholder in excess of the Ownership Limit will
automatically be exchanged for shares of Excess Stock (as described below)
that will be transferred, by operation of law, to a trustee (to be designated
by Bradley, but unaffiliated with Bradley) as trustee for the exclusive
benefit (except to the extent described below) of one or more charitable
beneficiaries designated from time to time by Bradley. The Excess Stock held
in trust will be considered as issued and outstanding shares of stock of
Bradley, will be entitled to receive distributions declared by Bradley and may
be voted by the trustee for the exclusive benefit of the charitable
beneficiary. Any dividend or distribution paid to the Prohibited Transferee
prior to the discovery by Bradley that capital stock has been transferred in
violation of the provisions of the Bradley Charter (a "prohibited transfer")
shall be repaid to Bradley upon demand and thereupon paid over by Bradley to
the trustee. Any votes of holders of shares of capital stock purported to have
been cast by the Prohibited Transferee prior to such discovery of a prohibited
transfer will be retroactively deemed not to have been cast, but said
retroactive nullification of the vote of the relevant shares of capital stock
shall not adversely affect the rights of any person (other than the Prohibited
Transferee) who has relied in good faith upon the effectiveness of the matter
that was the subject of the stockholder action as to which such votes were
cast.
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The Bradley Charter provides that Excess Stock is not transferable. Subject
to the redemption rights of Bradley discussed below, the trustee of the trust
may, however, sell and transfer the interest in the trust to a transferee in
whose hands the interest in the trust representing Excess Stock would not be
an interest in Excess Stock, and upon such sale the shares of Excess Stock
represented by the sold interest shall be automatically exchanged for shares
of capital stock of the class that was originally exchanged into such Excess
Stock. Upon such sale, the trustee shall distribute to the Prohibited
Transferee only so much of the sales proceeds as is not more than the price
paid by the Prohibited Transferee in the prohibited transfer that resulted in
the exchange of Excess Stock for the capital stock purported to have been
transferred (or, if the Prohibited Transferee received such capital stock by
gift, devise or otherwise without giving value for such stock, only an amount
that does not exceed the market price for such stock, as determined in the
manner set forth in the Bradley Charter, at the time of the prohibited
transfer), and the trustee shall distribute all remaining proceeds from such
sale to the charitable beneficiary.
In addition to the foregoing transfer restrictions, Bradley will have the
right, for a period of 90 days during the time any Excess Stock is held by the
trustee, to purchase all or any portion of the Excess Stock from the trustee
for the lesser of the price paid for the capital stock by the Prohibited
Transferee or the market price of the capital stock on the date Bradley
exercises its options to purchase. Upon any such purchase by Bradley, the
trustee shall distribute the purchase price to the Prohibited Transferee. The
90-day period begins on the date on which Bradley receives written notice of
the prohibited transfer or other event resulting in the exchange of capital
stock for Excess Stock, or, if no notice is given, the date on which the
prohibited transfer was made.
If the foregoing transfer restrictions are determined to be void or invalid
by virtue of any legal decision, statute, rule or regulation, then the
intended transferee of any Excess Stock may be deemed, at the option of
Bradley, to have acted as an agent on behalf of Bradley in acquiring the
Excess Stock and to hold the Excess Stock on behalf of Bradley.
These restrictions will not preclude settlement of transactions on the NYSE
or any other stock exchange on which capital stock of Bradley is listed. The
foregoing restrictions on transferability and ownership also will not apply if
the Bradley Board determines that it is no longer in the best interests of
Bradley to continue to qualify as a REIT.
The Bradley Charter requires that, upon demand by Bradley, each stockholder
and each proposed transferee of capital stock will disclose to Bradley in
writing any information with respect to the direct, indirect and constructive
ownership of shares of stock as the Bradley Board deems necessary to comply
with the provisions of the Code applicable to REITs, to comply with the
requirements of any taxing authority or governmental agency or to determine
any such compliance.
BUSINESS COMBINATIONS
The "business combinations" statute under the MGCL does not apply to Bradley
and the Merger. Under the MGCL, certain "business combinations" (including a
merger, consolidation, share exchange, or, in certain circumstances, an asset
transfer or issuance or reclassification of equity securities) between a
Maryland corporation and any person who beneficially owns 10% or more of the
voting power of the corporation's shares or an affiliate of the corporation
who, at any time within the two-year period prior to the date in question, was
the beneficial owner of 10% or more of the voting power of the then-
outstanding voting stock of the corporation (an "Interested Stockholder") or
an affiliate thereof are prohibited for five years after the most recent date
on which the Interested Stockholder becomes an Interested Stockholder.
Thereafter, any such business combination must be recommended by the board of
directors of the corporation and approved by the affirmative vote of at least
(i) 80% of the votes entitled to be cast by holders of outstanding voting
shares of the corporation and (ii) two-thirds of the votes entitled to be cast
by holders of outstanding voting shares of the corporation other than shares
held by the Interested Stockholder with whom (or with whose affiliate) the
business combination is to be effected, unless, among other conditions, the
corporation's common stockholders receive a minimum price (as defined in the
MGCL) for their shares and the consideration is received in cash or in the
same form as previously
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paid by the Interested Stockholder for its shares. These provisions of the
MGCL do not apply, however, to business combinations that are approved or
exempted by the board of directors of the corporation prior to the time that
the Interested Stockholder becomes an Interested Stockholder.
CONTROL SHARE ACQUISITIONS
At any time, the Bradley Board could amend the Bradley Bylaws to allow the
control share provision of the MGCL to apply to acquisitions of Bradley Common
Stock; thus, there can be no assurance that the provision will not be amended
or repealed in the future.
The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the
matter, excluding shares of stock owned by the acquiror or by officers or
directors who are employees of the corporation. "Control shares" are voting
shares of stock which, if aggregated with all other such shares of stock
previously acquired by the acquiror, or in respect to which the acquiror is
able to exercise or direct the exercise of voting power, except solely by
virtue of a revocable proxy, would entitle the acquiror to exercise voting
power in electing directors within one of the following ranges of voting
power: (i) one-fifth or more but less than one-third; (ii) one-third or more
but less than a majority; or (iii) a majority of all voting power. Control
shares do not include shares the acquiring person is then entitled to vote as
a result of having previously obtained stockholder approval. A "control share
acquisition" means the acquisition of control shares, subject to certain
exceptions.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses
and delivery of an "acquiring person statement"), may compel the corporation's
board of directors to call a special meeting of stockholders to be held within
50 days of demand to consider the voting rights of the shares. If no request
for a meeting is made, the corporation may itself present the question at any
stockholders meeting.
Unless the articles or bylaws provide otherwise, if an acquiring person
statement has been delivered on or before the 10th day after the control share
acquisition or if the acquiring person does not deliver an acquiring person
statement within ten (10) days following a control share acquisition then,
subject to certain conditions and limitations, the corporation may redeem any
or all of the control shares (except those for which voting rights have
previously been approved) for fair value determined, without regard to the
absence of voting rights for the control shares, as of the date of the last
control share acquisition or of any meeting of stockholders at which the
voting rights of such shares are considered. Moreover, unless the articles or
bylaws provide otherwise, if voting rights for control shares are approved at
a stockholders' meeting and the acquiror becomes entitled to exercise or
direct the exercise of a majority or more of all voting power, other
stockholders may exercise appraisal rights. The fair value of the shares as
determined for purposes of such appraisal rights may not be less than the
highest price per share paid by the acquiror in the control share acquisition.
The control share acquisition statute does not apply to shares acquired in a
merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by the articles or bylaws
of the corporation.
COMPARISON OF STOCKHOLDER RIGHTS
At the Effective Time, the holders of Mid-America Common Stock will become
holders of Series A Preferred Stock. Upon conversion of their shares of Series
A Preferred Stock, such holders will become holders of Bradley Common Stock.
Both Bradley and Mid-America are incorporated under and governed by the laws
of the State of Maryland in accordance with the MGCL. Accordingly, the rights
of the stockholders of Mid-America will continue to be governed by the MGCL
but instead of being subject to the Mid-America Charter and the Mid-America
Bylaws, their rights following the Merger will be governed by the Bradley
Charter, the Articles
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Supplementary designating the rights and preferences of the Series A Preferred
Stock (attached as Annex B to this Proxy Statement/Prospectus) and the Bradley
Bylaws.
The following discussion summarizes certain differences between the rights
of holders of Mid-America Common Stock, the rights of holders of Series A
Preferred Stock and the rights of holders of Bradley Common Stock. This
summary does not purport to be complete and is subject to and qualified in its
entirety by reference to the Mid-America Charter, the Mid-America Bylaws, the
Bradley Charter, the Articles Supplementary, the Bradley Bylaws and the
relevant provisions of the MGCL. Copies of the Mid-America Charter, the Mid-
America Bylaws, the Bradley Charter, the Articles Supplementary and the
Bradley Bylaws are incorporated by reference as exhibits to the Registration
Statement of which this Proxy Statement/Prospectus is a part.
VOTING RIGHTS
The Mid-America Charter provides the Mid-America Common Stock with full
voting rights on the basis of one vote per share. The Articles Supplementary
provide that, following the Merger, the holders of Series A Preferred Stock
will have the right to vote with the Bradley Common Stock, on an as-converted
basis, on all matters coming before any meeting of Bradley stockholders. In
addition to these voting rights, the Series A Preferred Stock will have the
right to vote as a single class prior to Bradley undertaking certain specified
actions. The approval of two-thirds of the outstanding shares of Series A
Preferred Stock will be required in order to amend the terms of the Series A
Preferred Stock to affect materially and adversely the rights, preferences or
voting power of the Series A Preferred Stock, or to authorize, create or
increase the authorized amount of, any class or series of stock having rights
senior to the Series A Preferred Stock with respect to the payment of
dividends or amounts upon the liquidation, dissolution or winding up of
Bradley. The Bradley Common Stock has full voting rights on the basis of one
vote per share.
Thus, as a result of the Merger, the Mid-America Stockholders will continue
to have full voting rights, albeit in a larger corporation, with respect to
matters typically voted on by holders of common stock and, in addition, will
have class voting rights with respect to certain matters affecting the Series
A Preferred Stock. After a conversion of Series A Preferred Stock, the holders
will continue to have full voting rights but will no longer be entitled to any
special voting rights.
DIVIDEND RIGHTS
The Mid-America Charter entitles the holders of Mid-America Common Stock to
receive dividends on their shares if, as and when authorized and declared by
the Board of Directors of Mid-America out of funds legally available therefor.
While Mid-America has historically paid a regular quarterly dividend, the
holders of Mid-America Common Stock have no right to any dividend or
distribution unless and until such a dividend has been authorized and
declared. The amount of the quarterly dividend is determined in the discretion
of the Mid-America Board and, recently, has been $0.22 per share.
The Articles Supplementary will entitle the holders of Series A Preferred
Stock to receive a cumulative fixed quarterly dividend of $0.525 per share if,
as and when authorized and declared by the Bradley Board out of funds legally
available therefor, unless prohibited by an agreement of Bradley or by law.
Because the dividends on the Series A Preferred Stock are cumulative, however,
the dividends will accrue to the holders regardless of whether a dividend is
authorized, declared or paid for a given quarter. In addition, the amount of
the dividend is fixed and, thus, not within the discretion of the Bradley
Board. After taking the Exchange Ratio into account, the fixed $0.525 per
share dividend results in substantially the same payment as the historical
$0.22 per share dividend on Mid-America Common Stock.
The Bradley Charter entitles the holders of Bradley Common Stock to receive
dividends on their shares if, as and when authorized and declared by the
Bradley Board out of funds legally available therefor. The quarterly dividend
to holders of Bradley Common Stock recently has been $0.35 per share, although
such amount may be changed in the discretion of the Bradley Board.
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Accordingly, following the Merger, the Mid-America Stockholders will have
the right to receive payment of substantially the same amount of dividends,
which, unlike their current dividends, will accrue to the holders even if not
authorized, declared or paid. The amount of their dividend will be fixed and
therefore unable to be either increased or decreased in the discretion of the
Bradley Board in the future. Following the conversion of Series A Preferred
Stock, the holders will have rights only to such dividends as are authorized
and declared on the Bradley Common Stock by the Bradley Board in its
discretion.
LIQUIDATION PREFERENCE
Under the Mid-America Charter, holders of Mid-America Common Stock are
entitled to share ratably in the assets of Mid-America legally available for
distribution in the event of its liquidation, dissolution or winding up after
payment of, or adequate provision for, all known debts and liabilities of Mid-
America. The Articles Supplementary provide that, in the event of a
liquidation, dissolution or winding up, the Series A Preferred Stock will be
entitled to receive a liquidation preference in the amount of $25.00 per
share, plus any accrued but unpaid dividend, prior to any amounts being
distributed to the holders of Bradley Common Stock.
Thus, the former Mid-America Stockholders will generally have rights in the
event of a liquidation of Bradley superior to those they had as holders of
Mid-America Common Stock in the event of a liquidation of Mid-America;
however, the holders are not entitled to any amounts exceeding their
liquidation preference and any accrued but unpaid dividends. The holders of
Series A Preferred Stock will surrender any senior rights in liquidation,
including the $25.00 liquidation preference, when such holders convert their
shares to Bradley Common Stock.
REDEMPTION
The Mid-America Common Stock is not subject to any right of Mid-America to
redeem any or all of the outstanding shares. Pursuant to the Articles
Supplementary, Bradley will have the right to redeem all of the outstanding
shares of the Series A Preferred Stock for $25.00 per share, plus accrued but
unpaid dividends, after the fifth anniversary of the Effective Time so long as
the average of the last sale price per share of Bradley Common Stock on the
NYSE for the 20 trading day period preceding exercise of such redemption right
equals or exceeds the Conversion Price. Bradley may only redeem the Series A
Preferred Stock (other than the portion thereof consisting of accrued and
unpaid dividends) with the proceeds from the sale of other equity securities
of Bradley, which may include other series of preferred stock, and from no
other source. See "Description of Bradley Capital Stock--Series A Preferred
Stock--Redemption."
Thus, the holdings of the Mid-America Stockholders following the Merger will
be subject to the right of Bradley to redeem the Series A Preferred Stock for
cash if the specified conditions are satisfied. At any time prior to
redemption (whether or not called for redemption), holders may convert their
Series A Preferred Stock into Bradley Common Stock, which is not generally
redeemable.
BOARD OF DIRECTORS
The Bradley Bylaws provide that the number of directors of Bradley may be
established by the Bradley Board but may not be fewer than the minimum number
required by the MGCL. The Mid-America Bylaws fix a minimum of three and a
maximum of fifteen directors. Directors of Bradley hold office until their
successors are duly elected and qualified or until their death, resignation or
removal. Both the Mid-America Charter and the Bradley Charter provide that a
director may be removed from office only for cause and only by the affirmative
vote of at least a majority of the votes entitled to be cast in the election
of directors.
The Bradley Charter classifies the Bradley directors into three classes with
staggered three-year terms, i.e., the term of one class expiring each year,
whereas the Mid-America Bylaws establish a one-year term for all of the Mid-
America directors.
The Mid-America Bylaws also require a majority of the Mid-America Board to
be independent as long as Mid-America intends to be qualified as a REIT. The
Bradley Bylaws contain no corresponding requirement with respect to Bradley's
directors, but currently only one of Bradley's directors is an officer or
employee of Bradley.
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The staggered board provision prevents the holders of Bradley Common Stock
and Series A Preferred Stock from voting on the election of all directors at
each annual meeting. The use of a staggered board may have the effect of
delaying or deferring a change in control of Bradley or the removal of
incumbent management.
AMENDMENT OF CHARTER AND BYLAWS
In conformity with the MGCL, both the Mid-America Charter and the Bradley
Charter may be amended by their respective Board of Directors, with the
approval of the holders of a majority of all of the votes entitled to be cast
on the matter at a meeting of stockholders, with two exceptions. First, the
Bradley Charter permits the Bradley Board to amend the limitations on transfer
and ownership of stock to the extent the Bradley Board deems appropriate to
assure continued qualification as a REIT without a vote of its stockholders.
Second, the Mid-America Charter requires that any amendment which changes the
terms or contract rights of any of Mid-America's outstanding capital stock
shall be invalid unless such amendment shall have been authorized by two-
thirds of all of the votes entitled to be cast on the matter at a meeting of
the stockholders. Following the Merger, however, the Articles Supplementary
will require the approval of two-thirds of the outstanding shares of Series A
Preferred Stock to amend the terms of such securities to affect materially and
adversely the rights, preferences or voting power of the Series A Preferred
Stock.
The Bradley Bylaws may be amended by the affirmative vote of the holders of
a majority of the shares of Bradley Common Stock or by the Bradley Board
without a vote of the stockholders. The Mid-America Bylaws contain similar
amendment provisions except that (i) the Mid-America Board may not amend any
Bylaw made by the Mid-America Stockholders and (ii) any amendment of the Bylaw
restricting the transfer of Mid-America Common Stock to preserve Mid-America's
REIT status requires an affirmative vote of not less than two-thirds of the
votes entitled to be cast thereon.
Thus, the Mid-America Stockholders' rights following the Merger regarding
charter and bylaws amendments will be comparable except that the Bradley Board
has the ability to amend the Bradley Charter without stockholder approval in
order to protect Bradley's REIT status and the Bradley Board is not prevented
from amending or repealing bylaws previously approved by the stockholders.
REQUIRED VOTE FOR AUTHORIZATION OF CERTAIN ACTIONS
Under the MGCL, unless a corporation's charter provides for a lesser
percentage (but not less than a majority), a proposed consolidation, merger,
share exchange, transfer of assets or amendment of the charter must be
approved by the stockholders of each corporation by the affirmative vote of
two-thirds of all the votes entitled to be cast on the matter. The Bradley
Charter provides that such transactions may be approved by the affirmative
vote of a majority of all the votes entitled to be cast on the matter. The
Mid-America Charter contains no such provision and therefore, such
transactions require the approval of two-thirds of all votes entitled to be
cast on the matter.
The lower percentage of stockholder approval required for such actions may
make it easier for Bradley to effect such matters as business combinations and
charter amendments, some of which may not be in the best interests of certain
stockholders.
SPECIAL MEETINGS
The Mid-America Bylaws currently provide that a majority of the Mid-America
Board, a majority of the independent directors or the president may call a
special meeting of the Mid-America Stockholders. Similarly, the Bradley Bylaws
provide that the chairman, the president or a majority of the Bradley Board
may call a special meeting of the Bradley Stockholders. The Mid-America Bylaws
provide that a special meeting of stockholders may be called by any
stockholders who hold in the aggregate not less than 10% of all the votes
entitled to be cast at such a meeting whereas the Bradley Bylaws require at
least 25% or more of the votes entitled to be cast at such meeting to call a
special meeting of stockholders. The MGCL authorizes the bylaws of a Maryland
73
<PAGE>
corporation to require a majority of the votes to be cast at a special meeting
to call such a meeting, and the Bradley Board has authority to amend the
Bradley Bylaws to provide for such higher number.
The higher threshold required for Bradley stockholders to call a special
meeting may have the effect of deterring or delaying a change in control of
Bradley.
DISSOLUTION
The dissolution of Mid-America would require (i) the affirmative resolution
of a majority of the entire Board of Directors declaring such dissolution to
be advisable and directing that the proposed dissolution be submitted for
consideration at an annual or special meeting of stockholders, and (ii) upon
proper notice, stockholder approval by the affirmative vote of the holders of
not less than two-thirds of all of the votes entitled to be cast on the
matter. The dissolution of Bradley would require a similar resolution of the
Bradley Board but only requires the approval of the holders of a majority of
all of the votes entitled to be cast on the matter.
Thus, a lesser vote of the stockholders of Bradley is required to authorize
voluntary dissolution than is currently required for Mid-America stockholders.
RESTRICTIONS ON THE OWNERSHIP, TRANSFER OR ISSUANCE OF SHARES
The Mid-America Charter prohibits, with certain exceptions, any person from
owning, or being deemed to own by virtue of the attribution provisions of the
Code, more than 9.8% of the outstanding shares of capital stock of Mid-
America. The Bradley Charter and the Articles Supplementary contain a similar
ownership limit, which prohibits beneficial ownership of (i) shares of Bradley
Common Stock having a value that is more than 9.8% of the value of all
outstanding shares of Bradley stock, or (ii) shares of Series A Preferred
Stock (x) whose value is in excess of 9.8% of the value of all outstanding
shares of stock in Bradley, or (y) which when converted would result in such
holder being the beneficial owner of in excess of 9.8% of the total number of
outstanding shares of Bradley Common Stock, after giving effect to such
conversion. See "Description of Bradley Capital Stock--Bradley Excess Stock."
The ownership restrictions provided by the Bradley Charter may have the
effect of delaying, deferring or preventing the acquisition of control of
Bradley. However, the Bradley Charter provides that the Ownership Limit shall
not apply to shares of capital stock acquired pursuant to an all cash tender
offer for all of the outstanding shares of capital stock in conformity with
applicable laws where not less than two-thirds of the outstanding shares of
capital stock (not including securities held by the tender offeror and/or its
affiliates and associates) are tendered and accepted pursuant to such tender
offer and where the tender offeror commits in such tender offer promptly after
the tender offeror's purchase of the tendered stock, to give any non-tendering
stockholders a reasonable opportunity to put their capital stock to the tender
offeror at a price not less than that paid pursuant to the tender offer.
74
<PAGE>
BRADLEY REAL ESTATE, INC.
INDEX TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Pro Forma Condensed Combined Balance Sheet as of March 31, 1998........... 76
Notes to Pro Forma Condensed Combined Balance Sheet..................... 77
Pro Forma Condensed Balance Sheet to reflect Prior Bradley Transactions
as of March 31, 1998................................................... 79
Pro Forma Condensed Combined Statement of Income for the three months
ended March 31, 1998..................................................... 80
Notes to Pro Forma Condensed Combined Statement of Income............... 81
Pro Forma Condensed Statement of Income to reflect Prior Bradley Trans-
actions for the three months ended March 31, 1998...................... 83
Pro Forma Condensed Combined Statement of Income for the year ended Decem-
ber 31, 1997............................................................. 86
Notes to Pro Forma Condensed Combined Statement of Income............... 87
Pro Forma Condensed Statement of Income to reflect Prior Bradley Trans-
actions for the year ended December 31, 1997........................... 89
</TABLE>
75
<PAGE>
BRADLEY REAL ESTATE, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1998
(UNAUDITED)
This unaudited Pro Forma Condensed Combined Balance Sheet is presented as if
the Merger had been consummated on March 31, 1998. The Merger has been
accounted for under the purchase method of accounting in accordance with
Accounting Principles Board Opinion No. 16. In the opinion of Bradley's
management, all adjustments necessary to reflect the effects of this
transaction have been made. The accompanying pro forma condensed combined
financial statements have been prepared based on pro forma adjustments to pro
forma and historical financial statements of Bradley and historical financial
statements of Mid-America.
This unaudited Pro Forma Condensed Combined Balance Sheet is presented for
comparative purposes only and is not necessarily indicative of what the actual
financial position of Bradley would have been at March 31, 1998, nor does it
purport to represent the future financial position of Bradley. This unaudited
Pro Forma Condensed Combined Balance Sheet should be read in conjunction with,
and is qualified in its entirety by, the pro forma condensed balance sheet of
Bradley and the respective historical financial statements and notes thereto
of Bradley and Mid-America incorporated by reference into this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
BRADLEY BRADLEY
PRO FORMA MID- PRO FORMA PRO FORMA
PRIOR AMERICA MERGER AS ADJUSTED
TRANSACTIONS(A) HISTORICAL ADJUSTMENTS (B) FOR THE MERGER
--------------- ---------- --------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Real estate investments,
at cost................ $815,062 $152,716 $ (10,926) $956,852
Accumulated depreciation
and amortization....... (44,582) (34,161) 34,161 (44,582)
-------- -------- --------- --------
Net real estate
investments.......... 770,480 118,555 23,235 912,270
Cash and cash
equivalents............ 2,505 -- -- 2,505
Rents and other
receivables............ 12,120 2,285 (1,106)(C) 13,299
Investment in
partnership............ -- 14,943 (1,656) 13,287
Deferred charges and
other assets........... 17,699 3,912 (2,927)(D) 18,684
-------- -------- --------- --------
Total assets.......... $802,804 $139,695 $ 17,546 $960,045
======== ======== ========= ========
LIABILITIES
Mortgage loans.......... 80,718 49,499 (11,417)(E) 118,800
Unsecured notes payable. 199,496 -- -- 199,496
Lines of credit......... 119,479 11,951 18,310 (F) 149,740
Accounts payable,
accrued expenses and
other liabilities...... 24,471 1,849 49 26,369
-------- -------- --------- --------
Total liabilities..... 424,164 63,299 6,942 494,405
-------- -------- --------- --------
Minority interest....... 19,803 -- -- 19,803
-------- -------- --------- --------
SHARE OWNERS' EQUITY
Series A Preferred Stock
and paid-in capital.... -- -- 87,000 (G) 87,000
Common stock at par..... 237 83 (83)(G) 237
Additional paid-in
capital................ 343,733 119,730 (119,730)(G) 343,733
Accumulated earnings in
excess of
distributions.......... 14,867 (43,417) 43,417 (G) 14,867
-------- -------- --------- --------
Total share owners'
equity............... 358,837 76,396 10,604 445,837
-------- -------- --------- --------
Total liabilities and
share owners'
equity.............. $802,804 $139,695 $ 17,546 $960,045
======== ======== ========= ========
</TABLE>
76
<PAGE>
- --------
NOTES TO PRO FORMA CONDENSED COMBINED BALANCE SHEET
(A) See page 79 for the pro forma condensed balance sheet giving effect to
prior Bradley transactions.
(B) Represents adjustments to record the Merger in accordance with the
purchase method of accounting, based upon a purchase price of
approximately $157.2 million, which assumes a value of $25 per share of
Series A Preferred Stock, computed as follows (in thousands):
<TABLE>
<S> <C>
Issuance of Series A Preferred Stock............................. $ 87,000
Assumption of Mid-America liabilities............................ 63,299
Adjustment to increase mortgage debt to estimated fair value..... 2,043
Estimated Merger costs........................................... 4,850
--------
$157,192
========
</TABLE>
(C) Represents the write-off of the portion of the Mid-America accounts
receivable representing deferred rents arising from Mid-America
recognition of rental income on a straight-line basis in accordance
with generally accepted accounting principles. Bradley, as the
surviving corporation, will recognize rental income on a straight-line
basis over the remaining terms of the Mid-America leases in accordance
with generally accepted accounting principles.
(D) Represents the adjustment of Mid-America's carrying value of deferred
charges to the estimated fair values in accordance with the purchase
method of accounting. Organization costs, leasing costs and management
contracts of Mid-America were deemed to have no future value to Bradley
and were written-off in accordance with the purchase method of
accounting. Other assets were adjusted to the estimated fair values as
of March 31, 1998. The amounts represented by these adjustments are
summarized below (in thousands):
<TABLE>
<S> <C>
Leasing costs.................................................... $ 2,693
Decrease in value of TIF bonds................................... 1,581
Loan costs....................................................... 1,319
Management contract.............................................. 893
Other............................................................ 406
Increase in cash surrender value of executive benefits........... (35)
Less accumulated amortization.................................... (3,930)
-------
Pro forma adjustment............................................. $ 2,927
=======
</TABLE>
(E) Represents the expected prepayment of Mid-America mortgage debt funded
with Bradley's line of credit, and the adjustment to the carrying value
of the remaining Mid-America mortgage debt to the estimated fair values
at March 31, 1998, as follows (in thousands):
<TABLE>
<S> <C>
Expected amount of Mid-America mortgage debt to be prepaid..... $(13,460)
Adjustment to estimated fair value for remaining mortgage debt. 2,043
--------
Pro forma adjustment........................................... $(11,417)
========
</TABLE>
77
<PAGE>
(F) Estimated payments for fees and expenses related to the Merger are as
follows (in thousands):
<TABLE>
<S> <C>
Investment advisory fees......................................... $ 1,770
Termination and severance........................................ 1,160
Legal and accounting............................................. 1,015
Real estate due diligence and closing costs...................... 614
Other............................................................ 145
Printing and filing fees......................................... 96
D&O insurance.................................................... 50
-------
4,850
Expected amount of Mid-America mortgage debt prepaid with
Bradley's line of credit........................................ 13,460
-------
Pro forma adjustment............................................. $18,310
=======
</TABLE>
(G) To adjust Mid-America's capital accounts to reflect the issuance of
3,480,000 shares of Series A Preferred Stock in exchange for all of the
outstanding shares of Mid-America Common Stock at an Exchange Ratio of
0.42 shares of Series A Preferred Stock for each outstanding share of
Mid-America Common Stock, as follows (in thousands):
<TABLE>
<CAPTION>
SERIES A
PREFERRED
COMMON PAID-IN DISTRIBUTION IN STOCK AND
SHARES CAPITAL EXCESS OF EARNINGS PAID-IN CAPITAL
------ --------- ------------------ ----------------
<S> <C> <C> <C> <C>
Issuance of Series A
Preferred Stock ....... $ -- $ -- $ -- $87,000
Mid-America's historical
stockholders' equity... 83 119,730 (43,417) --
---- --------- ------- -------
Pro forma adjustment.... $(83) $(119,730) $43,417 $87,000
==== ========= ======= =======
</TABLE>
78
<PAGE>
PRO FORMA CONDENSED BALANCE SHEET
TO REFLECT PRIOR BRADLEY TRANSACTIONS
MARCH 31, 1998
(UNAUDITED)
From March 31, 1998 through May 30, 1998, Bradley has acquired an additional
six shopping centers and has entered into contracts to acquire an additional
eight properties, which management believes will close. The aggregate purchase
price of these transactions is expected to be approximately $155 million. See
"The Companies--Bradley."
Subsequent to March 31, 1998, Bradley entered into a contract to sell One
North State for approximately $84.5 million subject to normal and customary
closing costs and adjustments with the proceeds assumed to be used to pay down
Bradley's line of credit. See "The Companies--Bradley." In addition, in May
1998, Bradley sold Holiday Plaza, a shopping center in Cedar Falls, Iowa, for
approximately $1.9 million.
The unaudited Pro Forma Condensed Balance Sheet of Bradley is presented as
if the acquisitions (including the probable acquisitions), and the
dispositions (including the probable disposition), described above, had been
consummated on March 31, 1998.
<TABLE>
<CAPTION>
MARCH 31, 1998 ACQUISITION DISPOSITION
HISTORICAL ADJUSTMENTS(A) ADJUSTMENTS(B) PRO FORMA
-------------- -------------- -------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Real estate
investments--at cost... $660,096 $154,966 $ -- $815,062
Accumulated depreciation
and amortization....... (44,582) -- -- (44,582)
-------- -------- -------- --------
Net real estate
investments............ 615,514 154,966 -- 770,480
Real estate investments
held for sale.......... 54,565 -- (54,565) --
Other assets:
Cash and cash
equivalents.......... 2,505 -- -- 2,505
Rents and other
receivables.......... 14,117 -- (1,997) 12,120
Deferred charges, net
and other assets..... 18,223 -- (524) 17,699
-------- -------- -------- --------
Total assets............ $704,924 $154,966 $(57,086) $802,804
======== ======== ======== ========
LIABILITIES AND SHARE
OWNERS' EQUITY
Mortgage loans.......... 50,966 29,752 -- 80,718
Unsecured notes payable. 199,496 -- -- 199,496
Line of credit.......... 79,100 125,214 (84,835) 119,479
Accounts payable,
accrued expenses and
other liabilities...... 27,798 -- (3,327) 24,471
-------- -------- -------- --------
Total liabilities....... 357,360 154,966 (88,162) 424,164
-------- -------- -------- --------
Minority interest....... 19,146 -- 657 19,803
-------- -------- -------- --------
Share owners' equity
Common stock at par... 237 -- -- 237
Additional paid-in
capital.............. 343,733 -- -- 343,733
Accumulated earnings
in excess of
distributions........ (15,552) -- 30,419 14,867
-------- -------- -------- --------
Total share owners'
equity................. 328,418 -- 30,419 358,837
-------- -------- -------- --------
Total liabilities and
share owners' equity... $704,924 $154,966 $(57,086) $802,804
======== ======== ======== ========
</TABLE>
EXPLANATORY NOTES
(A) Adjustments represent acquisitions of properties subsequent to March 31,
1998 that have been completed, or that are probable of completion.
(B) Adjustments represent the sale of Holiday Plaza subsequent to March 31,
1998, and the probable disposition of One North State for net sales
proceeds of approximately $1.9 million and $84.5 million subject to normal
and customary closing costs and adjustments, respectively, and the
application of the net proceeds to pay down Bradley's line of credit.
79
<PAGE>
BRADLEY REAL ESTATE, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
This unaudited Pro Forma Condensed Combined Statement of Income is presented
as if the Merger had been consummated on January 1, 1997 and with Bradley
qualifying as a REIT, distributing all of its taxable income and, therefore,
incurring no federal income tax expense during the period January 1, 1997
through March 31, 1998. The Merger has been accounted for under the purchase
method of accounting in accordance with Accounting Principles Board Opinion
No. 16. In the opinion of Bradley's management, all adjustments necessary to
reflect the effects of these transactions have been made.
This unaudited Pro Forma Condensed Combined Statement of Income is presented
for comparative purposes only and is not necessarily indicative of what the
actual results of operations of Bradley would have been for the period
presented, nor does it purport to represent the results to be achieved in
future periods. This unaudited Pro Forma Condensed Combined Statement of
Income should be read in conjunction with, and is qualified in its entirety
by, the pro forma condensed statement of income of Bradley and the respective
historical financial statements and notes thereto of Bradley and Mid-America
incorporated by reference into this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
---------------------------------------------------------------------
BRADLEY PRO FORMA BRADLEY
PRO FORMA MID-AMERICA MERGER PRO FORMA AS
PRIOR TRANSACTIONS(A) HISTORICAL(B) ADJUSTMENTS ADJUSTED FOR MERGER
--------------------- ------------- ----------- -------------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Income:
Rental income......... $ 29,821 $5,646 $ -- $ 35,467
Other income.......... 640 166 -- 806
----------- ------ ------ -----------
Total revenue....... 30,461 5,812 -- 36,273
----------- ------ ------ -----------
Expenses:
Operations,
maintenance and
management........... 4,408 899 -- 5,307
Real estate taxes..... 5,031 760 -- 5,791
Mortgage and other
interest............. 7,224 1,341 (173)(C) 8,392
General and
administrative....... 1,403 544 (323)(D) 1,624
Depreciation and
amortization......... 5,793 1,238 (470)(E) 6,561
----------- ------ ------ -----------
Total expenses...... 23,859 4,782 (966) 27,675
----------- ------ ------ -----------
Income before equity in
earnings of partnership
and allocation to
minority interest...... 6,602 1,030 966 8,598
Equity in earnings of
partnership............ -- 265 65(E) 330
Income allocated to mi-
nority interest........ (383) -- -- (383)
----------- ------ ------ -----------
Net income.............. 6,219 1,295 1,031 8,545
Preferred share distri-
butions................ -- -- (1,827)(F) (1,827)
----------- ------ ------ -----------
Net income attributable
to common stock........ $ 6,219 $1,295 $ (796) $ 6,718
=========== ====== ====== ===========
Weighted average number
of common shares
outstanding--basic(G) 23,532,849 23,532,849
Basic net income per
common
share(G)............... $ 0.26 $ 0.29
=========== ===========
</TABLE>
80
<PAGE>
- --------
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(A) See page 83 for the pro forma condensed statement of income giving
effect to prior Bradley transactions.
(B) Represents historical operating results as reported by Mid-America for
the three months ended March 31, 1998.
(C) Represents the net reduction in interest expense for the prepayment of
certain Mid-America mortgage indebtedness with Bradley's line of credit
at Bradley's current interest rate of 6.5%, combined with the reduction
in interest expense to reflect the estimated market interest rate of
approximately 7.25%, in accordance with the purchase method of
accounting, partially offset by an increase in interest expense for the
payment of fees and expenses related to the merger of approximately
$4,850,000, at an interest rate of 6.5%, as follows (in thousands):
<TABLE>
<S> <C>
Elimination of historical interest on mortgages expected to be
prepaid........................................................ $ (528)
Interest on Bradley's line of credit expected to be used to
prepay debt.................................................... 413
Reduction of Mid-America interest to reflect a market rate...... (137)
Interest on Bradley's line of credit for merger fees and
expenses....................................................... 79
-------
Pro forma adjustment............................................ $ (173)
=======
(D) Represents general and administrative cost savings which have been
estimated based upon historical costs for those items which will be
eliminated as a result of the Merger, as follows (in thousands):
Salaries and benefits........................................... $ 227
D&O insurance and director fees................................. 46
Professional fees............................................... 37
Other........................................................... 13
-------
Pro forma adjustment............................................ $ 323
=======
(E) Depreciation and amortization changes relate to recording Mid-America's
properties at Bradley's purchase price, the related depreciation
utilizing an estimated useful life of 39 years and a depreciable basis
of approximately $119,771,000, and the elimination of historical
amortization of Mid-America deferred assets in accordance with the
purchase method of accounting, as follows (in thousands):
Pro forma depreciation expense ($119,771 over 39 years)......... $ 768
Mid-America depreciation and amortization....................... (1,238)
-------
Pro forma adjustment............................................ $ (470)
=======
</TABLE>
The pro forma adjustment to the equity in earnings of partnership
reflects the adjustment to depreciation and amortization of the
partnership resulting from recording the investment in partnership at
Bradley's purchase price.
(F) Preferred share distributions are calculated using an annual dividend
rate of $2.10 per share for 3,480,000 shares of Series A Preferred
Stock pro rated for the period presented.
81
<PAGE>
(G) A reconciliation of the numerator and denominator used to compute basic
earnings per share ("EPS") to the numerator and denominator used to
compute diluted EPS is as follows:
<TABLE>
<CAPTION>
BRADLEY AS ADJUSTED FOR MERGER
NUMERATOR DENOMINATOR PER SHARE
----------- ----------- ---------
<S> <C> <C> <C>
Basic EPS:
Net income attributable to common
stock................................. $ 6,718,000 23,532,849 $ 0.29
Effect of dilutive securities:
Dilutive options exercised............. -- 54,379
Conversion of LP Units................. 383,000 1,435,311
----------- ----------
Diluted EPS:
Net income attributable to common
stock................................. $ 7,101,000 25,022,539 $ 0.28
=========== ========== ======
</TABLE>
82
<PAGE>
BRADLEY REAL ESTATE, INC.
PRO FORMA CONDENSED STATEMENT OF INCOME
TO REFLECT PRIOR BRADLEY TRANSACTIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
During the period from January 1, 1998 through May 30, 1998, Bradley
acquired 11 shopping centers at an aggregate cost of approximately $93.7
million. Consideration paid for such acquisitions included cash (provided
primarily from the bank line of credit) and assumption of mortgage
indebtedness. In addition, as of June 1, 1998, Bradley has entered into
contracts to acquire an additional eight shopping centers for an estimated
aggregate purchase price of approximately $94.8 million, which it believes
will close. See "The Companies--Bradley."
On January 28, 1998, Bradley, through BOLP, issued $100 million of 7.2% ten-
year unsecured Notes maturing January 15, 2008 (the "January 1998 Debt
Issuance"). The effective interest rate on the unsecured Notes is
approximately 7.61%. The issue was rated "BBB-" by Standard & Poor's
Investment Services ("Standard & Poor's") and "Baa3" by Moody's Investor's
Service ("Moody's"). Proceeds from the offering were used to reduce the
outstanding borrowings under the line of credit.
On February 18, 1998, Bradley issued 392,638 shares of common stock to a
unit investment trust at a price based upon the then market value of $20.375
per share (the "February 1998 Stock Offering"). Net proceeds from the offering
of approximately $7.6 million were contributed to BOLP and were used to reduce
outstanding borrowings under the line of credit.
Subsequent to March 31, 1998, Bradley entered into a contract to sell One
North State, for approximately $84.5 million subject to normal and customary
closing costs and adjustments, with the proceeds assumed to be used to pay
down Bradley's line of credit. See "The Companies--Bradley." In addition, in
May 1998, Bradley sold Holiday Plaza, a shopping center in Cedar Falls, Iowa,
for approximately $1.9 million.
The unaudited Pro Forma Condensed Statement of Income of Bradley is
presented as if the acquisitions (including the probable acquisitions), the
dispositions (including the probable disposition), the January 1998 Debt
Issuance, and the February 1998 Stock Offering, described above, had been
consummated on January 1, 1997, and with Bradley qualifying as a REIT and,
therefore, incurring no federal income tax expense during the period January
1, 1997 through March 31, 1998.
83
<PAGE>
<TABLE>
<CAPTION>
ACQUISITION DISPOSITION OTHER
HISTORICAL PROPERTIES(A) PROPERTIES(B) ADJUSTMENTS PRO FORMA
---------- ------------- ------------- ----------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenues:
Rental income......... $ 28,736 $4,882 $(3,797) $ -- $ 29,821
Other income.......... 619 21 -- -- 640
---------- ------ ------- ------- ----------
Total revenue....... 29,355 4,903 (3,797) -- 30,461
---------- ------ ------- ------- ----------
Expenses:
Operations,
maintenance and
management........... 4,333 597 (522) -- 4,408
Real estate taxes..... 5,481 609 (1,059) -- 5,031
Mortgage and other
interest............. 5,558 -- -- 1,666(C) 7,224
General and
administrative....... 1,403 -- -- -- 1,403
Depreciation and
amortization......... 4,963 -- -- 830(D) 5,793
---------- ------ ------- ------- ----------
Total expenses...... 21,738 1,206 (1,581) 2,496 23,859
---------- ------ ------- ------- ----------
Income before provision
for loss on real estate
investment and minority
interest............... 7,617 3,697 (2,216) (2,496) 6,602
Provision for loss on
real estate investment. (875) -- 875 -- --
---------- ------ ------- ------- ----------
Income before allocation
to minority
interest............... 6,742 3,697 (1,341) (2,496) 6,602
Income allocated to
minority interest...... (391) -- -- 8 (383)
---------- ------ ------- ------- ----------
Net income attributable
to common stock........ $ 6,351 $3,697 $(1,341) $(2,488) $ 6,219
========== ====== ======= ======= ==========
Weighted average common
shares outstanding--
basic(E)............... 23,301,629 23,532,849
Basic and diluted income
per common share(E) $ 0.27 $ 0.26
========== ==========
</TABLE>
EXPLANATORY NOTES
(A) Increase represents historical operating revenues and expenses on
properties acquired in 1998, or probable of acquisition subsequent to
March 31, 1998, for the period Bradley did not own such properties.
(B) Decrease represents the elimination of historical operating revenues
and expenses, of properties sold or probable of being sold subsequent
to March 31, 1998.
(C) Mortgage and other interest has been increased to reflect the pro forma
borrowings for property acquisitions for the period during which
Bradley did not own such properties, net of the reduction for the
application of net proceeds from the property dispositions and the
February 1998 Stock Offering to pay down the line of credit for the
period during which Bradley owned such properties, and for the period
preceding the stock offering, at an interest rate of 6.50%, which was
Bradley's approximate borrowing rate at May 30, 1998. Mortgage and
other interest has been increased for the January 1998 Debt Issuance
for the period preceding the issuance. A 0.125% change in the variable
rate would result in a change in the pro forma interest adjustment of
approximately $11,000.
<TABLE>
<S> <C>
Increase in interest expense attributable to acquisition
activities..................................................... $ 3,007
Decrease in interest expense attributable to disposition activi-
ties........................................................... (1,360)
Decrease in interest expense attributable to the February 1998
Stock Offering................................................. (65)
Net increase in interest expense attributable to the January
1998 Debt
Issuance offering.............................................. 84
-------
Pro forma adjustment............................................ $ 1,666
=======
</TABLE>
84
<PAGE>
(D) Depreciation and amortization has been increased to give effect to
recording the property acquisitions (including probable acquisitions)
over a depreciable life of 39 years, for the period which Bradley did
not own such properties, net of the reduction for properties sold or
probable of being sold subsequent to March 31, 1998 for the period
which Bradley owned such properties, as follows:
<TABLE>
<S> <C>
Increase in depreciation and amortization attributable to
acquisition activities........................................... $887
Decrease in depreciation and amortization attributable to disposi-
tion activities.................................................. (57)
----
Pro forma adjustment.............................................. $830
====
</TABLE>
(E) A reconciliation of the numerator and denominator used to compute basic
earnings per share ("EPS") to the numerator and denominator used to
compute diluted EPS is as follows:
<TABLE>
<CAPTION>
BRADLEY HISTORICAL BRADLEY PRO FORMA
NUMERATOR DENOMINATOR PER SHARE NUMERATOR DENOMINATOR PER SHARE
---------- ----------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Net income attributable
to common stock........ $6,351,000 23,301,629 $0.27 $6,219,000 23,532,849 $0.26
Effect of dilutive
securities:
Dilutive options
exercised.............. -- 54,379 -- 54,379
Conversion of LP Units.. 391,000 1,435,311 383,000 1,435,311
---------- ---------- ---------- ----------
Diluted EPS:
Net income attributable
to common stock........ $6,742,000 24,791,319 $0.27 $6,602,000 25,022,539 $0.26
========== ========== ===== ========== ========== =====
</TABLE>
85
<PAGE>
BRADLEY REAL ESTATE, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
The unaudited Pro Forma Condensed Combined Statement of Income is presented
as if the Merger had been consummated on January 1, 1997, and with Bradley
qualifying as a REIT and, therefore, incurring no federal income tax expense
during the period January 1, 1997 through December 31, 1997. The Merger has
been accounted for under the purchase method of accounting in accordance with
Accounting Principles Board Opinion No. 16. In the opinion of Bradley's
management, all adjustments necessary to reflect the effects of these
transactions have been made.
This unaudited Pro Forma Condensed Combined Statement of Income is presented
for comparative purposes only and is not necessarily indicative of what the
actual results of operations of Bradley would have been for the periods
presented, nor does it purport to represent the results to be achieved in
future periods. This unaudited Pro Forma Condensed Combined Statement of
Income should be read in conjunction with, and is qualified in its entirety
by, the pro forma condensed statement of income of Bradley and the respective
historical financial statements and notes thereto of Bradley and Mid-America
incorporated by reference into this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------------------------
BRADLEY PRO FORMA BRADLEY
PRO FORMA MID-AMERICA MERGER PRO FORMA AS
PRIOR TRANSACTIONS(A) HISTORICAL(B) ADJUSTMENTS ADJUSTED FOR MERGER
--------------------- ------------- ----------- -------------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenues:
Rental income......... $ 116,453 $22,478 $ -- $ 138,931
Other income.......... 1,632 787 -- 2,419
---------- ------- ------- ----------
Total revenue....... 118,085 23,265 -- 141,350
---------- ------- ------- ----------
Expenses:
Operations,
maintenance and
management........... 16,478 4,316 -- 20,794
Real estate taxes..... 19,069 2,952 -- 22,021
Mortgage and other
interest............. 27,739 5,539 (845)(C) 32,433
General and
administrative....... 5,123 1,985 (1,300)(D) 5,808
Non-recurring stock
based compensation... 3,415 -- -- 3,415
Depreciation and
amortization......... 21,111 4,981 (1,910)(E) 24,182
---------- ------- ------- ----------
Total expenses...... 92,935 19,773 (4,055) 108,653
---------- ------- ------- ----------
Income before net gain
on sale of properties,
equity in earnings of
partnership and
minority interest...... 25,150 3,492 4,055 32,697
Net gain on sale of
properties............. -- 130 (130) --
Equity in earnings of
partnership............ -- 1,026 260 (E) 1,286
Income allocated to
minority interest...... (1,568) -- -- (1,568)
---------- ------- ------- ----------
Income from operations.. 23,582 4,648 4,185 32,415
Preferred Share
Distributions.......... -- -- (7,308)(F) (7,308)
---------- ------- ------- ----------
Income from operations
attributable to common
stock.................. $ 23,582 $ 4,648 $(3,123) $ 25,107
========== ======= ======= ==========
Weighted average common
shares outstanding--
basic(G)............... 22,963,982 22,963,982
Basic and diluted income
from operations per
common share(G) $ 1.03 $ 1.09
========== ==========
</TABLE>
86
<PAGE>
- --------
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
(A) See page 89 for the pro forma condensed statement of income giving
effect to prior Bradley transactions.
(B) Represents historical operating results as reported by Mid-America for
the year ended December 31, 1997.
(C) Represents the net reduction in interest expense for the prepayment of
certain Mid-America mortgage indebtedness with Bradley's line of credit
at Bradley's current interest rate of 6.5%, combined with the reduction
in interest expense to reflect the estimated market interest rate of
approximately 7.25%, in accordance with the purchase method of
accounting, partially offset by an increase in interest expense for the
payment of fees and expenses related to the merger of approximately
$4,850,000, at an interest rate of 6.5%, as follows (in thousands):
<TABLE>
<S> <C>
Elimination of historical interest on mortgages expected to be
prepaid........................................................ $(2,263)
Interest on Bradley's line of credit expected to be used to pre-
pay debt....................................................... 1,652
Reduction of Mid-America interest to reflect a market rate...... (549)
Interest on Bradley's line of credit for merger fees and ex-
penses......................................................... 315
-------
Pro forma adjustment............................................ $ (845)
=======
</TABLE>
(D) Represents general and administrative cost savings which have been
estimated based upon historical costs for those items which will be
eliminated as a result of the Merger, as follows (in thousands):
<TABLE>
<S> <C>
Salaries and benefits............................................. $ 906
D&O Insurance and director fees................................... 230
Professional fees................................................. 136
Other............................................................. 28
------
Pro forma adjustment.............................................. $1,300
======
</TABLE>
(E) Depreciation and amortization changes relate to recording Mid-America's
properties at Bradley's purchase price and related depreciation
utilizing an estimated useful life of 39 years and a depreciable basis
of approximately $119,771,000, and the elimination of historical
amortization of Mid-America's deferred assets in accordance with the
purchase method of accounting, as follows (in thousands):
<TABLE>
<S> <C>
Pro forma depreciation expense ($119,771 over 39 years)......... $ 3,071
Mid-America depreciation and amortization....................... (4,981)
-------
Pro forma adjustment............................................ $(1,910)
=======
</TABLE>
The pro forma adjustment to the equity in earnings of partnership
reflects the adjustment to depreciation and amortization of the
partnership resulting from recording the investment in partnership at
Bradley's purchase price.
(F) Preferred share distributions are calculated using an annual dividend
rate of $2.10 per share for 3,480,000 shares of Series A Preferred
Stock.
87
<PAGE>
(G) A reconciliation of the numerator and denominator used to compute basic
earnings per share ("EPS") to the numerator and denominator used to
compute diluted EPS is as follows:
<TABLE>
<CAPTION>
BRADLEY AS ADJUSTED FOR MERGER
----------------------------------
NUMERATOR DENOMINATOR PER SHARE
------------ ----------- ---------
<S> <C> <C> <C>
Basic EPS:
Income from operations attributable to
common stock......................... $ 25,107,000 22,963,982 $ 1.09
Effect of dilutive securities:
Stock options......................... -- 42,451
Stock-based compensation.............. -- 315
Conversion of LP Units................ 1,568,000 1,523,587
------------ ----------
Diluted EPS:
Income from operations attributable to
common stock......................... $ 26,675,000 24,530,335 $ 1.09
============ ========== ======
</TABLE>
88
<PAGE>
BRADLEY REAL ESTATE, INC.
PRO FORMA CONDENSED STATEMENT OF INCOME
TO REFLECT PRIOR BRADLEY TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
During 1997, Bradley acquired 25 shopping centers aggregating over 3.1
million square feet of GLA for an aggregate cost of approximately $189.3
million and from January 1, 1998 through May 31, 1998, has acquired 11
properties aggregating 1.4 million square feet of GLA for an aggregate
acquisition price of approximately $94 million. Consideration paid for such
acquisitions included cash (provided primarily from the bank line of credit),
assumption of mortgage indebtedness and the issuance of Units of BOLP to
contributors of properties acquired. In addition, as of June 1, 1998, Bradley
has entered into contracts to acquire an additional eight shopping centers for
an estimated purchase price of approximately $94.8 million, which it believes
will close. See "The Companies--Bradley." During the period from January 1,
1997 through June 1, 1998, Bradley sold five shopping centers for net proceeds
of approximately $21.3 million utilizing the net proceeds to pay down its line
of credit.
In December 1997, Bradley entered into a new $200 million unsecured line of
credit facility with a syndicate of banks, replacing the previous $150 million
unsecured line of credit. The line of credit bears interest at a rate equal to
the lowest of (i) the lead bank's base rate, (ii) a spread over LIBOR ranging
from 0.70% to 1.25% depending on the credit rating assigned by national credit
rating agencies, or (iii) for amounts outstanding up to $100 million, a
competitive bid rate solicited from the syndicate of banks. Based on the
current credit rating assigned by Standard & Poor's and Moody's, the spread
over LIBOR is 1.00%, which represents a reduction in the spread over LIBOR
from the previous $150 million line of credit by 0.50%.
On November 26, 1997, Bradley prepaid a REMIC mortgage note (the "REMIC
Prepayment") primarily with the proceeds of an offering of $100 million of 7%
unsecured Notes due November 15, 2004 (the "November 1997 Debt Issuance"). The
effective interest rate on the unsecured Notes is approximately 7.19%. The
issue was rated "BBB-" by Standard & Poor's and "Baa3" by Moody's.
In December 1997, Bradley issued 1,290,000 shares of common stock pursuant
to two separate public offerings (the "December 1997 Stock Offerings"). Net
proceeds from the offerings, approximately $24.9 million, were contributed to
BOLP and were used to reduce outstanding borrowings under the line of credit.
On January 28, 1998, Bradley, through BOLP, issued $100 million, 7.2% ten-
year unsecured Notes maturing January 15, 2008 (the "January 1998 Debt
Issuance"). The effective interest rate on the unsecured Notes is
approximately 7.61%. The issue was rated "BBB-" by Standard & Poor's and
"Baa3" by Moody's. Proceeds from the issue were used to reduce the outstanding
borrowings under the line of credit.
On February 18, 1998, Bradley issued 392,638 shares of common stock to a
unit investment trust at a price based upon the then market value of $20.375
per share (the "February 1998 Stock Offering"). Net proceeds from the offering
of approximately $7.6 million were contributed to BOLP and were used to reduce
outstanding borrowings under the line of credit.
Subsequent to March 31, 1998, Bradley entered into a contract to sell One
North State for approximately $84.5 million subject to normal and customary
closing costs and adjustments, with the proceeds assumed to be used to pay
down Bradley's line of credit. See "The Companies--Bradley."
The unaudited Pro Forma Condensed Statement of Income is presented as if the
acquisitions (including the probable acquisitions), the dispositions
(including the probable disposition), the replacement of the previous line of
credit with the new line of credit, the REMIC Prepayment, the November 1997
Debt Issuance, the December
89
<PAGE>
1997 Stock Offerings, the January 1998 Debt Issuance, and the February 1998
Stock Offering, described above, had been consummated on January 1, 1997, and
with Bradley qualifying as a REIT and, therefore, incurring no federal income
tax expense during the period January 1, 1997 through December 31, 1997.
<TABLE>
<CAPTION>
ACQUISITION DISPOSITION OTHER
HISTORICAL PROPERTIES(A) PROPERTIES(B) ADJUSTMENTS PRO FORMA
---------- ------------- ------------- ----------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Revenue:
Rental income......... $ 96,115 $37,903 $(17,565) $ -- $ 116,453
Other income.......... 1,437 189 6 -- 1,632
---------- ------- -------- -------- ----------
Total revenue....... 97,552 38,092 (17,559) -- 118,085
---------- ------- -------- -------- ----------
Expenses:
Operations,
maintenance and
management........... 14,012 5,322 (2,856) -- 16,478
Real Estate taxes..... 18,398 5,291 (4,620) -- 19,069
Mortgage and other in-
terest............... 16,562 -- -- 11,177(C) 27,739
General and adminis-
trative.............. 5,123 -- -- -- 5,123
Non-recurring stock-
based compensation... 3,415 -- -- -- 3,415
Depreciation and amor-
tization............. 16,606 -- -- 4,505(D) 21,111
---------- ------- -------- -------- ----------
Total expenses...... 74,116 10,613 (7,476) 15,682 92,935
---------- ------- -------- -------- ----------
Income before net gain
on sale of properties
and extraordinary item. 23,436 27,479 (10,083) (15,682) 25,150
Net gain on sale of
properties............. 7,438 -- (7,438) -- --
---------- ------- -------- -------- ----------
Income before
extraordinary item and
allocation to minority
interest............... 30,874 27,479 (17,521) (15,682) 25,150
Income allocated to mi-
nority interest........ (1,116) -- -- (452) (1,568)
---------- ------- -------- -------- ----------
Income before extraordi-
nary item.............. $ 29,758 $27,479 $(17,521) $(16,134) $ 23,582
========== ======= ======== ======== ==========
Weighted average common
shares
outstanding--basic(E).. 21,776,146 22,963,982
Basic and diluted income
per common share:
Income before extraor-
dinary item(E)....... $ 1.36 $ 1.03
========== ==========
</TABLE>
EXPLANATORY NOTES
(A) Increase represents historical operating revenues and expenses on
properties acquired in 1997 and 1998, or probable of acquisition
subsequent to December 31, 1997, for the period Bradley did not own
such properties.
(B) Decrease represents the elimination of historical operating revenues
and expenses, and net gain on sale of properties disposed of during
1997 and 1998 or probable of being sold for the period during which
Bradley owned such properties.
(C) Mortgage and other interest has been increased to reflect the pro forma
borrowings for property acquisitions for the period during which
Bradley did not own such properties, net of the reduction for the
application of net proceeds from the property dispositions and the
December 1997 and February 1998 Stock Offerings to pay down the line of
credit for the period during which Bradley owned such properties, and
for the period preceding the Stock Offerings, at an interest rate of
6.50%, which was Bradley's approximate borrowing rate at May 30, 1998.
Mortgage and other interest has been increased for the November 1997
and January 1998 Debt Issuances, net of the reduction for the
application of net proceeds of such Debt Issuances to pay down the $100
million REMIC Note and the line of credit,
90
<PAGE>
respectively, at the applicable effective interest rates. Mortgage and
other interest has been decreased by the net reduction in interest
expense resulting from the December 1997 paydown of the existing line of
credit facility with proceeds from the new line of credit facility. A
0.125% change in the variable rate would result in a change in the pro
forma interest adjustment of approximately $19,000.
<TABLE>
<S> <C>
Increase in interest expense attributable to acquisition
activities..................................................... $18,885
Decrease in interest expense attributable to disposition
activities..................................................... (6,369)
Decrease in interest expense attributable to the Stock
Offerings...................................................... (1,987)
Net increase in interest expense attributable to the Debt
Issuances...................................................... 1,092
Net decrease in interest expense attributable to the paydown of
the existing line of credit facility with proceeds from the new
line of credit facility........................................ (444)
-------
Pro forma adjustment............................................ $11,177
=======
</TABLE>
(D) Depreciation and amortization has been increased to give effect to
recording the property acquisitions (including probable acquisitions)
over a depreciable life of 39 years, for the period which Bradley did
not own such properties, net of the reduction for properties disposed
for the period which Bradley owned such properties, as follows:
<TABLE>
<S> <C>
Increase in depreciation and amortization attributable to
acquisition activities........................................ $ 5,899
Decrease in depreciation and amortization attributable to
disposition activities........................................ (1,394)
-------
Pro forma adjustment........................................... $ 4,505
=======
</TABLE>
(E) A reconciliation of the numerator and denominator used to compute basic
earnings per share ("EPS") to the numerator and denominator used to
compute diluted EPS is as follows:
<TABLE>
<CAPTION>
BRADLEY HISTORICAL BRADLEY PRO FORMA
NUMERATOR DENOMINATOR PER SHARE NUMERATOR DENOMINATOR PER SHARE
----------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Income before
extraordinary item..... $29,758,000 21,776,146 $1.36 $23,582,000 22,963,982 $1.03
Effect of dilutive
securities:
Stock options........... -- 42,451 -- 42,451
Stock-based
compensation........... -- 315 -- 315
Conversion of LP Units.. 1,116,000 799,938 1,568,000 1,523,587
----------- ---------- ----------- ----------
Diluted EPS:
Income before
extraordinary item..... $30,874,000 22,618,850 $1.36 $25,150,000 24,530,335 $1.03
=========== ========== ===== =========== ========== =====
</TABLE>
91
<PAGE>
OTHER MATTERS
It is not expected that any matters other than those described in this Proxy
Statement/Prospectus will be brought before the Mid-America Special Meeting.
If any other matters are presented, however, it is the intention of the
persons named in the Mid-America proxy to vote the proxy in accordance with
their best judgment.
LEGAL MATTERS
Certain legal matters in connection with the Merger and the validity of the
shares of Series A Preferred Stock to be issued pursuant to the Merger will be
passed upon for Bradley by Goodwin, Procter & Hoar LLP (a partnership including
professional corporations), Boston, Massachusetts. William B. King, whose
professional corporation is a partner in Goodwin, Procter & Hoar LLP, is
Secretary of Bradley and is the beneficial owner of approximately 9,000 shares
of Bradley Common Stock.
EXPERTS
The financial statements and schedule of Bradley as of December 31, 1997 and
1996, and for each of the years in the three year period ended December 31,
1997 have been incorporated by reference in this Proxy Statement/Prospectus in
reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, incorporated by reference herein, and upon the authority
of said firm as experts in accounting and auditing.
The financial statements and the related financial statement schedule
incorporated in this Proxy Statement/Prospectus by reference from Mid-
America's Annual Report on Form 10-K for the year ended December 31, 1997 have
been audited by Deloitte & Touche LLP, independent auditors, as stated in
their reports, which are incorporated herein by reference, and have been so
incorporated in reliance upon the reports of such firms given upon their
authority as experts in accounting and auditing.
STOCKHOLDER PROPOSALS
Any Mid-America Stockholder who wishes to submit a proposal for presentation
at Mid-America's 1999 Annual Meeting of Stockholders, if the Merger is not
consummated by that time, must submit the proposal to Mid-America Realty
Investments, Inc., 11506 Nichols Street, Suite 100, Omaha, Nebraska 68154,
Attention: Shareholder Relations. Such proposal must be received not later
than November 18, 1998 for inclusion, if appropriate, in Mid-America's proxy
statement and form of proxy relating to its 1999 Annual Meeting.
92
<PAGE>
ANNEX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BETWEEN
BRADLEY REAL ESTATE, INC.
AND
MID-AMERICA REALTY INVESTMENTS, INC.
DATED AS OF MAY 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1.The Merger............................................................... 1
1.1 The Merger.......................................................... 1
1.2 The Closing......................................................... 1
1.3 Effective Time...................................................... 2
1.4 Amendments of Governing Documents of the MDI Subsidiaries........... 2
1.5 Severance Pay Agreements............................................ 2
2.Charter and Bylaws of the Surviving Corporation.......................... 2
2.1 Charter............................................................. 2
2.2 Bylaws.............................................................. 2
3.Directors and Officers of the Surviving Corporation...................... 2
3.1 Directors........................................................... 2
3.2 Officers............................................................ 2
4.MDI Stock................................................................ 2
4.1 Conversion of the MDI Stock......................................... 2
4.2 Exchange of Certificates Representing MDI Common Stock.............. 3
4.3 Return of Exchange Fund............................................. 5
5.Representations and Warranties of MDI.................................... 5
5.1 Existence; Good Standing; Authority; Compliance With Law............ 5
5.2 Authorization, Validity and Effect of Agreements.................... 6
5.3 Capitalization...................................................... 6
5.4 Subsidiaries........................................................ 7
5.5 Other Interests..................................................... 7
5.6 No Violation........................................................ 8
5.7 SEC Documents....................................................... 8
5.8 Litigation.......................................................... 9
5.9 Absence of Certain Changes or Events................................ 9
5.10 Taxes............................................................... 10
5.11 Books and Records................................................... 11
5.12 Properties.......................................................... 11
5.13 Leases.............................................................. 12
5.14 Rents............................................................... 13
5.15 Environmental Matters............................................... 13
5.16 Employee Benefit Plans.............................................. 13
5.17 Labor Matters....................................................... 14
5.18 No Brokers.......................................................... 14
5.19 Opinion of Financial Advisor........................................ 15
5.20 Bradley Share Ownership............................................. 15
5.21 Related Party Transactions.......................................... 15
5.22 Contracts and Commitments........................................... 15
5.23 Development Rights.................................................. 15
5.24 Certain Payments Resulting From Transactions........................ 16
5.25 Tenant Improvements................................................. 16
5.26 Status of Options to Purchase Real Property......................... 16
5.27 Related Parties..................................................... 16
5.28 Definition of MDI's Knowledge....................................... 16
5.29 Disclosure.......................................................... 16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
6. Representations and Warranties of Bradley................................ 17
6.1 Existence; Good Standing; Authority; Compliance With Law............ 17
6.2 Authorization, Validity and Effect of Agreements.................... 17
6.3 Capitalization...................................................... 18
6.4 Subsidiaries........................................................ 18
6.5 Other Interests..................................................... 19
6.6 No Violation........................................................ 19
6.7 SEC Documents....................................................... 19
6.8 Litigation.......................................................... 20
6.9 Absence of Certain Changes.......................................... 20
6.10 Taxes............................................................... 20
6.11 Books and Records................................................... 21
6.12 Employee Benefit Plans.............................................. 21
6.13 Labor Matters....................................................... 22
6.14 No Brokers.......................................................... 22
6.15 MDI Stock Ownership................................................. 22
6.16 Definition of Bradley's Knowledge................................... 22
6.17 Environmental Matters............................................... 22
6.18 Disclosure.......................................................... 23
7.Covenants................................................................. 23
7.1 Acquisition Proposals............................................... 23
7.2 Conduct of Businesses............................................... 24
7.3 Meeting of Stockholders............................................. 26
7.4 Filings; Other...................................................... 27
7.5 Inspection of Records............................................... 27
7.6 Publicity........................................................... 27
7.7 Initial Listing Application......................................... 28
7.8 Further Action...................................................... 28
7.9 Affiliates of MDI................................................... 28
7.10 Expenses............................................................ 28
7.11 Indemnification..................................................... 29
7.12 Reorganization...................................................... 30
7.13 Certain Benefits.................................................... 30
7.14 Dividends........................................................... 30
7.15 Environmental Matters............................................... 30
8.Conditions................................................................ 31
8.1 Conditions to Each Party's Obligation to Effect the Merger.......... 31
8.2 Conditions to Obligations of MDI to Effect the Merger............... 32
8.3 Conditions to Obligation of Bradley to Effect the Merger............ 32
9.Termination............................................................... 33
9.1 Termination......................................................... 33
9.2 Effect of Termination............................................... 34
9.3 Payment of Termination Amount or Expenses........................... 36
9.4 Extension; Waiver................................................... 37
10.General Provisions....................................................... 37
10.1 Nonsurvival of Representations, Warranties and Agreements........... 37
10.2 Notices............................................................. 37
10.3 Assignment; Binding Effect; Benefit................................. 38
10.4 Entire Agreement.................................................... 38
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
10.5 Confidentiality.................................................... 38
10.6 Amendment.......................................................... 39
10.7 Governing Law; Jurisdiction and Venue.............................. 39
10.8 Counterparts....................................................... 39
10.9 Headings........................................................... 40
10.10 Interpretation..................................................... 40
10.11 Waivers............................................................ 40
10.12 Incorporation...................................................... 40
10.13 Severability....................................................... 40
10.14 Enforcement of Agreement........................................... 40
10.15 Certain Definitions................................................ 40
EXHIBITS
EXHIBIT A--Acknowledgment of Severance Obligation
EXHIBIT B--Form of Articles Supplementary Establishing and Fixing the
Rights and Preferences of a Series of Shares of Preferred Stock for the
8.4% Convertible Preferred Stock of Bradley
EXHIBIT C--Form of Option Termination Agreement
EXHIBIT D--Form of Affiliate Letter
EXHIBIT E--Form of Opinion of Deloitte & Touche LLP
EXHIBIT F--Form of Estoppel Certificate
SCHEDULES
Schedule 8.3(f) Leases and REA Agreements Requiring Estoppel Certificates
Schedule 8.3(g) Required Consents
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of May 30, 1998, between Bradley Real Estate, Inc., a Maryland
corporation ("Bradley"), and Mid-America Realty Investments, Inc., a Maryland
corporation ("MDI").
RECITALS
A. The Board of Directors of Bradley and the Board of Directors of MDI each
have determined that a business combination between Bradley and MDI is in the
best interests of their respective companies and stockholders and presents an
opportunity for their respective companies to achieve long-term strategic and
financial benefits, and accordingly have agreed to effect the merger provided
for herein upon the terms and subject to the conditions set forth herein.
B. For federal income tax purposes, it is intended that the merger provided
for herein shall qualify as a tax-free reorganization under Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"), and that this
Agreement shall constitute a plan of reorganization under Section 368 of the
Code.
C. Each of Bradley and MDI has received a fairness opinion from its
financial advisor relating to the transactions contemplated hereby as more
fully described herein.
D. Bradley and MDI desire to make certain representations, warranties and
agreements in connection with the merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
1. THE MERGER.
1.1 The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.3 hereof), MDI shall be merged
with and into Bradley in accordance with this Agreement and the separate
corporate existence of MDI shall thereupon cease (the "Merger"). Bradley shall
be the surviving corporation in the Merger (sometimes hereinafter referred to
as the "Surviving Corporation"). The Merger shall have the effects specified
in Section 3-114 of the Maryland General Corporation Law (the "MGCL").
1.2 The Closing. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") shall take place (a) at the offices of
Goodwin, Procter & Hoar LLP, Exchange Place, Boston, Massachusetts, at 9:00
a.m., local time, on the first business day immediately following the day on
which the last of the conditions set forth in Article 8 shall be fulfilled or
waived in accordance herewith or (b) at such other time, date or place as the
parties hereto may agree. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
1.3 Effective Time. If all the conditions to the Merger set forth in Article
8 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 9, the parties
hereto shall cause Articles of Merger satisfying the requirements of the MGCL
to be properly executed, verified and delivered for filing in accordance with
the MGCL on the Closing Date. The Merger shall become effective upon the
acceptance for record of the Articles of Merger by the State Department of
Assessments and Taxation of Maryland in accordance with the MGCL or at such
later time which the parties hereto shall have agreed upon and designated in
such filing in accordance with applicable law as the effective time of the
Merger (the "Effective Time").
A-1
<PAGE>
1.4 Amendments of Governing Documents of the MDI Subsidiaries. In connection
with the Closing, the Articles of Incorporation, Bylaws, partnership
agreements and equivalent documents for the MDI Subsidiaries (as defined in
Section 5.1 hereof) will be amended to make certain changes to such documents
in order to reflect the Merger and the transactions contemplated by this
Agreement. MDI and the MDI Subsidiaries will take all actions which are
necessary to effectuate such amendments and will use their best efforts to
cause all of the stockholders in any MDI Subsidiary and all of the partners in
any MDI Subsidiary to approve such amendments and, if necessary, the
transactions contemplated by this Agreement and to take such other actions to
effectuate such amendments and the transactions contemplated by this Agreement
as may be reasonably requested by Bradley.
1.5 Severance Pay Agreements. Bradley agrees that after the Effective Time,
it will assume and be bound by the terms of the severance agreements (the
"Severance Agreements") entered into by MDI with each of Jerome Heinrichs and
Dennis G. Gethmann. Prior to the Effective Time, and as soon as practicable
after this Agreement is signed, MDI shall supply Bradley with the calculation
of the actual severance payments that would be payable pursuant to the
Severance Agreements. In addition, MDI agrees to obtain acknowledgments in the
form attached as Exhibit A hereto (an "Acknowledgment of Severance
Obligation") from each of Jerome Heinrichs and Dennis G. Gethmann that such
individual is not, and will not be, entitled to receive any amounts from MDI
pursuant to its Severance Pay Policy.
ARTICLE 2
2. CHARTER AND BYLAWS OF THE SURVIVING CORPORATION.
2.1 Charter. The Charter (as defined in the MGCL) of Bradley in effect
immediately prior to the Effective Time shall be the Charter of the Surviving
Corporation, until duly amended in accordance with applicable law.
2.2 Bylaws. The Bylaws of Bradley in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with applicable law.
ARTICLE 3
3. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION.
3.1 Directors. The directors of Bradley immediately prior to the Effective
Time shall be the directors of the Surviving Corporation as of the Effective
Time.
3.2 Officers. The officers of Bradley immediately prior to the Effective
Time shall be the officers of the Surviving Corporation as of the Effective
Time.
ARTICLE 4
4. MDI STOCK.
4.1 Conversion of the MDI Stock.
(a) At the Effective Time, each share of the common stock, $.01 par value
per share, of Bradley ("Bradley Common Stock") outstanding immediately prior
to the Effective Time shall remain outstanding and shall represent one share
of the Common Stock, $.01 par value per share, of the Surviving Corporation.
(b) At the Effective Time, each share of common stock, par value $.01 per
share, of MDI (the "MDI Common Stock") issued and outstanding immediately
prior to the Effective Time (other than those shares of MDI Common Stock to be
canceled pursuant to Section 4.1(d)) shall, by virtue of the Merger and
without any
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action on the part of MDI, Bradley or the holders of any of the securities of
any of these corporations, be converted into the right to receive 0.42 (the
"Exchange Ratio") of a share of Series A 8.4% Convertible Preferred Stock of
Bradley ("Bradley Preferred Stock"), the terms of which are substantially in
the form set forth in the Articles Supplementary Establishing and Fixing the
Rights and Preferences of a Series of Shares of Preferred Stock (the "Articles
Supplementary") attached hereto as Exhibit B; provided, however, that if
between the date of this Agreement and the Effective Time the outstanding
shares of Bradley Common Stock shall have been changed into a different number
of shares or a different class or series, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or
exchange of shares, the Exchange Ratio shall be correspondingly adjusted to
reflect such stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares.
(c) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time, all shares of MDI Common Stock shall
cease to be outstanding, shall be canceled and retired and shall cease to
exist and each holder of a certificate representing any shares of MDI Common
Stock (a "Certificate") shall thereafter cease to have any rights with respect
to such shares of MDI Common Stock, except the right to receive, without
interest, shares of Bradley Preferred Stock and cash in lieu of fractional
shares of Bradley Preferred Stock in accordance with Section 4.2(d) (the
"Merger Consideration") upon the surrender of such Certificate.
(d) Each share of MDI Common Stock issued and held in MDI's treasury at the
Effective Time, if any, by virtue of the Merger, shall cease to be
outstanding, shall be canceled and retired and shall cease to exist and no
payment of any consideration shall be made with respect thereto.
(e) Each outstanding stock option to purchase a share of MDI Common Stock (an
"Existing MDI Option") granted under MDI's Amended and Restated 1994 Stock
Option Plan or MDI's 1995 Stock Option Plan (together, the "MDI Stock Option
Plans") which has not been exercised by the Effective Time shall, at the
Effective Time, be canceled and upon the surrender and cancellation of the
option agreement representing such option and delivery of an Option
Termination (defined below), the holders of such options shall be entitled to
receive, as consideration therefor, an amount in cash equal to the excess, if
any, of the Option Consideration (defined below) over the per share exercise
price of such stock option, without interest thereon. For the purposes of this
section, "Option Consideration" shall mean the average last sale price (or bid
price for days on which there were no sales) per share of MDI Common Stock on
the New York Stock Exchange ("NYSE") for the ten trading days preceding the
fifth day prior to the Closing Date. MDI shall take all actions necessary to
ensure that (i) all Existing MDI Options, to the extent not exercised prior to
the Effective Time, shall terminate and be canceled as of the Effective Time
and thereafter shall be of no further force or effect, (ii) no Existing MDI
Options are granted after the date hereof, and (iii) the MDI Stock Option
Plans and any and all other outstanding option arrangements or plans of MDI
shall terminate as of the Effective Time. MDI hereby represents that
immediately after the Effective Time, no Existing MDI Option holder or other
participant in MDI Stock Option Plans shall have any right to acquire equity
securities of MDI, Bradley, the Surviving Corporation or any subsidiary or
affiliate thereof. MDI shall obtain, prior to the Closing, the consent, in the
form attached as Exhibit C hereto, from each holder of an Existing MDI Option
to the termination of such Existing MDI Option and the release of any and all
rights such holder had or may have in such Existing MDI Option as contemplated
by this Section 4.1(c) and a representation of such holder as to his or her
title to such stock option and agreement to the payment terms hereof (each
such document, an "Option Termination").
4.2 Exchange of Certificates Representing MDI Common Stock.
(a) As of the Effective Time, Bradley shall deposit, or shall cause to be
deposited, with an exchange agent selected by Bradley on or prior to the
Effective Time (the "Exchange Agent"), for the benefit of the holders of
shares of MDI Common Stock, for exchange in accordance with this Article 4,
certificates representing the shares of Bradley Preferred Stock and the cash
in lieu of fractional shares (such cash and certificates for shares of Bradley
Preferred Stock being hereinafter referred to as the "Exchange Fund") to be
issued pursuant to Section 4.1 and paid pursuant to this Section 4.2 in
exchange for outstanding shares of MDI Common Stock.
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(b) Promptly after the Effective Time, Bradley shall cause the Exchange
Agent to mail to each holder of record of a Certificate or Certificates (i) a
letter of transmittal which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Bradley may reasonably specify and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for
certificates representing shares of Bradley Preferred Stock and cash in lieu
of fractional shares. Upon surrender of a Certificate for cancellation to the
Exchange Agent together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor (x) a
certificate representing the number of whole shares of Bradley Preferred Stock
to which such holder shall be entitled, and (y) a check representing the
amount of cash in lieu of fractional shares, if any, plus the amount of any
dividends, or distributions, if any, pursuant to paragraph (c) below, after
giving effect to any required withholding tax, and the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued
on the cash in lieu of fractional shares or on the dividend or distribution,
if any, payable to holders of Certificates pursuant to this Section 4.2. In
the event of a transfer of ownership of MDI Common Stock which is not
registered in the transfer records of MDI, a Certificate representing the
proper number of shares of Bradley Preferred Stock, together with a check for
the cash to be paid in lieu of fractional shares plus, to the extent
applicable, the amount of any dividend or distribution, if any, payable
pursuant to paragraph (c) below, may be issued to such a transferee if the
Certificate representing shares of such MDI Common Stock is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable stock transfer taxes have
been paid.
(c) Notwithstanding any other provisions of this Agreement, no dividends or
other distributions on Bradley Preferred Stock paid with respect to any shares
of MDI Common Stock represented by a Certificate shall be delivered to the
holder of such Certificate until such Certificate is surrendered for exchange
as provided herein and until such time, the Exchange Agent shall hold the
amount of such dividends or distributions as a part of the Exchange Fund
(subject to returns as provided in Section 4.3 hereof); provided, however,
that, subject to the effect of applicable laws, following surrender of any
such Certificate, there shall be paid to the holder of the certificates
representing the whole shares of Bradley Preferred Stock issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective Time
theretofore payable with respect to such whole shares of Bradley Preferred
Stock and not paid, less the amount of any withholding or other applicable
taxes which may be required thereon, and (ii) at the appropriate payment date,
the amount of dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent to
surrender payable with respect to such whole shares of Bradley Preferred
Stock, less the amount of any withholding or other applicable taxes which may
be required thereon.
(d) At and after the Effective Time, there shall be no transfers on the
stock transfer books of MDI of the shares of MDI Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
canceled and exchanged for certificates for shares of Bradley Preferred Stock
and cash in lieu of fractional shares, if any, in accordance with this Section
4.2. Certificates surrendered for exchange by any Person constituting an
"affiliate" of MDI for purposes of Rule 145, as such rule may be amended from
time to time ("Rule 145"), of the rules and regulations promulgated under the
Securities Act of 1933, as amended (the "Securities Act"), shall not be
exchanged until Bradley has received an Affiliate Letter in the form of
Exhibit D attached hereto (an "Affiliate Letter"), from such Person as
provided in Section 7.9.
(e) No fractional shares of Bradley Preferred Stock shall be issued pursuant
hereto. In lieu of the issuance of any fractional share of Bradley Preferred
Stock pursuant to Section 4.1(b), each holder of MDI Common Stock upon
surrender of a Certificate for exchange shall be paid an amount in cash
(without interest), rounded to the nearest cent, determined by multiplying (i)
the fraction of a share of Bradley Preferred Stock which such holder would
otherwise be entitled to receive under this Article 4 by (ii) $25.00.
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4.3 Return of Exchange Fund. Any portion of the Exchange Fund (including the
proceeds of any investments thereof and any shares of Bradley Preferred Stock
and any dividends or distributions paid with respect thereto) that remains
unclaimed by the former stockholders of MDI one year after the Effective Time
shall be delivered to the Surviving Corporation. Any former stockholders of
MDI who have not theretofore complied with this Article 4 shall thereafter
look only to the Surviving Corporation for payment of their shares of Bradley
Preferred Stock and cash in lieu of fractional shares (plus dividends and
distributions to the extent set forth in Section 4.2(c), if any), as
determined pursuant to this Agreement, without any interest thereon. None of
Bradley, MDI, the Exchange Agent or any other Person shall be liable to any
former holder of shares of MDI Common Stock for any amount properly delivered
to a public official pursuant to applicable abandoned property, escheat or
similar laws. In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such Person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange
Agent or the Surviving Corporation will issue in exchange for such lost,
stolen or destroyed Certificate the shares of Bradley Preferred Stock and cash
in lieu of fractional shares (plus, to the extent applicable, dividends and
distributions payable pursuant to Section 4.2(c)).
ARTICLE 5
5. REPRESENTATIONS AND WARRANTIES OF MDI.
Except as set forth in the disclosure letter delivered at or prior to the
execution hereof to Bradley, which shall refer to the relevant Sections of
this Agreement (the "MDI Disclosure Letter"), MDI represents and warrants to
Bradley as follows:
5.1 Existence; Good Standing; Authority; Compliance With Law. MDI is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Maryland. MDI is duly licensed or qualified to do
business as a foreign corporation and is in good standing under the laws of
any other state of the United States in which the character of the properties
owned or leased by it therein or in which the transaction of its business
makes such qualification necessary, which states are listed in Section 5.1 of
MDI Disclosure Letter; provided, however, that if MDI has prepared Section 5.1
of the MDI Disclosure Letter in good faith, Bradley hereby covenants not to
exercise any right that it may have to terminate this agreement pursuant to
Section 9.1(c) based solely on any breach of the representation of MDI
contained in this sentence; provided further, however, that nothing contained
in this Section 5.1 shall affect Bradley's right to terminate this Agreement
pursuant to Section 9.1(c) with respect to any matter described in this
sentence that occurs or arises after the date hereof. MDI has all requisite
corporate power and authority to own, operate, lease and encumber its
properties and carry on its business as now conducted. Each of the MDI
Subsidiaries (as defined below) is a corporation or partnership duly
incorporated or organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization, has the corporate
or partnership power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business
and is in good standing in each jurisdiction in which the ownership of its
property or the conduct of its business requires such qualification, which
states are listed in Section 5.4 of the MDI Disclosure Letter; provided,
however, that if MDI has prepared Section 5.1 of the MDI Disclosure Letter in
good faith, Bradley hereby covenants not to exercise any right that it may
have to terminate this agreement pursuant to Section 9.1(c) based solely on
any breach of the representation of MDI contained in this sentence; provided
further, however, that nothing contained in this Section 5.1 shall affect
Bradley's right to terminate this Agreement pursuant to Section 9.1(c) with
respect to any matter described in this sentence that occurs or arises after
the date hereof. Neither MDI nor any of the MDI Subsidiaries is in violation
of any order of any court, governmental authority or arbitration board or
tribunal, or any law, ordinance, governmental rule or regulation to which MDI
or any MDI Subsidiary or any of their respective properties or assets is
subject, except where such violation would not have a material adverse effect
on the business, results of operations, properties or financial condition of
MDI and the MDI Subsidiaries taken as a whole (a "MDI Material Adverse
Effect"). MDI and the MDI Subsidiaries have obtained all licenses,
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permits and other authorizations and have taken all actions required by
applicable law or governmental regulations in connection with their business
as now conducted, except where the failure to obtain any such license, permit
or authorization or to take any such action would not have a MDI Material
Adverse Effect. Copies of the Charter or other equivalent documents, Bylaws,
organizational documents and partnership and joint venture agreements (and in
each such case, all amendments thereto) of MDI and each of the MDI
Subsidiaries are listed in Section 5.1 of MDI Disclosure Letter, and the
copies of such documents, which have previously been delivered or made
available to Bradley and its counsel, are true and correct. For the purposes
of this Agreement, the term "MDI Subsidiary" shall include any of the entities
listed under such heading in Section 5.4 of the MDI Disclosure Letter.
5.2 Authorization, Validity and Effect of Agreements. Each of MDI and the
MDI Subsidiaries has the requisite power and authority to enter into the
transactions contemplated hereby and to execute and deliver this Agreement.
The Board of Directors of MDI has, by resolutions duly adopted by unanimous
vote, approved this Agreement, the Merger and the transactions contemplated by
this Agreement and has agreed to recommend that the holders of MDI Common
Stock adopt and approve this Agreement, the Merger and the transactions
contemplated by this Agreement at the MDI stockholders' meeting which will be
held in accordance with the provisions of Section 7.3. In connection with the
foregoing, the Board of Directors of MDI has taken such actions and votes as
are necessary on its part to render the provisions of the Control Share
Acquisition Statute (Title 3, Subtitle 7), the Business Combination Statute
(Title 3, Subtitle 6) and all other applicable takeover statutes of the MGCL
and any other applicable takeover statutes of any other state, inapplicable to
this Agreement, the Merger and the transactions contemplated by this
Agreement. As of the date hereof, all of the directors and executive officers
of MDI have indicated that they presently intend to vote all shares of MDI
Common Stock which they own to approve this Agreement, the Merger, and the
transactions contemplated by this Agreement at the MDI stockholders' meeting
which will be held in accordance with the provisions of Section 7.3. Subject
only to the approval of this Agreement and the transactions contemplated
hereby by the holders of two-thirds of the outstanding shares of MDI Common
Stock, the execution by MDI and the MDI Subsidiaries of this Agreement, the
ancillary agreements to which they are parties and the consummation of the
transactions contemplated by this Agreement and the ancillary agreements has
been duly authorized by all requisite corporate or partnership action on the
part of such entities, including, without limitation, the consent of the Class
B Partner of MAB (as defined in Section 5.3(b) below). This Agreement
constitutes, and the ancillary agreements to which they are parties (when
executed and delivered pursuant hereto) will constitute, the valid and legally
binding obligations of MDI and the MDI Subsidiaries, enforceable against MDI
and each of the MDI Subsidiaries in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity.
5.3 Capitalization.
(a) The authorized capital stock of MDI consists of 25,000,000 shares of MDI
Common Stock of which 8,285,715 shares are issued and outstanding. All such
issued and outstanding shares of MDI Common Stock are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights. MDI has no
outstanding bonds, debentures, notes or other obligations the holders of which
have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the stockholders of MDI on any
matter. Except for the Existing MDI Options (all of which have been issued
under the MDI Stock Option Plans), there are not at the date of this Agreement
any existing options, warrants, calls, subscriptions, convertible securities,
or other rights, agreements or commitments which obligate MDI to issue,
transfer or sell any shares of capital stock of MDI. Section 5.3(a) of the MDI
Disclosure Letter sets forth a full list of the Existing MDI Options,
including the name of the person to whom such stock options have been granted,
the number of shares subject to each option, the per share exercise price for
each option, the vesting schedule for each option and the termination date for
each option. There are no agreements or understandings to which MDI or any MDI
Subsidiary is a party with respect to the voting of any shares of MDI Common
Stock or which restrict the transfer of any such shares, nor does MDI have
knowledge of any such agreements or understandings with respect to the voting
of any such shares or which restrict the transfer of any such shares. There
are no outstanding contractual obligations of MDI or any MDI Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital stock,
partnership
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interests or any other securities of MDI or any MDI Subsidiary. All dividends
which have been declared with respect to MDI Common Stock have been paid in
full. Neither MDI nor any MDI Subsidiary is under any obligation, contingent
or otherwise, by reason of any agreement to register any of their securities
under the Securities Act. After the Effective Time the Surviving Corporation
will have no obligation to issue, transfer or sell any shares of capital stock
or other equity interest of MDI or the Surviving Corporation pursuant to any
MDI Stock Option Plan or any other MDI Benefit Plan (as defined in Section
5.16 hereof).
(b) The sole general partner of Mid-America Bethal Limited Partnership, a
Nebraska limited partnership ("MAB"), is MDI. As of the date hereof, MDI owns
a 50% partnership interest in MAB and is the Class A Partner, as defined in
the Amended and Restated Limited Partnership Agreement of MAB (the "MAB
Partnership Agreement") and the Class B Partner, as defined in the Partnership
Agreement, owns a 50% partnership interest in MAB as set forth in Section 5.4
of the MDI Disclosure Letter. All such issued and outstanding partnership
interests are duly authorized, validly issued, fully paid, and free of
preemptive rights. There are not at the date of this Agreement, any existing
options, warrants, calls, subscriptions, convertible securities, or other
rights, agreements or commitments which obligate MAB to issue, transfer or
sell any partnership interests of MAB. There are no outstanding contractual
obligations of MAB to repurchase, redeem or otherwise acquire any partnership
interests of MAB. The partnership interests owned by MDI and, to the best
knowledge of MDI, the partnership interests owned by the Class B Partner, are
subject only to the restrictions on transfer set forth in the MAB Partnership
Agreement and those imposed by applicable securities laws. MAB has not issued
or granted, and is not a party to, any commitments of any kind relating to, or
any agreements or understandings with respect to, partnership interests or any
other interest in MAB or any securities convertible into partnership interests
or such other interests and neither the Class B Partner nor MDI has offered to
purchase the other's partnership interest or has notified the other of an
offer by a third party to purchase its partnership interest. All material
notices, consents and other written communications in the last two years
between MAB and either the Class B Partner or MDI or between the Class B
Partner and MDI are listed in Section 5.3 of the MDI Disclosure Letter. Prior
to the date hereof, the Class B Partner of MAB has consented in writing to the
consummation of the transactions contemplated in this Agreement and the
resulting transfer of partnership interests of MAB held by MDI to Bradley.
5.4 Subsidiaries. Except as set forth in Section 5.4 of the MDI Disclosure
Letter, MDI owns directly all of the outstanding shares of capital stock or
all of the partnership or other equity interests of each of the
MDI Subsidiaries. Each of the outstanding shares of capital stock in each of
the MDI Subsidiaries having corporate form is duly authorized, validly issued,
fully paid and nonassessable. Except as set forth in Section 5.4 of the MDI
Disclosure Letter, each of the outstanding shares of capital stock of, or
partnership or other equity interests in, each of the MDI Subsidiaries is
owned, directly or indirectly, by MDI free and clear of all liens, pledges,
security interests, claims or other encumbrances. The following information
for each the MDI Subsidiary is set forth in Section 5.4 of the MDI Disclosure
Letter: (i) its name and jurisdiction of incorporation or organization; (ii)
the jurisdictions in which such entity is qualified to conduct business; (iii)
its authorized capital stock or share capital or partnership or other
interests; (iv) the name of each stockholder or owner of a partnership or
other equity interest and the number of issued and outstanding shares of
capital stock or share capital or percentage ownership for non-corporate
entities held by it; and (v) the name of the general partners, if applicable.
Mid-America Centers Corp. is the only MDI Subsidiary which is a "qualified
REIT subsidiary" as such term is defined under Section 856(i) of the Code.
5.5 Other Interests. Except for interests in the MDI Subsidiaries as set
forth in Section 5.4 of the MDI Disclosure Letter, neither MDI nor any MDI
Subsidiary owns directly or indirectly any interest or investment (whether
equity or debt) in any corporation, partnership, joint venture, trust or other
entity (other than investments in short-term investment securities). With
respect to the interests set forth in Section 5.4 of the MDI Disclosure
Letter, MDI or the applicable MDI Subsidiary, as the case may be, is a partner
or stockholder in good standing, owns such interests free and clear of all
liens, pledges, security interests, claims, options or other encumbrances, is
not in breach of any provision of any agreement, document or contract
governing such entity's rights in or to the interests owned or held, all of
which agreements, documents and contracts are set forth in
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Section 5.4 of the MDI Disclosure Letter, and have not been modified or
amended since their description therein, and are in full force and effect and,
to the best of the knowledge of MDI, the other parties to such agreements,
documents or contracts are not in breach of any of their respective
obligations under such agreements, documents or contracts, and to the best of
the knowledge of MDI, if such other entities were included within the
definition of MDI Subsidiaries for purposes of this Agreement, there would be
no exceptions or breaches to the representations and warranties made in this
Article for the MDI Subsidiaries.
5.6 No Violation. Neither the execution and delivery by MDI and the MDI
Subsidiaries of this Agreement or the ancillary agreements nor the
consummation by MDI and the MDI Subsidiaries of the transactions contemplated
by this Agreement and the ancillary agreements in accordance with their terms,
will: (i) conflict with or result in a breach of any provisions of the
Charter, Bylaws, organizational documents, partnership agreements, or joint
venture agreements of MDI or any MDI Subsidiary; (ii) result in a breach or
violation of, a default under, or the triggering of any payment or other
material obligations pursuant to, or accelerate vesting under, the MDI Stock
Option Plans, or any grant or award made thereunder; (iii) except as set forth
in Section 5.6 of the MDI Disclosure Letter, violate, or conflict with, or
result in a breach of any provision of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination or in a right of termination or
cancellation of, or accelerate the performance required by, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties of MDI or the MDI Subsidiaries under, or result in being declared
void, voidable or without further binding effect, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, deed of trust or any
license, franchise, permit, lease, contract, agreement or other instrument,
commitment or obligation to which MDI or any of the MDI Subsidiaries is a
party, or by which MDI or any of the MDI Subsidiaries or any of their
properties is bound or affected, which would have a material adverse effect on
any of the MDI Properties (as defined in Section 5.12 hereof), individually or
in the aggregate; or (iv) other than the filings provided for in Article 1 of
this Agreement, or required under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act"), the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Securities Act or applicable state securities and
"Blue Sky" laws (collectively, the "Regulatory Filings"), require any consent,
approval or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority except where the failure to obtain any
such consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority would not have a
MDI Material Adverse Effect.
5.7 SEC Documents. A complete list of filings by MDI with the United States
Securities and Exchange Commission ("SEC") filings and each (A) registration
statement, (B) annual report on Form 10-K, (C) quarterly report on Form 10-Q,
(D) current report on Form 8-K, (E) proxy statement or information statement,
and (F) other reports filed with the SEC pursuant to the requirements of the
Exchange Act or the Securities Act (in all such cases, including all exhibits,
amendments and supplements thereto), prepared by MDI or any of the
MDI Subsidiaries or relating to properties of MDI or the MDI Subsidiaries
since January 1, 1994, is set forth in Section 5.7 of the MDI Disclosure
Letter, and copies of such documents, in the form (including exhibits and any
amendments thereto) filed with the SEC, have previously been provided or made
available to Bradley or its counsel (collectively, the "MDI Reports"). The MDI
Reports were filed with the SEC in a timely manner and constitute all forms,
reports and documents required to be filed by MDI under the Securities Act,
the Exchange Act and the rules and regulations promulgated thereunder (the
"Securities Laws") since January 1, 1994. As of their respective dates, the
MDI Reports (i) complied as to form in all material respects with the
applicable requirements of the Securities Laws 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 made therein, in the
light of the circumstances under which they were made, not misleading. Each of
the consolidated balance sheets of MDI included in or incorporated by
reference into the MDI Reports (including the related notes and schedules)
fairly presents the consolidated financial position of MDI and the MDI
Subsidiaries as of its date and each of the consolidated statements of income,
retained earnings and cash flows of MDI included in or incorporated by
reference into the MDI Reports (including any related notes and schedules)
fairly presents the results of operations, retained earnings or cash flows, as
the case may be, of MDI and the MDI Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to normal year-end
audit adjustments which would
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not be material in amount or effect), in each case in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except as may be noted therein and except, in the case of
the unaudited statements, as permitted by Form 10-Q of the SEC. Except as and
to the extent set forth on the consolidated balance sheet of MDI and the MDI
Subsidiaries at December 31, 1997, including all notes thereto, neither MDI
nor any of the MDI Subsidiaries has any material liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on, or reserved against in, a balance sheet of MDI or
in the notes thereto, prepared in accordance with generally accepted
accounting principles consistently applied, except liabilities arising in the
ordinary course of business since such date and liabilities for expenses of
attorneys, accountants and investment bankers incurred in connection with the
Merger. MDI represents and warrants that, as of the date hereof, it is
eligible under the regulations promulgated under the Securities Act to
register the primary issuance of its securities on Form S-3.
5.8 Litigation. Except as disclosed in Section 5.8 of the MDI Disclosure
Letter, and other than personal injury and other routine tort litigation
arising from the ordinary course of operations of MDI and the MDI Subsidiaries
(a) which are covered by adequate insurance or (b) for which all material
costs and liabilities arising therefrom are reimbursable pursuant to common
area maintenance or similar agreements, there is no suit, action or proceeding
pending (in which service of process has been received by an employee of MDI
or a MDI Subsidiary) or, to the best knowledge of MDI, threatened in writing
against or affecting MDI or any MDI Subsidiary or any of their respective
assets or properties nor is there any judgment, decree, injunction, rule or
order of any court, administrative or regulatory agency or commission or other
governmental authority or agency, domestic or foreign ("Governmental Entity")
or arbitrator outstanding against or affecting MDI or any MDI Subsidiary or
any of their respective assets or properties (any such proceeding hereinafter
referred to as "Litigation"); provided, however, that if MDI has prepared
Section 5.8 of the MDI Disclosure Letter in good faith, Bradley hereby
covenants not to exercise any right that it may have to terminate this
agreement pursuant to Section 9.1(c) based solely on any breach of the
representation of MDI contained in this sentence; provided further, however,
that nothing contained in this Section 5.8 shall affect Bradley's right to
terminate this Agreement pursuant to Section 9.1(c) with respect to any matter
described in this sentence that occurs or arises after the date hereof.
5.9 Absence of Certain Changes or Events. Absence of Certain Changes or
Events. Except as disclosed in Section 5.9 of the MDI Disclosure Letter, since
the date of the most recent audited financial statements included in MDI
Reports (the "MDI Financial Statement Date"), MDI and the MDI Subsidiaries
have conducted their business only in the ordinary course and there has not
been (a) any change which has had a MDI Material Adverse Effect, nor has there
been any occurrence or circumstance that with the passage of time would
reasonably be expected to result in a MDI Material Adverse Effect, (b) except
for regular quarterly distributions not in excess of $.22 per share of MDI
Common Stock, respectively (or, with respect to the period commencing on the
date hereof and ending on the Closing Date, distributions as necessary to
maintain REIT status), in each case with customary record and payment dates,
any authorization, declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to the
MDI Common Stock, (c) any split, combination or reclassification of the MDI
Common Stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for, or giving the
right to acquire by exchange or exercise, shares of capital stock of MDI or
partnership interests in MAB or any issuance of an ownership interest in, any
MDI Subsidiary, (d) any damage, destruction or loss, whether or not covered by
insurance, that has or might reasonably be expected to have a MDI Material
Adverse Effect, (e) any change in accounting methods, principles or practices
by MDI or any MDI Subsidiary materially affecting its assets, liabilities or
business, except insofar as may have been required by a change in generally
accepted accounting principles ("GAAP"), or (f) any amendment of any
employment, consulting, severance, retention or any other agreement between
MDI or any Second Party Subsidiary and any officer or director of MDI or any
MDI Subsidiary.
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5.10 Taxes.
(a) MDI and each of the MDI Subsidiaries has paid or caused to be paid all
federal, state, local, foreign, and other taxes, including without limitation,
income taxes, estimated taxes, alternative minimum taxes, excise taxes, sales
taxes, use taxes, value-added taxes, gross receipts taxes, franchise taxes,
capital stock taxes, employment and payroll-related taxes, withholding taxes,
stamp taxes, transfer taxes, windfall profit taxes, environmental taxes and
property taxes, whether or not measured in whole or in part by net income, and
all deficiencies, or other additions to tax, interest, fines and penalties
(collectively, "Taxes"), owed by it through the date hereof.
(b) MDI and each of the MDI Subsidiaries has timely filed, or requested
extensions to file, all federal, state, local and foreign tax returns required
to be filed by any of them through the date hereof, and all such returns are
complete and accurate. Attached as Section 5.10 to the MDI Disclosure Letter
is a list all written requests for extension of filing obligations which MDI
has submitted to the IRS and a summary of the current status of the filing.
(c) As of December 31, 1997 and March 31, 1998, MDI had a net operating loss
carry forward for federal income tax purposes of $1,072,921 and $1,072,921,
respectively.
(d) Neither the Internal Revenue Service ("IRS") nor any other governmental
authority is now asserting by written notice to MDI or any MDI Subsidiary or,
to the knowledge of MDI or the MDI Subsidiaries, threatening to assert against
MDI or any MDI Subsidiary any deficiency or claim for additional Taxes. There
is no dispute or claim concerning any Tax liability of MDI or any MDI
Subsidiary, either claimed or raised by any governmental authority, or as to
which any officer of MDI or any MDI Subsidiary has reason to believe may be
claimed or raised by any federal or state governmental authority. No claim has
ever been made by a taxing authority in a jurisdiction where MDI or any MDI
Subsidiary does not file reports and returns that MDI or any MDI Subsidiary is
or may be subject to taxation by that jurisdiction. There are no security
interests on any of the assets of MDI or any MDI Subsidiary that arose in
connection with any failure (or alleged failure) to pay any Taxes. Neither MDI
nor any of the MDI Subsidiaries has ever entered into a closing agreement
pursuant to Section 7121 of the Code.
(e) Neither MDI nor any of the MDI Subsidiaries has received written notice
of any audit of any tax return filed by MDI or any MDI Subsidiary, and neither
MDI nor any of the MDI Subsidiaries has been notified by any tax authority
that any such audit is contemplated or pending. Except as set forth in Section
5.10 of the MDI Disclosure Letter, neither MDI nor any of the MDI Subsidiaries
has executed or filed with the IRS or any other taxing authority any agreement
now in effect extending the period for assessment or collection of any income
or other taxes, and no extension of time with respect to any date on which a
tax return was or is to be filed by MDI or any MDI Subsidiary is in force.
True, correct and complete copies of all federal, state and local income or
franchise tax returns filed by MDI and each of the MDI Subsidiaries and all
communications relating thereto have been delivered to Bradley or made
available to representatives of Bradley.
(f) MDI and each MDI Subsidiary has withheld and paid all taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other party.
(g) Each of the MDI Subsidiaries of which all the outstanding capital stock
is owned solely by MDI is a Qualified REIT Subsidiary as defined in Section
856(i) of the Code. MAB and each of the other MDI Subsidiaries listed as a
partnership or limited liability company in Section 5.4 of the MDI Disclosure
Letter are, and have been at all times, properly classified as partnerships
for federal income tax purposes and not as publicly-traded partnerships.
(h) For all tax years of MDI, MDI has qualified as a real estate investment
trust ("REIT") within the meaning of Sections 856-860 of the Code, including,
without limitation, the requirements of Sections 856 and 857 of the Code. For
the periods described in the preceding sentence, MDI has met all requirements
necessary to be treated as a REIT for purposes of the income tax provisions of
those states in which MDI is subject to income
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tax and which provide for the taxation of REITs in a manner similar to the
treatment of REITs under Sections 856-860 of the Code. For the short period
ended with the date hereof, MDI has operated in a manner that will allow it to
qualify as a REIT for the period January 1, 1998 through the Closing Date.
5.11 Books and Records.
(a) The books of account and other financial records of MDI and each of the
MDI Subsidiaries are true, complete and correct in all material respects, have
been maintained in accordance with good business practices, and are accurately
reflected in all material respects in the financial statements included in the
MDI Reports.
(b) The minute books and other records of MDI and each of the MDI
Subsidiaries have been made available to Bradley, contain in all material
respects accurate records of all meetings and accurately reflect in all
material respects all other corporate action of the stockholders and directors
and any committees of the Board of Directors of MDI and each of the MDI
Subsidiaries and all actions of the partners of each of the MDI Subsidiaries.
5.12 Properties. All of the real estate properties owned by MDI and each of
the MDI Subsidiaries are set forth in Section 5.12 of the MDI Disclosure
Letter. Except as set forth in Section 5.12 of the MDI Disclosure Letter, MDI
and each MDI Subsidiary owns fee simple title to each of the real properties
identified in the MDI Disclosure Letter (the "MDI Properties"), free and clear
of liens, mortgages or deeds of trust, claims against title, charges which are
liens, security interests or other encumbrances on title (collectively,
"Encumbrances") and the MDI Properties are not subject to any rights of way,
written agreements, laws, ordinances and regulations affecting building use or
occupancy, or reservations of an interest in title (collectively, "Property
Restrictions"), except for (x) Property Restrictions imposed or promulgated by
law or any governmental body or authority with respect to real property,
including zoning regulations, that do not adversely affect the current use of
the property, materially detract from the value of or materially interfere
with the present use of the property, (y) Encumbrances and Property
Restrictions disclosed on existing title reports or current surveys (in either
case copies of which title reports and surveys have been delivered or made
available to Bradley and are listed in Section 5.12 of the MDI Disclosure
Letter), and (z) mechanics', carriers', workmen's or repairmen's liens and
other Encumbrances, Property Restrictions and other limitations of any kind,
if any, which, individually or in the aggregate, are not material in amount,
do not materially detract from the value of or materially interfere with the
present use of any of the MDI Properties subject thereto or affected thereby,
and do not otherwise materially impair business operations conducted by MDI
and the MDI Subsidiaries and which have arisen or been incurred only in the
ordinary course of business. Valid policies of title insurance have been
issued insuring MDI's or the applicable MDI Subsidiary's fee simple title to
each of the MDI Properties in amounts at least equal to the purchase price
thereof, and such policies are, at the date hereof, in full force and effect
and no claim has been made against any such policy and MDI has no knowledge of
any facts or circumstances which would constitute the basis for such a claim.
To the best knowledge of MDI, (i) no certificate, permit or license from any
governmental authority having jurisdiction over any of the MDI Properties or
any agreement, easement or other right which is necessary to permit the lawful
use and operation of the buildings and improvements on any of the MDI
Properties or which is necessary to permit the lawful use and operation of all
driveways, roads and other means of egress and ingress to and from any of the
MDI Properties (a "REA Agreement") has not been obtained and is not in full
force and effect, and there is no pending threat of modification or
cancellation of any of the same nor is MDI nor any MDI Subsidiary currently in
default under any REA Agreement and the MDI Properties are in full compliance
with all governmental permits, licenses and certificates, except for any of
the foregoing matters which would have a material adverse effect on any of the
MDI Properties, individually or in the aggregate; (ii) no written notice of
any violation of any federal, state or municipal law, ordinance, order,
regulation or requirement affecting any portion of any of the MDI Properties
has been issued by any governmental authority and none of the MDI Properties
are in violation of any such federal, state or municipal law, order,
ordinance, regulation or requirement, including, without limitation, the
Americans with Disabilities Act, except for such violations that would not
have a material adverse effect on any of the MDI Properties, individually or
in the aggregate; (iii) there are no material structural defects relating to
any of the MDI Properties; (iv) there is no MDI Property whose building
systems are not in working order in any material respect; (v) there is no
physical damage to any MDI Property in excess of $10,000 for which there is no
insurance in effect covering the full cost of the restoration;
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or (vi) there is no current renovation or restoration or tenant improvements
to any MDI Property or any portion thereof, the cost of which exceeds $10,000,
except in each instance as set forth in Section 5.12 of the MDI Disclosure
Letter. The use and occupancy of each of the MDI Properties complies in all
material respects with all applicable codes and zoning laws and regulations,
and MDI has no knowledge of any pending or threatened proceeding or action
that will in any manner affect the size of, use of, improvements on,
construction on, or access to any of the MDI Properties, with such exceptions
as are not material and do not interfere with the use made and proposed to be
made of such MDI Properties. Neither MDI nor any of the MDI Subsidiaries has
received any notice to the effect that (A) any betterment assessments have
been levied against, or any condemnation or rezoning proceedings are pending
or threatened with respect to any of the MDI Properties or (B) any zoning,
building or similar law, code, ordinance, order or regulation is or will be
violated by the continued maintenance, operation or use of any buildings or
other improvements on any of the MDI Properties or by the continued
maintenance, operation or use of the parking areas. Except as set forth in
Section 5.12 of the MDI Disclosure Letter, to the best knowledge of MDI, there
are no facts or circumstances under which the owner of real estate (other than
MDI) can cause MDI to breach or be in default under any lease or REA
Agreement. Section 5.12 of MDI's Disclosure Letter sets forth all fire and
extended coverage casualty policies issued to MDI and the amounts of such
coverage.
5.13 Leases.
(a) Section 5.13 of the MDI Disclosure Letter sets forth a true, accurate
and complete rent roll for each of the MDI Properties (the "Rent Roll") as of
December 31, 1997. The Rent Roll includes, without limitation, the name of the
tenant, the space leased, the lease expiration date, security and other
deposits, prepaid rent (for more than 30 days), percentage rent, pro rata
share of operating expenses, taxes, charges and assessments. Section 5.13 of
the MDI Disclosure Letter contains a list of known defaults and a list of any
extraordinary clauses including, without limitation, any "kick-out" clauses,
cotenancy requirements or exclusions, exclusives, restrictions, "go-dark"
clauses, or clauses requiring any future funding of tenant improvements.
Except as noted in Section 5.13 of the MDI Disclosure Letter, to MDI's
knowledge, there is no violation of any cotenancy, exclusive or restriction
listed in such Section 5.13.
(b) As of the last day of the calendar month immediately preceding the date
hereof, (i) each of the leases and tenancies for all or any portion of the MDI
Properties (the "MDI Leases") is valid and subsisting and in full force and
effect, has not been amended, modified or supplemented; (ii) the tenant under
each of the MDI Leases is in actual possession of the leased premises; (iii)
no tenants are in arrears for the payment of rent for any month preceding the
month of the date of this Agreement or otherwise in default of such tenant's
lease obligations as to which MDI has given notice of default to such tenant;
and (iv) neither MDI nor any MDI Subsidiary has received any written notice
from any tenant of any intention to vacate. Neither MDI nor any MDI Subsidiary
has collected payment of rent (other than security deposits) accruing for a
period which is more than one month beyond the date of collection.
(c) MDI has previously delivered or made available to Bradley a true and
correct copy of all MDI Leases.
(d) As of the last day of the calendar month immediately preceding the date
hereof, no tenant under any of the MDI Leases has asserted any claim of which
MDI or any MDI Subsidiary has received written notice which would materially
affect the collection of rent from such tenant and neither MDI nor any MDI
Subsidiary has received written notice of any material default or breach on
the part of MDI or any MDI Subsidiary under any of the MDI Leases which has
not been cured.
(e) Section 5.13 of the MDI Disclosure Letter sets forth a complete and
correct list, as of the date hereof, of all written or oral commitments made
by MDI or any MDI Subsidiary to lease any of the MDI Properties or any portion
thereof which has not yet been reduced to a written lease. MDI has provided
true and correct copies of all such written commitments to Bradley and Section
5.13 of the MDI Disclosure Letter provides with respect to each such oral
commitment the principal terms of such commitment, including, if applicable,
(i) the space to be occupied, (ii) the name of the tenant, (iii) the length of
the original term thereof and any right or option to
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renew or extend the lease term, (iv) the monthly minimum rental, (v) rental
escalations, (vi) the terms with respect to percentage rent or other overage
rent, (vii) any provisions for tenant allowances and tenant build-out and
(viii) the right of any third-party broker to any outstanding brokerage or
other commission incidental thereto and all other financial terms.
(f) All material leases pursuant to which MDI or any MDI Subsidiary, as
lessee, leases real or personal property are in good standing, valid and
effective in accordance with their respective terms, and there is not, under
any of such leases, any material existing default or any event which with
notice or lapse of time or both would constitute such a default, nor do any of
such leases contain any provision which would preclude the Surviving
Corporation from occupying and using the leased premises for the same purposes
and upon substantially the same rental and other terms as are applicable to
the occupation and use by MDI and the MDI Subsidiaries.
5.14 Rents. The rents and other income and charges set forth in Section 5.13
of the MDI Disclosure Letter are the actual rents, income and charges
presently being charged by MDI and the MDI Subsidiaries under the MDI Leases.
No space is occupied rent free or at a rental rate reduced from the rate
stated in Section 5.13 of the MDI Disclosure Letter. No tenant under any of
the MDI Leases is entitled to any purchase option, concessions, allowances,
abatements, set-offs, rebates or refunds or has prepaid any rents or other
charges for more than one month. None of the MDI Leases and none of the rents
or other amounts payable thereunder have been assigned, pledged or encumbered,
other than to lenders, as described in Section 5.22 of the MDI Disclosure
Letter. No brokerage or leasing commission or other compensation will be due
or payable to any Person, firm, corporation or other entity with respect to or
on account of any of the MDI Leases or any extensions or renewals thereof on
and after the Effective Time.
5.15 Environmental Matters. None of MDI, any MDI Subsidiary or, to the best
knowledge of MDI, any other Person has caused or permitted (a) the presence of
any hazardous substances, hazardous materials, toxic substances or waste
materials (collectively, "Hazardous Materials") on any of the MDI Properties,
or (b) any spills, releases, discharges or disposal of Hazardous Materials to
have occurred or be presently occurring on or from any of the MDI Properties
as a result of any construction on or operation and use of such properties,
which presence or occurrence could, individually or in the aggregate, have a
MDI Material Adverse Effect; and in connection with the construction on or
operation and use of the MDI Properties, neither MDI nor any of the MDI
Subsidiaries has failed to comply, in any material respect, with any
applicable local, state or federal environmental law, regulation, ordinance or
administrative and judicial order relating to the generation, recycling,
reuse, sale, storage, handling, transport and disposal of any Hazardous
Materials. In addition, no lien has ever been imposed by any governmental
agency on the MDI Properties in connection with the presence of any Hazardous
Materials and neither MDI nor any MDI Subsidiary has ever entered into or been
subject to any judgment, consent decree, compliance order, or administrative
order with respect to any environmental or health and safety matter except for
such judgments, consent decrees, compliance orders or administrative orders
that would not have a material adverse effect on any of the MDI Properties,
individually or in the aggregate, or received any request for information,
notice, demand letter, administrative inquiry, or formal or informal complaint
or claim with respect to any environmental or health and safety matter within
the last seven years. The MDI has provided to Bradley copies of all documents,
records, and information available to MDI and any MDI Subsidiary concerning
any environmental or health and safety matter relevant to any MDI Properties,
including, without limitation, environmental risk assessments, site
assessments, documentation regarding off-site disposal of any Hazardous
Materials, and reports, correspondence, permits, licenses, approvals,
consents, and other authorizations related to environmental or health and
safety matters issued by any governmental agency. In addition, MDI has
disclosed to Bradley all sites formerly or currently owned or operated by MDI
or any MDI Subsidiary.
5.16 Employee Benefit Plans.
(a) All employee benefits plans (within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and
other benefit arrangements covering employees of MDI and
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the MDI Subsidiaries, other than any multiemployer plan (within the meaning of
Section 3(37) of ERISA) (the "MDI Benefit Plans") are listed in Section
5.16(a) of the MDI Disclosure Letter. True and complete copies of the MDI
Benefit Plans have been provided or made available to Bradley. To the extent
applicable, the MDI Benefit Plans have been administered in all material
respects in accordance with their terms and comply, in all material respects,
with the applicable requirements of ERISA and the Code. Any MDI Benefit Plan
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the IRS or a determination letter request
has been filed with the IRS with respect to any such plan and is still
pending. No MDI Benefit Plan is covered by Title IV of ERISA or Section 412 of
the Code. No MDI Benefit Plan nor MDI or any MDI Subsidiary has incurred any
liability or penalty under Section 4975 of the Code or Section 502(i) of
ERISA. There are no pending or anticipated claims against or otherwise
involving any of the MDI Benefit Plans and no suit, action or other litigation
(excluding claims for benefits incurred in the ordinary course of MDI Benefit
Plan activities) has been brought against or with respect to any such MDI
Benefit Plan. All contributions required to be made as of the date hereof to
the MDI Benefit Plans have been made or provided for. Except as otherwise
required by Sections 601 through 608 of ERISA, Section 4980B of the Code and
applicable state laws, MDI does not maintain or contribute to any plan or
arrangement which provides or has any liability to provide life insurance,
medical or other employee welfare benefits to any employee or former employee
upon his retirement or termination of employment and MDI has never
represented, promised or contracted (whether in oral or written form) to any
employee or former employee that such benefits would be provided. Except as
set forth in the Severance Agreements, the execution of, and performance of
the transactions contemplated in, this Agreement will not (either alone or
upon the occurrence of any additional subsequent events directly related to
the transaction contemplated herein) (i) constitute an event under any MDI
Benefit Plan that will or may result in any payment (whether of severance pay
or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligations to fund benefits with
respect to any employee, director or consultant of MDI or any MDI Subsidiary
pursuant to any MDI Benefit Plan or (ii) result in the triggering or
imposition of any restrictions or limitations on the right of MDI or Bradley
to amend or terminate any MDI Benefit Plan. No payment or benefit which will
be required to be made pursuant to the terms of any agreement, commitment or
MDI Benefit Plan, as a result of the transactions contemplated by this
Agreement, to any officer, director or employee of MDI or any of the MDI
Subsidiaries, could be characterized as an "excess parachute payment" within
the meaning of Section 280G of the Code or non-deductible by virtue of Section
162(m) of the Code. MDI represents and warrants that the Severance Pay Policy
described in MDI's employee handbook does not apply to either of Jerome
Heinrichs or Dennis G. Gethmann.
(b) Except as listed in Section 5.16(b) of the MDI Disclosure Letter,
neither MDI nor any MDI Subsidiary contributes to or has any liability to
contribute to a multiemployer plan. All contributions have been made as
required by the terms of each of the plans listed in Section 5.16(b) of the
MDI Disclosure Letter and the terms of any related collective bargaining
agreements and neither MDI nor any MDI Subsidiary has any knowledge or
received any notice that any such plan is in reorganization, that increased
contributions are required to avoid a reduction in plan benefits or the
imposition of any excise tax, that any such plan is or has been funded at a
rate less than required under Section 412 of the Code, or that any such plan
is insolvent.
5.17 Labor Matters. Neither MDI nor any MDI Subsidiary is a party to, or
bound by, any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor union organization. There is no
unfair labor practice or labor arbitration proceeding pending or, to the
knowledge of MDI, threatened against MDI or any of the MDI Subsidiaries
relating to their business, except for any such proceeding which would not
have a MDI Material Adverse Effect. To the knowledge of MDI, there are no
organizational efforts with respect to the formation of a collective
bargaining unit presently being made or threatened involving employees of MDI
or any of the MDI Subsidiaries.
5.18 No Brokers. Neither MDI nor any of the MDI Subsidiaries has entered
into any contract, arrangement or understanding with any Person or firm which
may result in the obligation of such entity or Bradley to pay any finder's
fees, brokerage or agent's commissions or other like payments in connection
with the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby, except
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that MDI has retained SBC Warburg Dillon Reed ("SBC") as its financial
advisors, the arrangements with which have been disclosed in writing to
Bradley prior to the date hereof. Other than the foregoing arrangements and
Bradley's arrangement with BT Alex. Brown & Sons Incorporated ("Alex. Brown"),
MDI is not aware of any claim for payment of any finder's fees, brokerage or
agent's commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions contemplated
hereby.
5.19 Opinion of Financial Advisor. MDI has received the opinion of SBC, to
the effect that, as of the date hereof, the Merger Consideration is fair to
the holders of MDI Common Stock from a financial point of view, and has
delivered a true and correct copy of such opinion to Bradley.
5.20 Bradley Share Ownership. Neither MDI nor any of the MDI Subsidiaries
owns any shares of Bradley Common Stock or other securities convertible into
any shares of Bradley Common Stock.
5.21 Related Party Transactions. Set forth in Section 5.21 of the MDI
Disclosure Letter is a list of all arrangements, agreements and contracts
entered into by MDI or any of the MDI Subsidiaries (which are or will be in
effect as of or after the date of this Agreement) with (i) any consultant,
other than investment bankers, accountants or lawyers retained in the ordinary
course of business or for the purposes of the transaction contemplated hereby
(A) involving payments in excess of $25,000 or (B) which may not be terminated
at will by MDI or the MDI Subsidiary which is a party thereto, (ii) any Person
who is an officer, director or affiliate of MDI or any of the MDI
Subsidiaries, any relative of any of the foregoing or any entity of which any
of the foregoing is an affiliate, except for MDI Benefit Plans of which such
individuals are participants or (iii) any Person who acquired MDI Common Stock
in a private placement. All such documents are listed in Section 5.21 of the
MDI Disclosure Letter and the copies of such documents, which have previously
been provided or made available to Bradley and its counsel, are true and
correct copies. All of the management, leasing or other contracts to which any
of the MDI Subsidiaries or any affiliate of MDI is a party, receives income
from or has obligations or liabilities arising out of are listed on Section
5.21 of the MDI Disclosure Letter.
5.22 Contracts and Commitments. Section 5.22 of the MDI Disclosure Letter
sets forth (i) all notes, debentures, bonds and other evidence of indebtedness
which are secured or collateralized by mortgages, deeds of trust or other
security interests in the MDI Properties or personal property of MDI and each
of the MDI Subsidiaries and (ii) each material commitment, contractual
obligation, borrowing, capital expenditure or transaction (each, a
"Commitment") entered into by MDI or any of the MDI Subsidiaries which may
result in total payments by or liability of MDI or any MDI Subsidiary in
excess of $10,000. Copies of the foregoing are listed in Section 5.22 of the
MDI Disclosure Letter and the copies of such documents, which have previously
been provided or made available to Bradley and its counsel, are true and
correct. None of MDI or any of the MDI Subsidiaries has received any notice of
a default that has not been cured under any of the documents described in
clause (i) above or is in default respecting any payment obligations
thereunder beyond any applicable grace periods except where such default would
not have a MDI Material Adverse Effect. All joint venture agreements to which
MDI or any of the MDI Subsidiaries is a party are set forth in Section 5.22 of
the MDI Disclosure Letter and neither MDI nor any of the MDI Subsidiaries is
in default with respect to any obligations, which individually or in the
aggregate are material, thereunder.
5.23 Development Rights. Set forth in Section 5.23 of the MDI Disclosure
Letter is a list of all agreements entered into by MDI or any of the MDI
Subsidiaries relating to the development or construction of the MDI Properties
and a description of the current status of each such development. The copies
of such agreements are listed in Section 5.23 of the MDI Disclosure Letter,
and such copies, which have previously been provided to Bradley and its
counsel, are true and correct. All work to be performed, payments to be made
and actions to be taken by MDI or any of the MDI Subsidiaries prior to the
date hereof pursuant to any agreement entered into with a governmental body or
authority in connection with the development of the MDI Properties, including
any development agreement relating to a site approval, zoning reclassification
or other similar action (e.g., local improvement district, road improvement
district, environmental mitigation, etc.) has been performed, paid or taken,
as the case may be, and MDI is not aware of any planned or proposed work,
payments or actions that may be required after the date hereof pursuant to
such agreements.
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5.24 Certain Payments Resulting From Transactions. Except for the vesting of
options as set forth in Section 5.3 of the MDI Disclosure Letter and except as
set forth in Section 5.24 of the MDI Disclosure Letter, the execution of, and
performance of the transactions contemplated by, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
(i) constitute an event under any MDI Benefit Plan, policy, practice,
agreement or other arrangement or any trust or loan (the "Employee
Arrangements") that will or may result in any payment (whether of severance
pay or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any employee, director or consultant of MDI or any of the MDI Subsidiaries,
or (ii) result in the triggering or imposition of any restrictions or
limitations on the right of MDI or Bradley to amend or terminate any Employee
Arrangement and receive the full amount of any excess assets remaining or
resulting from such amendment or termination, subject to applicable taxes. No
payment or benefit which will be required to be made pursuant to the terms of
any agreement, commitment or MDI Benefit Plan, as a result of the transactions
contemplated by this Agreement, to any officer, director or employee of MDI or
any of the MDI Subsidiaries, could be characterized as an "excess parachute
payment" within the meaning of Section 280G of the Code.
5.25 Tenant Improvements. Section 5.25 of the MDI Disclosure Letter contains
(i) a list of any unfunded tenant improvements being conducted by MDI or any
MDI Subsidiary in excess of $10,000 and (ii) to the best knowledge of MDI, the
aggregate amount of all unfunded tenant improvements for all MDI Properties.
MDI and each MDI Subsidiary has delivered or made available true and correct
copies of any and all contracts, plans, specifications and agreements in
connection with all tenant improvements in excess of $10,000.
5.26 Status of Options to Purchase Real Property. All options of MDI or any
of the MDI Subsidiaries to purchase real property, including a description of
the current status, conditions and contingencies relating to each of such
options, are set forth in Section 5.26 of the MDI Disclosure Letter.
5.27 Related Parties. Except as set forth in Section 5.27 of the MDI
Disclosure Letter, (i) MDI does not have any outstanding agreements,
arrangements or understandings, including, without limitation, leases and
promissory notes, with any Person who is or was an officer or director of MDI
at any time in the last eight (8) years, including, without limitation, Donald
F. Day, Christopher R. Held, Terry L. Clauff and Joseph H. Carter, or with any
Person that is owned in part or controlled by any such individual, and
(ii) there is no Litigation pending or, to the knowledge of MDI, threatened,
involving, relating to or affecting MDI and any Person who is or was an
officer or director of MDI at any time in the last eight (8) years, including,
without limitation, Donald F. Day, Christopher R. Held, Terry L. Clauff and
Joseph H. Carter, or any Person that is owned in part or controlled by any
such individual.
5.28 Definition of MDI's Knowledge. As used in this Agreement, the phrase
"to the knowledge of MDI" or "to the best knowledge of MDI" (or words of
similar import) means the knowledge or the best knowledge of those individuals
identified in Section 5.28 of the MDI Disclosure Letter, and includes any
fact, matter or circumstance which any of such individuals, as an ordinary and
prudent business person employed in the same capacity in the same type and
size of business as MDI, should have known.
5.29 Disclosure. The representations, warranties and statements made by MDI
in this Agreement, the ancillary agreements and in the MDI Disclosure Letter
and in the certificates and other documents delivered pursuant hereto do not
contain any untrue statement of a material fact, and, when taken together, do
not omit to state any material fact necessary to make such representations,
warranties and statements, in light of the circumstances under which they are
made, not misleading.
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ARTICLE 6
6. REPRESENTATIONS AND WARRANTIES OF BRADLEY.
Except as set forth in the disclosure letter delivered at or prior to the
execution hereof to MDI, which shall refer to the relevant Sections of this
Agreement (the "Bradley Disclosure Letter"), Bradley represents and warrants
to MDI as follows:
6.1 Existence; Good Standing; Authority; Compliance With Law. Bradley is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Maryland. Bradley is duly licensed or qualified to do
business as a foreign corporation and is in good standing under the laws of
any other state of the United States in which the character of the properties
owned or leased by it therein or in which the transaction of its business
makes such qualification necessary, which states are listed in Section 6.1 of
the Bradley Disclosure Letter; provided, however, that if Bradley has prepared
Section 6.1 of the Bradley Disclosure Letter in good faith, MDI hereby
covenants not to exercise any right that it may have to terminate this
agreement pursuant to Section 9.1(d) based solely on any breach of the
representation of Bradley contained in this sentence; provided further,
however, that nothing contained in this Section 6.1 shall affect MDI's right
to terminate this Agreement pursuant to Section 9.1(d) with respect to any
matter described in this sentence that occurs or arises after the date hereof.
Bradley has all requisite corporate power and authority to own, operate, lease
and encumber its properties and carry on its business as now conducted. Each
of the Bradley Subsidiaries is a corporation or partnership duly incorporated
or organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has the corporate or
partnership power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business
and is in good standing in each jurisdiction in which the ownership of its
property or the conduct of its business requires such qualification, which
states are listed in Section 6.4 of the Bradley Disclosure Letter; provided,
however, that if Bradley has prepared Section 6.1 of the Bradley Disclosure
Letter in good faith, MDI hereby covenants not to exercise any right that it
may have to terminate this agreement pursuant to Section 9.1(d) based solely
on any breach of the representation of Bradley contained in this sentence;
provided further, however, that nothing contained in this Section 6.1 shall
affect MDI's right to terminate this Agreement pursuant to Section 9.1(d) with
respect to any matter described in this sentence that occurs or arises after
the date hereof. Neither Bradley nor any Bradley Subsidiary is in violation of
any order of any court, governmental authority or arbitration board or
tribunal, or any law, ordinance, governmental rule or regulation to which
Bradley or any Bradley Subsidiary or any of their respective properties or
assets is subject, except where such violation would not have a material
adverse effect on the business, results of operations, properties or financial
condition of Bradley and the Bradley Subsidiaries taken as a whole (a "Bradley
Material Adverse Effect"). Bradley and the Bradley Subsidiaries have obtained
all licenses, permits and other authorizations and have taken all actions
required by applicable law or governmental regulations in connection with
their business as now conducted, where the failure to obtain any such license,
permit or authorization or to take any such action would have a Bradley
Material Adverse Effect. Copies of the Charter and other equivalent documents
and Bylaws (and all amendments thereto) of Bradley and each of the Bradley
Subsidiaries are listed in Section 6.1 of the Bradley Disclosure Letter, and
the copies of such documents, which have previously been delivered or made
available to MDI or its counsel, are true and correct copies. For purposes of
this Agreement, the term "Bradley Subsidiary" shall include any of the
entities set forth under such heading in Section 6.4 of the Bradley Disclosure
Letter.
6.2 Authorization, Validity and Effect of Agreements. Bradley has the
requisite corporate power and authority to enter into the transactions
contemplated hereby and to execute and deliver this Agreement and the
ancillary agreements to which it is a party. The Board of Directors of Bradley
has, by resolutions duly adopted by unanimous vote approved this Agreement,
the Merger, the issuance of the Bradley Preferred Stock and the other
transactions contemplated by this Agreement. In connection with the foregoing,
the Board of Directors of Bradley has taken such actions and votes as are
necessary on its part to render the provisions of the Control Share
Acquisition Statute, the Business Combination Statute and all other applicable
takeover statutes of the MGCL and any other applicable takeover statutes of
any other state, inapplicable to this Agreement, the Merger, and the
transactions contemplated by this Agreement. The execution by Bradley of this
Agreement, the ancillary
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agreements and the consummation of the transactions contemplated by this
Agreement and the ancillary agreements has been duly authorized by all
requisite corporate action on the part of Bradley. This Agreement constitutes,
and the ancillary agreements to which it will become a party (when executed
and delivered pursuant hereto) will constitute, the valid and legally binding
obligations of Bradley, enforceable against Bradley in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general principles of
equity.
6.3 Capitalization.
(a) The authorized capital stock of Bradley consists of 80,000,000 shares of
Bradley Common Stock, of which 23,701,762 are issued and outstanding,
20,000,000 shares of preferred stock, par value $.01 per share (the "Bradley
Preferred Stock"), of which none are issued and outstanding, and 50,000,000
shares of excess stock, par value $.01 per share ("Bradley Excess Stock"), of
which none are issued and outstanding. All such issued and outstanding shares
of Bradley Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. Bradley has no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the stockholders of Bradley on any matter. Except for the
Bradley OP Units, as defined below, there are not at the date of this
Agreement any existing options, warrants, calls, subscriptions, convertible
securities, or other rights, agreements or commitments which obligate Bradley
to issue, transfer or sell any shares of Bradley Common Stock, other than the
issuance by Bradley of up to 385,550 shares of Bradley Common Stock upon the
exercise of stock options issued pursuant to Bradley's stock option plans.
There are no agreements or understandings to which Bradley or any Bradley
Subsidiary is a party with respect to the voting of any shares of Bradley
Common Stock or which restrict the transfer of any such shares, nor does
Bradley have knowledge of any such agreements or understandings with respect
to the voting of any such shares or which restrict the transfer of such
shares. Except for the Bradley OP Units, as defined below, there are no
outstanding contractual obligations of Bradley or any Bradley Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital stock,
partnership interests or other securities of Bradley or any Bradley
Subsidiary.
(b) The sole general partner of Bradley Operating Limited Partnership, a
Delaware limited partnership ("Bradley OP"), is Bradley. As of the date
hereof, there are issued and outstanding 25,083,004 units of partnership
interest in Bradley OP ("Bradley OP Units"), 23,701,262 of which are owned by
Bradley and the remainder of which are owned by the Persons (the "Limited
Partners") and in the amounts set forth in Section 6.3 of the Bradley
Disclosure Letter. All such issued and outstanding Bradley OP Units are duly
authorized, validly issued, fully paid, and free of preemptive rights. There
are not at the date of this Agreement, any existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate Bradley OP to issue, transfer or sell any limited
partnership interests of Bradley OP. The Bradley OP Units owned by Bradley
and, to the best knowledge of Bradley, the Bradley OP Units owned by the
Limited Partners, are subject only to the restrictions on transfer set forth
in the Limited Partnership Agreement of Bradley OP (the "Bradley OP
Partnership Agreement") and those imposed by applicable securities laws.
Except as set forth in Section 6.3 of the Bradley Disclosure Letter, Bradley
has not issued or granted, and is not a party to, any commitments of any kind
relating to, or any agreements or understandings with respect to, Bradley OP
Units or any other interest in Bradley or any securities convertible into
Bradley OP Units or such interests.
6.4 Subsidiaries. Except as set forth in Section 6.4 of the Bradley
Disclosure Letter, Bradley owns directly or indirectly all of the outstanding
shares of capital stock or all of the partnership or other equity interests of
each of the Bradley Subsidiaries. Each of the outstanding shares of capital
stock of each of the Bradley Subsidiaries having corporate form is duly
authorized, validly issued, fully paid and nonassessable. Except as set forth
in Section 6.4 of the Bradley Disclosure Letter, each of the outstanding
shares of capital stock of, or partnership or other equity interests in, each
of the Bradley Subsidiaries is owned, directly or indirectly, by Bradley free
and clear of all liens, pledges, security interests, claims or other
encumbrances. The following information for each Bradley Subsidiary is set
forth in Section 6.4 of the Bradley Disclosure Letter: (i) its name and
jurisdiction of incorporation or organization; (ii) the jurisdictions in which
such entity is qualified to conduct
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business; (iii) its authorized capital stock or share capital, or partnership
or other interests; (iv) the name of each stockholder or owner of capital
stock or share capital or percentage ownership for non-corporate entities held
by it; and (v) the name of the general partners, if applicable.
6.5 Other Interests. Except for interests in the Bradley Subsidiaries and
the securities of other publicly traded REITs, neither Bradley nor any Bradley
Subsidiary owns directly or indirectly any interest or investment (whether
equity or debt) in any corporation, partnership, joint venture, trust or other
entity, other than investments in short-term investment securities and other
than disclosed in Section 6.5 of the Bradley Disclosure Letter.
6.6 No Violation. Except as set forth in Section 6.6 of the Bradley
Disclosure Letter, neither the execution and delivery by Bradley of this
Agreement or the ancillary agreements nor the consummation by Bradley of the
transactions contemplated by this Agreement and the ancillary agreements in
accordance with their terms, will: (i) conflict with or result in a breach of
any provisions of the Articles of Amendment or Bylaws of Bradley; (ii) result
in a breach or violation of, a default under, or the triggering of any payment
or other material obligations pursuant to, or accelerate vesting under, any of
Bradley's stock option plans, or any grant or award under any of the
foregoing; (iii) violate, or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or result in the
termination or in a right of termination or cancellation of, or accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties of Bradley or any
of the Bradley Subsidiaries under, or result in being declared void, voidable,
or without further binding effect, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, deed of trust or any license,
franchise, permit, lease, contract, agreement or other instrument, commitment
or obligation to which Bradley or any of the Bradley Subsidiaries is a party,
or by which Bradley or any of the Bradley Subsidiaries or any of their
properties is bound or affected, except for any of the foregoing matters
which, individually or in the aggregate, would not have a Bradley Material
Adverse Effect; or (iv) other than the Regulatory Filings, require any
consent, approval or authorization of, or declaration, filing or registration
with, any governmental or regulatory authority except where the failure to
obtain any such consent, approval or authorization of, or declaration, filing
or registration with, any governmental or regulatory authority would not have
a Bradley Material Adverse Effect.
6.7 SEC Documents. A complete list of Bradley SEC filings, and each (A)
registration statement, (B) annual report on Form 10-K, (C) quarterly report
on Form 10-Q, (D) current report on Form 8-K, (E) proxy statement or
information statement, and (F) any other report filed with the SEC pursuant to
the Exchange Act or the Securities Act (in all such cases, including all
exhibits, amendments and supplements thereto) prepared by Bradley or relating
to either of their respective properties since January 1, 1994, are set forth
in Section 6.7 of the Bradley Disclosure Letter, and copies of which, in the
form (including exhibits and any amendments thereto) filed with the SEC, have
previously been provided or made available to MDI or its counsel
(collectively, the "Bradley Reports"). The Bradley Reports were filed with the
SEC in a timely manner and constitute all forms, reports and documents
required to be filed by Bradley under the Securities Laws subsequent to
January 1, 1994. As of their respective dates, the Bradley Reports (i)
complied as to form in all material respects with the applicable requirements
of the Securities Laws 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 made therein, in the light of the
circumstances under which they were made, not misleading. Each of the
consolidated balance sheets of Bradley included in or incorporated by
reference into the Bradley Reports (including the related notes and schedules)
fairly presents the consolidated financial position of Bradley and the Bradley
Subsidiaries as of its date and each of the consolidated statements of income,
retained earnings and cash flows of Bradley included in or incorporated by
reference into the Bradley Reports (including any related notes and schedules)
fairly presents the results of operations, retained earnings or cash flows, as
the case may be, of Bradley and the Bradley Subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to normal year-
end audit adjustments which would not be material in amount or effect), in
each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except as may be noted
therein and except, in the case of the unaudited statements, as permitted by
Form 10-Q of the SEC. Except as and to the
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extent set forth on the consolidated balance sheet of Bradley and the Bradley
Subsidiaries at December 31, 1997, including all notes thereto, or as set
forth in the Bradley Reports, neither Bradley nor any of the Bradley
Subsidiaries has any material liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on, or reserved against in, a balance sheet of Bradley or in the
notes thereto, prepared in accordance with generally accepted accounting
principles consistently applied, except liabilities arising in the ordinary
course of business since such date and liabilities for expenses of attorneys,
accountants and investment bankers incurred in connection with the Merger.
6.8 Litigation. Other than personal injury and other routine tort litigation
arising from the ordinary course of operations of Bradley and the Bradley
Subsidiaries (a) which are covered by adequate insurance or (b) for which all
material costs and liabilities arising therefrom are reimbursable pursuant to
common area maintenance or similar agreements, there is no suit, action or
proceeding pending (in which service of process has been received by an
employee of Bradley or a Bradley Subsidiary) or, to the best knowledge of
Bradley threatened in writing against or affecting Bradley or any Bradley
Subsidiary that, individually or in the aggregate, could reasonably be
expected to (i) have a Bradley Material Adverse Effect or (ii) prevent the
consummation of any of the transactions contemplated by this Agreement, nor is
there any judgment, decree, injunction, rule or order of any court of
Governmental Entity or arbitrator outstanding against Bradley or any of the
Bradley Subsidiaries having, or which, insofar as reasonably can be foreseen,
in the future would have, any such effect.
6.9 Absence of Certain Changes. Since the date of the most recent audited
financial statements included in Bradley Reports (the "Bradley Financial
Statement Date"), Bradley and the Bradley Subsidiaries have conducted their
business only in the ordinary course and there has not been (a) any change
which has had a Bradley Material Adverse Effect, nor has there been any
occurrence or circumstance that with the passage of time would reasonably be
expected to result in a Bradley Material Adverse Effect, (b) except for
regular quarterly distributions not in excess of $.35 per share Bradley Common
Stock or Bradley OP Unit, respectively (or, with respect to the period
commencing on the date hereof and ending on the Closing Date, distributions as
necessary to maintain REIT status), in each case with customary record and
payment dates, any authorization, declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with
respect to the Bradley Common Stock or Bradley OP Units, (c) any split,
combination or reclassification of the Bradley Common Stock or the Bradley OP
Units or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for, or giving the
right to acquire by exchange or exercise, shares of stock of Bradley or
partnership interests in Bradley OP or any issuance of an ownership interest
in, any Bradley Subsidiary, (d) any damage, destruction or loss, whether or
not covered by insurance, that has or might reasonably be expected to have a
Bradley Material Adverse Effect, or (e) any change in accounting methods,
principles or practices by Bradley or any Bradley Subsidiary materially
affecting its assets, liabilities or business, except insofar as may have been
disclosed in Bradley Reports or required by a change in GAAP.
6.10 Taxes. Except as set forth in Section 6.10 of the Bradley Disclosure
Letter:
(a) Bradley and each of the Bradley Subsidiaries has paid or caused to be
paid all Taxes owed by it through the date hereof.
(b) Bradley and each of the Bradley Subsidiaries has timely filed all
federal, state, local and foreign tax returns required to be filed by any of
them through the date hereof, and all such returns completely and accurately
set forth the amount of any Taxes relating to the applicable period.
(c) Neither the IRS nor any other governmental authority is now asserting by
written notice to Bradley or any Bradley Subsidiary or, to the knowledge of
Bradley or the Bradley Subsidiaries, threatening to assert against Bradley any
deficiency or claim for additional Taxes. There is no dispute or claim
concerning any Tax liability of Bradley, either claimed or raised by any
governmental authority, or as to which any officer of Bradley has reason to
believe may be claimed or raised by any governmental authority. No claim has
ever been made by a taxing authority in a jurisdiction where Bradley does not
file reports and returns that Bradley is or may be subject to taxation by that
jurisdiction. There are no security interests on any of the assets of Bradley
or any Bradley
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Subsidiary that arose in connection with any failure (or alleged failure) to
pay any Taxes. Bradley has never entered into a closing agreement pursuant to
Section 7121 of the Code.
(d) Bradley has not received written notice of any audit of any tax return
filed by Bradley, no such audit is in progress, and Bradley has not been
notified by any tax authority that any such audit is contemplated or pending.
Neither Bradley nor any of the Bradley Subsidiaries has executed or filed with
the IRS or any other taxing authority any agreement now in effect extending
the period for assessment or collection of any income or other taxes, and no
extension of time with respect to any date on which a tax return was or is to
be filed by Bradley is in force. True, correct and complete copies of all
federal, state and local income or franchise tax returns filed by Bradley and
each of the Bradley Subsidiaries and all communications relating thereto have
been delivered to MDI or made available to representatives of MDI.
(e) Bradley and each Bradley Subsidiary has withheld and paid all taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
party.
(f) Each of the Bradley Subsidiaries of which all the outstanding capital
stock is owned solely by Bradley is a Qualified REIT Subsidiary as defined in
Section 856(i) of the Code. Bradley OP and each of the other Bradley
Subsidiaries listed as a partnership or limited liability company in Section
6.4 of the Bradley Disclosure Letter are, and have been at all times, properly
classified as partnerships for federal income tax purposes and not as
publicly-traded partnerships.
(g) For all applicable tax years as to which Bradley's federal income tax
returns are subject to audit and Bradley is subject to assessment for taxes
reportable therein, and at all times thereafter up to and including the date
hereof, Bradley has qualified to be treated as a REIT within the meaning of
Sections 856-860 of the Code, including, without limitation, the requirements
of Sections 856 and 857 of the Code. For the periods described in the
preceding sentence, Bradley has met all requirements necessary to be treated
as a REIT for purposes of the income tax provisions of each state in which
Bradley is subject to income tax and which provides for the taxation of REITs
in a manner similar to the treatment of REITs under Sections 856-860 of the
Code, but, with respect to each such state, only for such periods for which
Bradley's income tax returns are subject to audit and Bradley is subject to
assessment for taxes reportable therein.
6.11 Books and Records. The books of account and other financial records of
Bradley and each of the Bradley Subsidiaries are true, complete and correct in
all material respects, have been maintained in accordance with good business
practices, and are accurately reflected in all material respects in the
financial statements included in the Bradley Reports. The minute books and
other records of Bradley and each of the Bradley Subsidiaries have been made
available to MDI, contain in all material respects accurate records of all
meetings and accurately reflect in all material respects all other corporate
action of the stockholders and directors and any committees of the Board of
Directors of Bradley and each of the Bradley Subsidiaries.
6.12 Employee Benefit Plans. All employee benefits plans (within the meaning
of Section 3(3) of ERISA) and other benefit arrangements covering employees of
Bradley and the Bradley Subsidiaries (other than multiemployer plans as
defined in Sections 3(37) and 4001(a)(3) of ERISA) (the "Bradley Benefit
Plans") are listed in Section 6.12 of the Bradley Disclosure Letter. True and
complete copies of the Bradley Benefit Plans have been provided or made
available to MDI. To the extent applicable, the Bradley Benefit Plans have
been administered in all material respects in accordance with their terms and
comply, in all material respects, with the applicable requirements of ERISA
and the Code. Any Bradley Benefit Plan intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the IRS or a determination letter request has been filed with the IRS with
respect to any such plan and is still pending. No Bradley Benefit Plan is
covered by Title IV of ERISA or Section 412 of the Code. No Bradley Benefit
Plan nor Bradley or any of the Bradley Subsidiaries has incurred any liability
or penalty under Section 4975 of the Code or Section 502(i) of ERISA. There
are no pending or anticipated claims against or otherwise involving any of the
Bradley Benefit Plans and no suit, action or other litigation (excluding
claims for benefits incurred in the ordinary course of
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Bradley Benefit Plan activities) has been brought against or with respect to
any such Bradley Benefit Plan. All material contributions required to be made
as of the date hereof to the Bradley Benefit Plans have been made or provided
for. Except as otherwise required by Sections 601 through 608 of ERISA,
Section 4980B of the Code and applicable state laws, Bradley does not maintain
or contribute to any plan or arrangement which provides or has any liability
to provide life insurance, medical or other employee welfare benefits to any
employee or former employee upon his retirement or termination of employment
and Bradley has never represented, promised or contracted (whether in oral or
written form) to any employee or former employee that such benefits would be
provided. Except as disclosed in the Bradley Reports, the execution of, and
performance of the transactions contemplated in, this Agreement will not
(either alone or upon the occurrence of any additional subsequent events
directly related to the transaction contemplated herein) constitute an event
under any Bradley Benefit Plan that will or may result in any payment (whether
of severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligations to fund benefits
with respect to any employee, director or consultant of Bradley or any Bradley
Subsidiary.
6.13 Labor Matters. Except as listed in Section 6.13 of the Bradley
Disclosure Letter, neither Bradley nor any Bradley Subsidiary is a party to,
or bound by, any collective bargaining agreement, contract or other agreement
or understanding with a labor union or labor union organization. There is no
unfair labor practice or labor arbitration proceeding pending or, to the
knowledge of Bradley, threatened against Bradley or any of the Bradley
Subsidiaries relating to their business, except for any such proceeding which
would not have a Bradley Material Adverse Effect. To the knowledge of Bradley,
there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of Bradley or any of the Bradley Subsidiaries.
6.14 No Brokers. Neither Bradley nor any of the Bradley Subsidiaries has
entered into any contract, arrangement or understanding with any Person or
firm which may result in the obligation of such entity or MDI to pay any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby, except that Bradley has retained
Alex. Brown as its financial advisor, the arrangements with which have been
disclosed in writing to MDI prior to the date hereof. Other than the foregoing
arrangements and MDI's arrangements set forth in Section 5.18 of this
Agreement, Bradley is not aware of any claim for payment of any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby.
6.15 MDI Stock Ownership. Except as disclosed in Section 6.15 of the Bradley
Disclosure Letter, neither Bradley nor any of the Bradley Subsidiaries owns
any shares of capital stock of MDI or other securities convertible into
capital stock of MDI.
6.16 Definition of Bradley's Knowledge. As used in this Agreement, the
phrase "to the knowledge of Bradley" or "to the best knowledge of Bradley" (or
words of similar import) means the knowledge or the best knowledge of those
individuals identified in Section 6.16 of the Bradley Disclosure Letter, and
includes any fact, matter or circumstance which any of such individuals, as an
ordinary and prudent business person employed in the same capacity in the same
type and size of business as Bradley, should have known.
6.17 Environmental Matters. Except as disclosed in Section 6.17 of the
Bradley Disclosure Letter, none of Bradley, any Bradley Subsidiary or, to the
best knowledge of Bradley, any other Person has caused or permitted (a) the
unlawful presence of any Hazardous Materials on any of the real properties
identified in the Bradley Disclosure Letter (the "Bradley Properties"), or (b)
any unlawful spills, releases, discharges or disposal of Hazardous Materials
to have occurred or be presently occurring on or from any of the Bradley
Properties as a result of any construction on or operation and use of such
properties, which presence or occurrence would, individually or in the
aggregate, have a Bradley Material Adverse Effect; and in connection with the
construction on or operation and use of the Bradley Properties, neither
Bradley nor any of the Bradley Subsidiaries has failed to comply, in any
material respect, with any applicable local, state or federal environmental
law, regulation,
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ordinance or administrative and judicial order relating to the generation,
recycling, reuse, sale, storage, handling, transport and disposal of any
Hazardous Materials.
6.18 Disclosure. The representations, warranties and statements made by
Bradley in this Agreement, the ancillary agreements and in the Bradley
Disclosure Letter and in the certificates and other documents, delivered
pursuant hereto do not contain any untrue statement of a material fact, and,
when taken together, do not omit to state any material fact necessary to make
such representations, warranties and statements, in light of the circumstances
under which they are made, not misleading.
ARTICLE 7
7. COVENANTS.
7.1 Acquisition Proposals. Unless and until this Agreement shall have been
terminated in accordance with its terms, MDI agrees and covenants that (a)
neither it nor any MDI Subsidiary shall, and each of them shall direct and use
its best efforts to cause its respective officers, directors, employees,
agents and representatives (including, without limitation, any investment
banker, attorney or accountant retained by it or any of the MDI Subsidiaries)
not to, directly or indirectly, initiate, solicit or encourage any inquiries
or the making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its stockholders) with respect to a
merger, acquisition, tender offer, exchange offer, consolidation or similar
transaction involving, or any purchase of 10% or more of the assets or any
equity securities or partnership interests (including, without limitation,
partnership interests of MAB) of, MDI or any MDI Subsidiary, other than the
transactions contemplated by this Agreement (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or engage in any
negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any Person relating to an Acquisition Proposal,
or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal; (b) MDI will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing and will
take the necessary steps to inform the individuals or entities referred to
above of the obligations undertaken in this Section 7.1; and (c) MDI will
notify Bradley immediately if any such inquiries or proposals are received by,
any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with, it; provided,
however, that nothing contained in this Section 7.1 shall prohibit the Board
of Directors of MDI, from (i) furnishing information to or entering into
discussions or negotiations with, any Person or entity that makes an
unsolicited bona fide Acquisition Proposal, if, and only to the extent that,
(A) the Board of Directors of MDI, after consultation with and based upon the
advice of McGrath, North, Mullin & Kratz, P.C., or another nationally
recognized law firm selected by MDI, determines in good faith that such action
is required for the Board of Directors to comply with its fiduciary duties to
stockholders under applicable law, (B) prior to furnishing such information
to, or entering into discussions or negotiations with, such Person or entity,
MDI provides written notice to Bradley to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such Person
or entity, and (C) MDI keeps Bradley informed of the status of any such
discussions or negotiations, including, without limitation, promptly informing
Bradley (in any case within 24 hours) of all material developments relating
thereto; and (ii) to the extent applicable, complying with Rule 14e-2 and Rule
14a-9 promulgated under the Exchange Act with regard to an Acquisition
Proposal. Notwithstanding anything to the contrary set forth herein, nothing
in this Section 7.1 shall (x) permit MDI to terminate this Agreement (except
as specifically provided in Article 9 hereof), (y) except as specifically
provided in Article 9 hereof, permit MDI or any MDI Subsidiary to enter into
any agreement with respect to an Acquisition Proposal during the term of this
Agreement (it being agreed that during the term of this Agreement, neither MDI
nor any MDI Subsidiary shall enter into any agreement with any Person that
provides for, or in any way facilitates, an Acquisition Proposal), or (z)
affect any other obligation of any party under this Agreement.
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7.2 Conduct of Businesses.
(a) Prior to the Effective Time, except as specifically permitted by this
Agreement, unless the other party has consented in writing thereto, Bradley
and MDI:
(i) Shall use their reasonable best efforts, and shall cause each of
their respective Subsidiaries to use their reasonable best efforts, to
preserve intact their business organizations and goodwill and keep
available the services of their respective officers and employees;
(ii) Shall confer on a regular basis with one or more representatives of
the other to report operational matters of materiality and, subject to
Section 7.1, any proposals to engage in material transactions, whether or
not in the ordinary course of business;
(iii) Shall promptly notify the other of any material emergency or other
material change in the condition (financial or otherwise), business,
properties, assets, liabilities, prospects or the normal course of their
businesses or in the operation of their properties, any material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the breach in any
material respect of any representation or warranty contained herein; and
(iv) Shall promptly deliver to the other true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of
this Agreement.
(b) At all times from the execution of this Agreement until the Effective
Time, MDI:
(i) Shall, and shall cause each MDI Subsidiary to, conduct its operations
according to their usual, regular and ordinary course in substantially the
same manner as heretofore conducted, subject to clauses (ii)-(xv) below;
(ii) Shall not, and shall cause each MDI Subsidiary not to, acquire,
enter into an option to acquire or exercise an option or contract to
acquire, additional real property, incur additional indebtedness
(including, without limitation, refinancing any existing indebtedness),
encumber assets or commence construction of, or enter into any agreement or
commitment to develop or construct, shopping centers or any other type of
real estate projects (including, but not limited, to options to purchase
real property listed in Section 5.26 of the MDI Disclosure Letter);
provided, however, that MDI shall be able (A) to engage in the construction
of Imperial Mall in accordance with the budget set forth in Section 7.2(b)
of the MDI Disclosure Letter; and (B) to borrow money under its existing
lines of credit in the ordinary course of business in accordance with the
budget set forth in Section 7.2(b) of the MDI Disclosure Letter; provided
further that in no event shall MDI or any MDI Subsidiary enter into any
form of third party financing or refinancing of existing indebtedness
relating to Imperial Mall without the prior written consent of Bradley.
(iii) Shall not amend its Charter or Bylaws, and shall cause each MDI
Subsidiary not to amend its Charter, Bylaws, joint venture documents,
partnership agreements or equivalent documents except as contemplated by
Section 1.4 of this Agreement;
(iv) Shall not (A) except pursuant to the exercise of options, warrants,
conversion rights and other contractual rights existing on the date hereof
and disclosed pursuant to this Agreement, issue any shares of its capital
stock, effect any stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction, (B) grant, confer or award
any option, warrant, conversion right or other right not existing on the
date hereof to acquire any shares of its capital stock, (C) increase any
compensation or enter into or amend any employment agreement with any of
its present or future officers or directors, or (D) adopt any new employee
benefit plan (including any stock option, stock benefit or stock purchase
plan) or amend any existing employee benefit plan in any material respect,
except for changes which are less favorable to participants in such plans;
(v) Shall not (A) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital
stock, except in compliance with Section 7.14 of this Agreement, or (B)
directly or indirectly redeem, purchase or otherwise acquire any shares of
its capital stock or capital stock of any of the MDI Subsidiaries, or make
any commitment for any such action;
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(vi) Shall not, and shall not permit any of the MDI Subsidiaries to,
sell, lease or otherwise dispose of (A) any MDI Properties or any portion
thereof or any of the capital stock of or partnership or other interests in
any of the MDI Subsidiaries or (B) except in the ordinary course of
business, any of its other assets; provided, however, that, subject to the
approval of a committee composed of two individuals selected by Bradley and
two individuals selected by MDI, MDI may (A) lease any MDI Properties or
any portion thereof in the ordinary course of business (provided, however,
that approval of such committee shall not be required for leases of less
than 5,000 square feet, which are on market rates, terms and conditions and
do not violate any exclusives or restrictions) and (B) solicit purchase
bids for the properties located at Town West, Macon County and Imperial
Mall;
(vii) Shall not, and shall not permit any of the MDI Subsidiaries to,
make any loans, advances or capital contributions to, or investments in,
any other Person;
(viii) Shall not, and shall not permit any of the MDI Subsidiaries to,
pay, discharge or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated by, the most
recent consolidated financial statements (or the notes thereto) of MDI
included in the MDI Reports or incurred in the ordinary course of business
consistent with past practice;
(ix) Shall not, and shall not permit any of the MDI Subsidiaries to,
enter into any Commitment which may result in total payments or liability
by or to it in excess of $25,000, except for the renewal of casualty and
property insurance held by MDI in the ordinary course of business
(provided, however, that nothing contained in this clause (ix) shall permit
MDI or any MDI Subsidiary to take any action prohibited by the other
provisions of this Section 7.2);
(x) Shall not, and shall not permit any of the MDI Subsidiaries to, enter
into any Commitment with any officer, director, consultant or affiliate of
MDI or any of the MDI Subsidiaries;
(xi) Shall provide Bradley with a reasonable opportunity to review and
comment on any federal income tax returns filed by MDI or any MDI
Subsidiary prior to the Effective Time;
(xii) Shall not, without prior notification and consultation with
Bradley, terminate any employee under circumstances which would result in
severance payments to such employee or pay any severance benefits to any
employee on account of such employee's termination;
(xiii) Shall maintain the MDI Properties in substantially the same
condition as the same are in as of the date of this Agreement, subject only
to reasonable use and wear and casualty;
(xiv) Shall maintain in full force and effect fire and extended coverage
casualty insurance on the MDI Properties as shown in Section 5.12 of the
MDI Disclosure Letter; and
(xv) Shall take all such actions necessary in order to terminate the
MDI's dividend reinvestment plan as soon as possible following the
execution of this Agreement but in any event prior to the distribution of
the Merger Dividend (as defined in Section 7.14 hereof).
(c) Notwithstanding anything to the contrary set forth in this Agreement and
without limiting any of the other rights of Bradley set forth herein, between
the date of this Agreement and the Effective Time, (i) Bradley and the Bradley
Subsidiaries may enter into leases with respect to all or any portion of the
Bradley Properties, acquire, lease, enter into an option to acquire or lease,
or exercise an option or contract to acquire or lease, additional real
property, incur additional indebtedness, encumber assets or commence
construction of, or enter into any agreement or commitment to develop,
construct or renovate, shopping centers or other real estate projects, (ii)
Bradley may issue directly or indirectly in a public or private transaction
any kind of securities, including without limitation shares of any class or
series of common, preferred or other type of capital stock, and may cause
Bradley OP to issue in a public or private transaction any kind of securities,
including, without limitation, partnership units or debt securities, (iii)
Bradley may acquire, or agree to acquire any business or any corporation,
partnership, limited liability company or other business organization by
merger, consolidation or by
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purchasing substantially all of the assets, capital stock or partnership or
membership interests of such entity, or by any other manner, (iv) Bradley may
sell or agree to sell all or substantially all of its assets or to issue or
sell any amount of its outstanding capital stock or Bradley OP Units to a
Person or group of Persons or an entity, and may merge or consolidate with
another entity regardless of whether Bradley is the surviving entity in such
transaction, (v) Bradley may amend and/or restate its Charter and Bylaws and
Bradley and the other partners of Bradley OP may amend and/or restate the
Bradley OP Partnership Agreement, and (vi) Bradley and the Bradley
Subsidiaries may take any action necessary or advisable to effectuate any of
the foregoing clauses.
7.3 Meeting of Stockholders.
(a) MDI will take all action necessary in accordance with applicable law and
its Charter and Bylaws to convene a meeting of its stockholders (the
"Stockholders' Meeting") as promptly as practicable to consider and vote upon
the approval of this Agreement and the transactions contemplated hereby. The
Board of Directors of MDI shall recommend and declare advisable that its
stockholders approve this Agreement and the transactions contemplated hereby,
and, prior to the Effective Time, neither the Board of Directors of MDI nor
any committee thereof shall withdraw or modify the approval or recommendation
by such Board of Directors. MDI shall use its best efforts to timely mailing
the proxy statement/prospectus contained in the Form S-4 (as defined below) to
MDI's stockholders and to take all such other actions necessary or desirable
to obtain such approval; provided, however, that nothing contained in this
Section 7.3(a) shall prohibit the Board of Directors of MDI from failing to
make such recommendation or using its best efforts to obtain such approval if
the Board of Directors of MDI has determined in good faith after consultation
with and based upon the advice of McGrath, North, Mullin & Kratz, P.C. or
another nationally recognized law firm selected by MDI, that such action is
necessary for the Board to comply with its fiduciary duties to its
stockholders under applicable law. Notwithstanding the foregoing, MDI will
immediately notify Bradley in writing if it takes any action set forth in the
prior sentence.
(b) Promptly following the execution of this agreement, Bradley and MDI
shall prepare and file a proxy statement/prospectus (the "Form S-4") relating
to the stockholder meeting of MDI and the registration of the Bradley
Preferred Stock and the Bradley Common Stock (the "Underlying Bradley Common
Stock") which will be issued upon conversion of the Bradley Preferred Stock in
accordance with the terms set forth in the Articles Supplementary. The
respective parties will cause the Form S-4 to comply as to form in all
material respects with the applicable provisions of the Securities Act, the
Exchange Act and the rules and regulations thereunder. Each of Bradley and MDI
shall furnish all information about itself and its business and operation and
all necessary financial information to the other as the other may reasonably
request in connection with the preparation of the Form S-4. Bradley shall use
its reasonable best efforts, and MDI will cooperate with Bradley, to have the
Form S-4 declared effective by the SEC as promptly as practicable. Bradley
shall use its reasonable best efforts to obtain, prior to the effective date
of the Form S-4, all necessary state securities law or "Blue Sky" permits or
approvals required to carry out the transactions contemplated by this
Agreement and will pay all expenses incident thereto. Bradley agrees that the
Form S-4 and each amendment or supplement thereto at the time of mailing
thereof and at the time of the meeting of stockholders of MDI, will not
include 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; provided, however, that the foregoing shall not apply to the
extent that any such untrue statement of a material fact or omission to state
a material fact was made by Bradley in reliance upon and in conformity with
information concerning MDI furnished to Bradley by MDI for use in the Form S-
4. MDI agrees that the information provided by it for inclusion in the Form S-
4 and each amendment or supplement thereto, at the time of mailing thereof and
at the time of the meeting of stockholders of MDI, will not include 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; provided, however,
that the foregoing shall not apply to the extent that any such untrue
statement of a material fact or omission to state a material fact was made by
MDI in reliance upon and in conformity with information concerning Bradley
furnished to MDI by Bradley for use in the Form S-4. Bradley will advise and
deliver copies (if any) to MDI, promptly after it receives notice thereof, of
the time when the Form S-4 has become effective or any supplement or amendment
has been
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filed, the issuance of any stop order, the suspension of the qualification of
the Bradley Preferred Stock issuable in connection with the Merger for
offering or sale in any jurisdiction, or any request by the SEC for amendment
of the Form S-4 or comments thereon and responses thereto or requests by the
SEC for additional information.
(c) It shall be a condition to the mailing of the proxy statement/prospectus
that (i) Bradley shall have received a "comfort" letter from Deloitte & Touche
LLP, independent public accountants for MDI, of the kind contemplated by the
Statement of Auditing Standards with respect to Letters to Underwriters
promulgated by the American Institute of Certified Public Accountants (the
"AICPA Statement"), dated as of the date on which the Form S-4 shall become
effective, addressed to Bradley in form and substance reasonably satisfactory
to Bradley, concerning the procedures undertaken by Deloitte & Touche LLP with
respect to the financial statements and information of MDI and the MDI
Subsidiaries contained in the Form S-4 and the other matters contemplated by
the AICPA Statement and otherwise customary in scope and substance for letters
delivered by independent public accountants in connection with transactions
such as those contemplated by this Agreement and (ii) MDI shall have received
a "comfort" letter from KPMG Peat Marwick LLP, independent public accountants
for Bradley, of the kind contemplated by the AICPA Statement, dated as of the
date on which the Form S-4 shall become effective, addressed to MDI, in form
and substance reasonably satisfactory to MDI, concerning the procedures
undertaken by KPMG Peat Marwick LLP with respect to the financial statements
and information of Bradley and the Bradley Subsidiaries contained in the Form
S-4 and the other matters contemplated by the AICPA Statement and otherwise
customary in scope and substance for letters delivered by independent public
accountants in connection with transactions such as those contemplated by this
Agreement.
7.4 Filings; Other Action. Subject to the terms and conditions herein
provided, MDI and Bradley shall: (a) to the extent required, promptly make
their respective filings and thereafter make any other required submissions
under the HSR Act with respect to the Merger; (b) use all reasonable best
efforts to cooperate with one another in (i) determining which filings are
required to be made prior to the Effective Time with, and which consents,
approvals, permits or authorizations are required to be obtained prior to the
Effective Time from, governmental or regulatory authorities of the United
States, the several states and foreign jurisdictions and any third parties in
connection with the execution and delivery of this Agreement, and the
ancillary agreements and the consummation of the transactions contemplated by
such agreements and (ii) timely making all such filings and timely seeking all
such consents, approvals, permits or authorizations; (c) use all reasonable
best efforts to obtain in writing any consents required from third parties to
effectuate the Merger, such consents to be in reasonably satisfactory form to
MDI and Bradley; and (d) use all reasonable best efforts to take, or cause to
be taken, all other action and do, or cause to be done, all other things
necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement and the ancillary agreements. If,
at any time after the Effective Time, any further action is necessary or
desirable to carry out the purpose of this Agreement or the ancillary
agreements, the proper officers and directors of Bradley and MDI shall take
all such necessary action.
7.5 Inspection of Records. From the date hereof to the Effective Time, each
of MDI and Bradley shall allow all designated officers, attorneys, accountants
and other representatives of the other access at all reasonable times to the
records and files, correspondence, audits and properties, as well as to all
information relating to commitments, contracts, titles and financial position,
or otherwise pertaining to the business and affairs, of MDI and Bradley and
their respective subsidiaries.
7.6 Publicity. Bradley and MDI shall consult with each other before issuing
any press release or otherwise making any public statements with respect to
this Agreement or any transaction contemplated herein and shall not issue any
such press release or make any such public statement without the prior consent
of the other party, which consent shall not be unreasonably withheld;
provided, however, that a party may, without the prior consent of the other
party, issue such press release or make such public statement as may be
required by law or the rules of the NYSE if it has used its reasonable best
efforts to consult with the other party and to obtain such party's consent but
has been unable to do so in a timely manner.
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7.7 Initial Listing Application. Bradley shall promptly prepare and submit
to the NYSE an initial listing application covering the shares of Bradley
Preferred Stock issuable in the Merger and the Underlying Bradley Common Stock
issuable upon the conversion of Bradley Preferred Stock, and shall use its
best efforts to obtain, prior to the Effective Time, approval for the listing
of such Bradley Preferred Stock and Underlying Bradley Common Stock, subject
to official notice of issuance.
7.8 Further Action.
(a) Each party hereto shall, subject to the fulfillment at or before the
Effective Time of each of the conditions of performance set forth herein or
the waiver thereof, perform such further acts and execute such documents as
may reasonably be required to effect the Merger. Without limiting the
foregoing, at the Closing, MDI shall deliver, deeds, affidavits or other
documents necessary for Bradley to obtain endorsements to existing title
insurance policies or new title insurance policies which (i) insure that
Bradley (or its designee) is the record owner of the MDI Properties, subject
only to the Encumbrances, and (ii) contain a so-called "non-imputation"
endorsement (such non-imputation endorsement insuring that Bradley will not be
charged with the imputed knowledge of MDI, the MDI Subsidiaries and Affiliates
thereof). In connection with the Closing, MDI and each MDI Subsidiary shall
use their respective best efforts to deliver to Bradley such deeds, bills of
sale, assignments, certificates and affidavits as are required to effectuate
the consummation of the transactions described herein and as may be necessary
to effectuate the transfer of the MDI Properties to Bradley OP by Bradley
subsequent to the Closing.
(b) MDI shall have remedied any violations of any laws applicable to the MDI
Properties, including, without limitation, fire safety standards, of which it
has been notified by any governmental authority to the satisfaction of and
within the time periods required by such governmental authority.
(c) MDI shall obtain updated or new surveys of each to the MDI Properties in
accordance with the "Minimum Standard Detail Requirements and Classifications
for Land Title Surveys" jointly established by ALTA and ACSM in 1992, which
(i) include items 1-4 and 6-11 in Table A, (ii) meet the accuracy requirements
of an Urban Survey, as defined therein, and (iii) are certified to Bradley and
Bradley OP and the title insurance company specified by Bradley.
7.9 Affiliates of MDI.
(a) At least 30 days prior to the Closing Date, MDI shall deliver to Bradley
a list of names and addresses of those Persons who were, in MDI's reasonable
judgment, at the record date for its stockholders' meeting to approve the
Merger, "affiliates" (each such Person, an "Affiliate") of MDI within the
meaning of Rule 145. MDI shall provide Bradley such information and documents
as Bradley shall reasonably request for purposes of reviewing such list. MDI
shall use its reasonable best efforts to deliver or cause to be delivered to
Bradley, prior to the Closing Date, from each of the Affiliates of MDI
identified in the foregoing list, an Affiliate Letter in the form attached
hereto as Exhibit D. Bradley shall be entitled to place legends as specified
in such Affiliate Letters on the certificates evidencing any shares of Bradley
Preferred Stock to be received by such Affiliates pursuant to the terms of
this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for the shares of Bradley Preferred Stock, consistent with the
terms of such Affiliate Letters.
(b) Bradley shall file the reports required to be filed by it under the
Exchange Act and the rules and regulations adopted by the SEC thereunder, and
it will take such further action as any Affiliate of MDI may reasonably
request, all to the extent required from time to time to enable such Affiliate
to sell shares of Bradley Preferred Stock received by such Affiliate in the
Merger without registration under the Securities Act pursuant to (i) Rule
145(d)(1) or (ii) any successor rule or regulation hereafter adopted by the
SEC.
7.10 Expenses. Subject to the provisions of Article 9, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, except
that (a) the filing fee in connection with the HSR Act filing, if any, (b) the
filing fee in connection with the filing of the Form S-4 with the SEC and (c)
the expenses incurred for printing and mailing the Form S-4,
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shall be shared equally by MDI and Bradley. All costs and expenses for
professional services rendered pursuant to the transactions contemplated by
this Agreement including, but not limited to, investment banking and legal
services, will be paid by each party incurring such services.
7.11 Indemnification.
(a) Bradley agrees that all rights to indemnification or exculpation now
existing in favor of the directors, officers, employees, advisors and agents
of MDI and the MDI Subsidiaries (including, without limitation, MAB) as
provided in their respective Charters or By-laws in effect as of the date
hereof with respect to matters occurring at or prior to the Effective Time
shall survive the Merger and shall continue in full force and effect. For a
period of six years after the Effective Time, Bradley shall not amend, repeal
or otherwise modify the provisions in its Charter and By-laws providing for
exculpation of director liability and indemnification in any manner that would
materially and adversely affect the rights thereunder of individuals who at
any time prior to the Effective Time were directors, officers, employees,
advisors or agents of MDI in respect of actions or omissions occurring at or
prior to the Effective Time (including, without limitation, the transactions
contemplated by this Agreement), unless such modification is required by law;
provided, however, that in the event any claim or claims are asserted or made
either prior to the Effective Time or within such six year period, all rights
to indemnification in respect of any such claim or claims shall continue until
disposition of any and all such claims.
(b) In addition to the rights provided in Section 7.11(a) above, in the
event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, including, without
limitation, any action by or on behalf of any or all security holders of MDI
or Bradley or by or in the right of MDI or Bradley or any claim, action, suit,
proceeding or investigation in which any Person who is now, or has been, at
any time prior to the date hereof, or who becomes prior to the Effective Time,
a director of MDI (the "Indemnified Parties"), is, or is threatened to be,
made a party based in whole or in part on, or arising in whole or in part out
of, or pertaining to (i) the fact that he is or was a director of MDI or any
of the MDI Subsidiaries (including, without limitation, MAB) or any action or
omission by such Person in his capacity as a director, or (ii) this Agreement
or the transactions contemplated by this Agreement, whether in any case
asserted or arising before or after the Effective Time, Bradley on one hand
and the Indemnified Parties on the other hand, hereto agree to cooperate and
use their reasonable best efforts to defend against and respond thereto. It is
understood and agreed that, after the Effective Time, Bradley shall indemnify
and hold harmless, as and to the full extent permitted by applicable law, each
Indemnified Party against any losses, claims, liabilities, expenses (including
reasonable attorneys' fees and expenses), judgments, fines and amounts paid in
settlement in connection with any such threatened or actual claim, action,
suit, proceeding or investigation. In addition, after the Effective Time, in
the event of any such threatened or actual claim, action, suit, proceeding or
investigation, Bradley shall promptly pay and advance expenses and costs
incurred by each Indemnified Person as they become due and payable in advance
of the final disposition of any claim, action, suit, proceeding or
investigation to the fullest extent and in the manner permitted by law.
Notwithstanding the foregoing, Bradley shall pay for only one counsel and one
local counsel for all Indemnified Parties unless the use of one such counsel
and one local counsel for such Indemnified Parties would present such counsel
with a conflict of interest, in which case Bradley shall employ other counsel
to the extent necessary to avoid a conflict of interest with any counsel or
party involved in the matter. Notwithstanding anything to the contrary set
forth in this Agreement, Bradley (i) shall not be liable for any settlement
effected without its prior written consent, and (ii) shall not have any
obligation hereunder to any Indemnified Party if a court of competent
jurisdiction shall determine in a final and non-appealable order that
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law. In the event of such a final and non-appealable
determination by a court that such indemnification is prohibited by applicable
law, the Indemnified Person shall promptly refund to Bradley the amount of all
expenses theretofore advanced pursuant hereto. Any Indemnified Party wishing
to claim indemnification under this Section, upon learning of any such claim,
action, suit, proceeding or investigation, shall promptly notify Bradley of
such claim and the relevant facts and circumstances with respect thereto,
provided that the failure to provide such notice shall not affect the
obligations of Bradley except to the extent such failure to notify materially
prejudices Bradley's ability to defend such claim, action, suit, proceeding or
investigation.
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(c) At or prior to the Effective Time, Bradley shall purchase directors' and
executive officers' liability insurance policy coverage for MDI's directors
and executive officers for a period of six years following the Effective Time,
which will provide the directors and executive officers with coverage on
substantially similar terms as currently provided by MDI to such directors and
executive officers. In fulfilling its obligations under the preceding
sentence, Bradley shall not be required to pay more than $50,000 in the
aggregate (provided that if the premium of such coverage exceeds such amount,
Bradley shall be obligated to obtain a policy with the greatest dollar amount
of coverage available for costs not exceeding such amount). MDI shall have the
right to reasonably review and approve any such policy, which approval shall
not be unreasonably withheld.
(d) This Section 7.11 is intended for the irrevocable benefit of, and to
grant third party rights to, the Indemnified Parties and their successors,
assigns and heirs and shall be binding on all successors and assigns of
Bradley. Each of the Indemnified Parties shall be entitled to enforce the
covenants contained in this Section 7.11 and Bradley acknowledges and agrees
that each Indemnified Party would suffer irreparable harm and that no adequate
remedy at law exists for a breach of such covenants.
(e) In the event that Bradley or any of its successors or assigns (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger
or (ii) transfers or conveys all or substantially all of its properties and
assets to any Person, then, and in each such case, proper provision shall be
made so that the successors and assigns of Bradley assume the obligations set
forth in this Section.
7.12 Reorganization. From and after the date hereof and until the Effective
Time, neither Bradley nor MDI nor any of their respective subsidiaries or
other affiliates shall (i) knowingly take any action, or knowingly fail to
take any action, that would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code or (ii) enter
into any contract, agreement, commitment or arrangement with respect to the
foregoing. Following the Effective Time, Bradley shall use its best efforts to
conduct its business in a manner that would not jeopardize the
characterization of the Merger as a reorganization within the meaning of
Section 368(a) of the Code.
7.13 Certain Benefits. Except for normal increases in the ordinary course of
business that are consistent with past practices and cost increases of third
party providers necessary to maintain benefits at current levels that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to MDI or any of the MDI Subsidiaries or as set forth in Section 5.16
of the MDI Disclosure Letter, MDI will not, and will not permit any of the MDI
Subsidiaries to, adopt or amend (except as may be required by law) any bonus,
profit sharing, compensation, severance, termination, stock option, pension,
retirement, deferred compensation, employment or other employee benefit
agreements, trusts, plans, funds or other arrangements for the benefit or
welfare of any director, officer or employee that increase in any manner the
compensation, retirement, welfare or fringe benefits of any director, officer
or employee or pay any benefit not required by any existing plan or
arrangement (including without limitation the granting of stock options) or
take any action or grant any benefit not expressly required under the terms of
any existing agreements, trusts, plans, funds or other such arrangements or
enter into any contract, agreement, commitment or arrangement to any of the
foregoing.
7.14 Dividends.
(a) Prior to the Effective Time, MDI and Bradley shall cooperate and
coordinate with each other so that (i) the record date for regular quarterly
dividends and distributions with respect to the first quarter of 1998 and
thereafter until the Effective Time shall occur on the same date, (ii) the
payment date for each such regular quarterly dividend and distribution shall
be on the last day of such applicable quarter, and (iii) the amount of each
such regular quarterly dividend and distribution shall not exceed $.22 per
quarter for MDI and $.35 per quarter for Bradley.
(b) For its taxable year ending at the Effective Time (the "Short Taxable
Year") MDI will not have any (i) "net income from foreclosure property" as
defined by Section 857(b)(4) of the Code or (ii) "net income derived from
prohibited transactions" as defined by Section 857(b)(6) of the Code.
Immediately prior to the
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Effective Time, MDI will cause to be distributed a dividend (within the
meaning of Section 316 of the Code) to its stockholders (the "Merger
Dividend") of an amount such that (i) MDI's "real estate investment trust
taxable income" as defined in Section 857(b)(2) of the Code for the Short
Taxable Year shall equal zero; (ii) MDI's current and accumulated earnings and
profits as described in Section 312 of the Code for the Short Taxable Year
shall equal zero; and (iii) MDI's "deduction for dividends paid during the
taxable year" (within the meaning of Sections 561 and 857(a)(1) of the Code
and determined without regard to "capital gain dividends" within the meaning
of Section 857(b) of the Code) for the Short Taxable Year will equal or exceed
the amount set forth in Section 857(a)(1)(A) and (B) of the Code.
(c) MDI will do all things necessary to ensure that it continues to meet all
of the requirements to be treated as a REIT for all purposes under the Code
and the tax provisions of the State of Nebraska (and any other state in which
MDI is subject to tax and which provides for the taxation of REITs in a manner
similar to the treatment of REITs under Sections 856-860 of the Code) and
shall make any and all required filings in connection therewith, including
providing Bradley with all information, documentation and assistance Bradley
may reasonably request in order for Bradley to mail the stockholder demand
letters required by Treasury Regulation (S) 1.857-8 within 30 days after the
Effective Time and to take any other actions that may be necessary or
appropriate for Bradley, as the Surviving Corporation, to take in order to
maintain MDI's status as a REIT through the Effective Time.
7.15 Environmental Matters. MDI and Bradley shall cooperate and keep each
other informed in a timely manner regarding any communications to or filings
with any state environmental regulatory authorities regarding the MDI
Properties and MDI shall not submit any written communication or filing to any
such state environmental authority without the prior written consent of
Bradley, which consent shall not be unreasonably withheld.
ARTICLE 8
8. Conditions.
8.1 Conditions to Each Party's Obligation to Effect the Merger. Conditions
to Each Party's Obligation to Effect the Merger. The respective obligation of
each party to effect the Merger and the other transactions contemplated herein
shall be subject to the fulfillment at or prior to the Effective Time of the
following conditions, any or all of which may be waived, in whole or in part
by the parties hereto, to the extent permitted by applicable law:
(a) This Agreement and the transactions contemplated hereby shall have been
approved by the requisite vote of stockholders of MDI.
(b) The waiting period applicable to the consummation of the Merger under
the HSR Act, if applicable, shall have expired or been terminated.
(c) Neither of the parties hereto shall be subject to any temporary
restraining order, ruling or preliminary or permanent injunction or other
order of a court of competent jurisdiction or other legal restraint or
prohibition which prohibits the consummation of the transactions contemplated
by this Agreement. In the event any such order, ruling, injunction or other
prohibition shall have been issued, each party agrees to use its best efforts
to have any such order, ruling, injunction or other prohibition lifted, stayed
or reversed.
(d) The Form S-4 shall have been declared effective by the SEC under the
Securities Act, and no stop order suspending the effectiveness of the Form S-4
shall have been issued by the SEC, and no proceedings for that purpose shall
have been initiated or, to the knowledge of Bradley or MDI, threatened by the
SEC.
(e) Bradley shall have obtained the approval for the listing of the shares
of Bradley Preferred Stock issuable in the Merger on the NYSE, subject to
official notice of issuance.
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(f) Bradley shall have received all state securities or "blue sky" permits
and other authorizations necessary to issue the Bradley Preferred Stock as
contemplated in this Agreement.
(g) Bradley and MDI shall have received the opinion of Goodwin, Procter &
Hoar LLP, or another nationally recognized law firm selected by Bradley, dated
not less than five business days prior to the date the Form S-4 is declared
effective by the SEC, reasonably acceptable to Bradley, and subject to
customary conditions and qualifications (including reliance, in part, on
representations of Bradley and MDI and certain stockholders of MDI), to the
effect that the Merger will be treated for federal income tax purposes as a
tax-free reorganization qualifying under the provisions of Sections 368(a) of
the Code, which opinion shall not have been withdrawn or modified in any
material respect.
8.2 Conditions to Obligations of MDI to Effect the Merger. The obligation of
MDI to effect the Merger shall be subject to the fulfillment at or prior to
the Closing Date of the following conditions, unless waived by MDI:
(a) Each of the representations and warranties of Bradley contained in this
Agreement qualified as to materiality or Bradley Material Advance Effect shall
be true and correct in all respects and the representations and warranties of
Bradley contained in this Agreement that are not so qualified shall be true
and correct in all material respects, in each case as of the date of this
Agreement and as of the Effective Time as though made on and as of the
Effective Time except to the extent any such representation or warranty is
expressly limited by its terms to another date or time, and MDI shall have
received a certificate, dated the Closing Date, signed on behalf of Bradley by
the President of Bradley to the foregoing effect.
(b) Bradley shall have performed or complied in all material respects with
all agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time, and MDI shall have
received a certificate, dated the Closing Date, signed on behalf of Bradley by
the President of Bradley to the foregoing effect.
(c) From the date of this Agreement through the Effective Time, there shall
not have occurred any change concerning Bradley or any of the Bradley
Subsidiaries that has had or could be reasonably likely to have a Bradley
Material Adverse Effect and MDI shall have received a certificate, dated the
Closing Date, signed on behalf of Bradley by the President of Bradley to the
foregoing effect.
(d) All consents, authorizations, orders and approvals of (or filings or
registrations with) any governmental commission, board, other regulatory body
or third parties required to be made or obtained by Bradley and its
subsidiaries and affiliated entities in connection with the execution,
delivery and performance of this Agreement and the ancillary agreements shall
have been obtained or made, except where the failure to have obtained or made
any such consent, authorization, order, approval, filing or registration,
would not have Bradley Material Adverse Effect.
8.3 Conditions to Obligation of Bradley to Effect the Merger. The
obligations of Bradley to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions,
unless waived by Bradley:
(a) Each of the representations and warranties of MDI contained in this
Agreement qualified as to materiality or MDI Material Adverse Effect shall be
true and correct in all respects and the representations and warranties of MDI
contained in this Agreement that are not so qualified shall be true and
correct in all material respects, in each case as of the date of this
Agreement and as of the Effective Time as though made on and as of the
Effective Time except to the extent any such representation or warranty is
expressly limited by its terms to another date or time, and Bradley shall have
received a certificate, dated the Closing Date, signed on behalf of MDI by the
President of MDI to the foregoing effect. Notwithstanding the foregoing, the
occurrence of any Litigation subsequent to the date hereof and prior to the
Effective Time, which could not reasonably be expected
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to have a MDI Material Adverse Effect shall be deemed not to be a breach of
the provisions of this Section 8.3(a).
(b) MDI shall have performed or complied in all material respects with all
agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time, and Bradley shall have
received a certificate, dated the Closing Date, signed on behalf of MDI by the
President of MDI to the foregoing effect.
(c) Bradley shall have received Option Terminations relating to each of the
Existing MDI Options, as required by Section 4.1(e) of this Agreement and
shall have received an Acknowledgment of Severance Obligation from each of the
applicable employees as required by Section 1.5 of this Agreement.
(d) At closing, Bradley shall have received the opinion of Deloitte & Touche
LLP, in the form attached hereto as Exhibit E.
(e) From the date of this Agreement through the Effective Time, there shall
not have occurred any change concerning MDI or any of the MDI Subsidiaries,
that has had or could be reasonably likely to have a MDI Material Adverse
Effect and Bradley shall have received a certificate, dated the Closing Date,
signed on behalf of MDI by the President of MDI to the foregoing effect.
(f) MDI shall have obtained and delivered to Bradley estoppel certificates
dated no earlier than 60 days prior to the Effective Time with respect to (x)
leases and REA Agreements representing at least 90% of the total rented space
represented by the leases and REA Agreements set forth on Schedule 8.3(f)
hereof and (y) leases representing a total of 50% of the total rented space of
each MDI Property, other than rented space represented by the leases listed on
Schedule 8.3(f) hereof. Such estoppel certificates shall either be (x)
substantially in the form of Exhibit F hereto or (y) in the form required by
the applicable lease.
(g) (i) The consents set forth in Schedule 8.3(g) hereof shall have been
obtained, and (ii) all other consents, authorizations, orders and approvals of
(or filings or registrations with) any governmental commission, board, other
regulatory body or third parties required to be made or obtained by MDI and
its subsidiaries and affiliated entities in connection with the execution,
delivery and performance of this Agreement and the ancillary agreements shall
have been obtained or made, except where the failure to have obtained or made
any such consent, authorization, order, approval, filing or registration,
would not have a MDI Material Adverse Effect.
ARTICLE 9
9. TERMINATION.
9.1 Termination. This Agreement may be terminated and abandoned at any time
prior to the Effective Time, whether before or after approval and adoption of
this Agreement by the stockholders of MDI and Bradley:
(a) by mutual written consent of Bradley and MDI;
(b) by either Bradley or MDI if any United States federal or state court of
competent jurisdiction or other governmental entity shall have issued an
order, decree or ruling or taken any other action permanently restraining,
enjoining or otherwise prohibiting the Merger and such order, decree, ruling
or other action shall have become final and non-appealable, provided that the
party seeking to terminate shall have used its best efforts to appeal such
order, decree, ruling or other action;
(c) by Bradley upon a breach of any representation, warranty, covenant or
agreement on the part of MDI set forth in this Agreement, or if any
representation or warranty of MDI shall have become untrue, in either case
such that the conditions set forth in Section 8.3(a) or Section 8.3(b), as the
case may be, would be incapable of being satisfied by September 30, 1998;
provided, however, that, in any case, a willful breach of Sections 7.1,
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7.2(b), 7.3(a), 7.9, 7.12 and 7.14(c) shall be deemed to cause such conditions
to be incapable of being satisfied for purposes of this Section 9.1(c);
(d) by MDI upon a breach of any representation, warranty, covenant or
agreement on the part of Bradley set forth in this Agreement, or if any
representation or warranty of Bradley shall have become untrue, in either case
such that the conditions set forth in Section 8.2(a) or Section 8.2(b), as the
case may be, would be incapable of being satisfied by September 30, 1998;
provided, however, that, in any case, a willful breach shall be deemed to
cause such conditions to be incapable of being satisfied for purposes of this
Section 9.1(d);
(e) by Bradley if (i) the Board of Directors of MDI shall have failed to
make, or shall have withdrawn, amended, modified or changed its approval or
recommendation of this Agreement or any of the transactions contemplated
hereby; (ii) MDI shall have failed as soon as practicable to mail the
proxy/prospectus contained in the Form S-4 to its stockholders or to include
the recommendation of its Board of Directors of this Agreement and the
transactions contemplated hereby in the proxy/prospectus contained in the Form
S-4; (iii) the Board of Directors of MDI shall have recommended that
stockholders of MDI accept or approve an Acquisition Proposal by a Person
other than Bradley (or MDI or its Board shall have resolved to do such); or
(iv) MDI or its Board of Directors shall have resolved to do any of the
foregoing;
(f) by MDI, if the Board of Directors of MDI recommends to MDI's
stockholders approval or acceptance of a Acquisition Proposal by a Person
other than Bradley, but only in the event that the Board of Directors of MDI,
after consultation with and based upon the advice of McGrath, North, Mullin &
Kratz, P.C. or another nationally recognized law firm, has determined in good
faith that such action is necessary for the Board of Directors of MDI to
comply with its fiduciary duties to its stockholders under applicable law;
(g) by either Bradley or MDI if this Agreement and the transactions
contemplated hereby shall have failed to receive the requisite vote for
approval and adoption by the stockholders of MDI upon the holding of a duly
convened stockholder meeting;
(h) by either Bradley or MDI, if the Merger shall not have been consummated
on or before September 30, 1998 (other than due to the failure of the party
seeking to terminate this Agreement to perform its obligations under this
Agreement required to be performed by it at or prior to the Effective Time);
or
(i) by MDI if Bradley enters into a definitive agreement pursuant to which
Bradley agrees (A) to sell all or substantially all of its assets or (B) to
merge or consolidate with another Person if consummation of such merger or
consolidation would result in the voting securities of Bradley outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
Person) less than 50% of the combined voting power of the voting securities of
Bradley or such surviving Person outstanding immediately after such merger or
consolidation. MDI's right of termination under this Section 9.1(i) shall
expire and become null and void on the seventh (7th) day after receipt of
notice by MDI that Bradley has entered into such definitive agreement.
The right of any party hereto to terminate this Agreement pursuant to this
Section 9.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any Person
controlling any such party or any of their respective employees, officers,
directors, agents, representatives or advisors, whether prior to or after the
execution of this Agreement.
9.2 Effect of Termination.
(a) In the event of the termination and abandonment of this Agreement
pursuant to Section 9.1 hereof, this Agreement shall forthwith become void and
have no effect, all rights and obligations of any party hereto shall cease
except for agreements contained in Section 10.5 and neither party shall have
any liability to the other party or any of its affiliates, directors, officers
or stockholders; provided, however, that MDI shall be required to make such
payments to Bradley as are required pursuant to this Article 9.
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(b) If (x) Bradley terminates this Agreement pursuant to Section 9.1(e)(iii)
or pursuant to 9.1(c) as a result of a willful breach by MDI or (y) MDI
terminates this Agreement pursuant to Section 9.1(f), then MDI shall pay to
Bradley an amount in cash equal to the sum of (i) $2,500,000, plus (ii)
Bradley's out-of-pocket costs and expenses, in connection with this Agreement
and the transactions contemplated hereby, including, without limitation, fees
and disbursements of accountants, attorneys and investment bankers up to a
maximum of $875,000 (clauses (i) and (ii) collectively, the "Termination
Amount") in accordance with the provisions of Section 9.3.
(c) If Bradley terminates this Agreement pursuant to Section 9.1(e)(i),
9.1(e)(ii), 9.1(e)(iv) or 9.1(c) (except for a termination because of a
willful breach by MDI in which case the provisions of Section 9.2(b) will
apply), MDI shall pay all of Bradley's out-of-pocket costs and expenses, in
connection with this Agreement and the transactions contemplated hereby,
including, without limitation, fees and disbursements of accountants,
attorneys and investment bankers (collectively, "Expenses") up to a maximum of
$875,000, in accordance with the provisions of Section 9.3.
(d) If this Agreement is terminated pursuant to Section 9.1(g), MDI shall
pay all of Bradley's Expenses up to a maximum of $500,000 in accordance with
the provisions of Section 9.3.
(e) If at any time prior to or within one year after termination of this
Agreement (unless such termination was pursuant to Section 9.1(a), (b), (d),
(g) or (h)) MDI enters into an agreement relating to a PTAP (as hereinafter
defined) with a Person other than Bradley or MDI's Board of Directors
recommends or resolves to recommend to MDI's stockholders approval or
acceptance of a PTAP with a Person other than Bradley, then, upon the entry
into such agreement or the making of such recommendation or resolution, MDI
shall pay to Bradley the Termination Amount in accordance with the provisions
of Section 9.3 which amount shall be reduced by any monies previously paid by
MDI to Bradley pursuant to Section 9.2(b) or Section 9.2(c). For purposes of
this Agreement, PTAP shall mean any proposal or offer (including, without
limitation, any proposal or offer to its stockholders) with respect to a
merger, acquisition, tender offer, exchange offer, consolidation or similar
transaction involving, or any purchase of, 20% or more of the assets or any
equity securities of, MDI or any MDI Subsidiary, other than the transactions
contemplated by this Agreement; provided, however, that PTAP shall not include
any transaction involving the partnership interests or assets of MAB.
(f) If (A) prior to MDI's Stockholders' Meeting, a PTAP has been received by
MDI or a Person has publicly disclosed a PTAP or an intent to make a PTAP and
(B) if at any time prior to or within one year after termination of this
Agreement pursuant to Section 9.1(g), MDI enters into an agreement relating to
a PTAP with a Person other than Bradley or MDI's Board of Directors recommends
or resolves to recommend to MDI's stockholders approval or acceptance of a
PTAP with a Person other than Bradley, then upon the entry into such agreement
or the making of such recommendation or resolution, MDI shall pay to Bradley
the Termination Amount in accordance with the provisions of Section 9.3 which
amount shall be reduced by any monies previously paid by MDI to Bradley
pursuant to Section 9.2(d).
(g) At any time prior to or within one year after termination of this
Agreement, MDI shall not enter into any agreement relating to a PTAP with a
Person other than Bradley unless such agreement provides that such Person
shall, upon the execution of such agreement, pay any Termination Amount due
Bradley under this Section 9.2. All such amounts shall be paid in accordance
with the provisions of Section 9.3.
(h) The parties acknowledge and agree that the provisions for payment of
Expenses and/or the Termination Amount are included herein in order to induce
Bradley to enter into this Agreement and to reimburse Bradley for incurring
the costs and expenses related to entering into this Agreement and
consummating the transactions contemplated by this Agreement. Notwithstanding
anything to the contrary set forth in this Agreement, in the event Bradley is
required to file suit to seek all or a portion of Termination Amount and/or
the Expenses, Bradley shall be reimbursed by MDI for any and all expenses
which it has incurred in enforcing its rights hereunder, including, without
limitation, attorneys' fees and expenses. The parties further expressly
acknowledge and agree that (i) the payment of the Termination Amount shall
constitute liquidated damages with respect to any claim for
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damages or any other claim which Bradley would otherwise be entitled to assert
against MDI with respect to this Agreement and the transactions contemplated
hereby and shall constitute the sole and exclusive remedy available to
Bradley; and (ii) in light of the difficulty of accurately determining actual
damages with respect to the foregoing upon any termination of this Agreement
pursuant to Section 9.2 hereof, the Termination Amount: (A) constitutes a
reasonable estimate of the damages that will be suffered by reason of any such
proposed or actual termination of this Agreement pursuant to Section 9.2 and
(B) shall be in full and complete satisfaction of any and all damages arising
as a result of the foregoing. Notwithstanding the foregoing, in the event
there is a judicial determination that the Termination Amount is invalid,
illegal or unenforceable in any respect for any reason, in whole or in part,
or in the event that there is a judicial determination that MDI's obligation
to pay the Termination Amount is invalid, illegal or unenforceable, in whole
or in part, the validity, legality and enforceability of this Agreement shall
not in any way be impaired thereby and Bradley shall be entitled to enforce
all of its rights and privileges to the fullest extent of the law, including
without limitation its right to pursue a claim for monetary damages or
equitable relief against MDI; provided that in no circumstances will the
amount of monetary damages (exclusive of costs and expenses incurred in
collecting such amounts) exceed the sum of (i) $500,000 in connection with the
termination of the Agreement pursuant to Section 9.1(g), or $875,000 in
connection with any other expense award otherwise allowed under Section 9.2
for recovery of fees and disbursements of accountants, attorneys and
investment bankers, and (ii) $2.5 million for events for which a Termination
Amount would otherwise be payable to Bradley under Section 9.2.
(i) Notwithstanding any provision to the contrary herein, the aggregate
amount of the Termination Amount or Expenses, as the case may be, payable to
Bradley pursuant to this Section 9.2 shall be subject to the limitations set
forth in Section 9.3.
9.3 Payment of Termination Amount or Expenses.
(a) In the event that MDI is obligated to pay Bradley the Termination Amount
and/or Expenses pursuant to Section 9.2 (the "Section 9.2 Amount"), MDI (or
any other Person to the extent provided by Section 9.2(d)) shall pay to
Bradley from the applicable Section 9.2 Amount deposited into escrow in
accordance with the next sentence, an amount equal to the lesser of (m) the
Section 9.2 Amount and (n) the sum of (1) the maximum amount that can be paid
to Bradley without causing Bradley to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code determined as if the payment of such
amount did not constitute income described in Sections 856(c)(2)(A)-(H) or
856(c)(3)(A)-(I) of the Code ("Qualifying Income"), as determined by Bradley's
certified public accountants, plus (2) in the event Bradley receives either
(X) a letter from Bradley's counsel indicating that Bradley has received a
ruling from the IRS described in Section 9.3(b)(ii) or (Y) an opinion from
Bradley's counsel as described in Section 9.3(b)(ii), an amount equal to the
Section 9.2 Amount less the amount payable under clause (1) above. To secure
MDI's obligation to pay these amounts, MDI shall deposit into escrow an amount
in cash equal to the Section 9.2 Amount with an escrow agent selected by
Bradley and on such terms (subject to Section 9.3(b)) as shall be agreed upon
by Bradley and the escrow agent. The payment or deposit into escrow of the
Section 9.2 Amount pursuant to this Section 9.3(a) shall be made within three
days of the event which gives rise to the payment of the Section 9.2 Amount by
wire transfer or bank check. Notwithstanding anything to the contrary in this
Agreement, if MDI shall not have paid the Section 9.2 Amount within the period
set forth in the preceding sentence, Bradley shall also be entitled to receive
interest on such Section 9.2 Amount, commencing on the date that the Section
9.2 Amount became due, at a rate per annum equal to the rate of interest
publicly announced by CitiBank, N.A., from time to time, in the City of New
York, as such Bank's prime rate.
(b) The escrow agreement shall provide that the Section 9.2 Amount in escrow
or any portion thereof shall not be released to Bradley unless the escrow
agent receives any one or combination of the following: (i) a letter from
Bradley's certified public accountants indicating the maximum amount that can
be paid by the escrow agent to Bradley without causing Bradley to fail to meet
the requirements of Sections 856(c)(2) and (3) of the Code determined as if
the payment of such amount did not constitute Qualifying Income or a
subsequent letter from Bradley's accountants revising that amount, in which
case the escrow agent shall release such amount to Bradley, or (ii) a letter
from Bradley's counsel indicating that Bradley received a ruling from the IRS
holding that the receipt by Bradley of the Section 9.2 Amount would either
constitute Qualifying Income or would be excluded
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from gross income within the meaning of Sections 856(c)(2) and (3) of the Code
(or alternatively, Bradley's legal counsel has rendered a legal opinion to the
effect that the receipt by Bradley of the Section 9.2 Amount would either
constitute Qualifying Income or would be excluded from gross income within the
meaning of Sections 856(c)(2) and (3) of the Code), in which case the escrow
agent shall release the remainder of the Section 9.2 Amount to Bradley. MDI
agrees to amend this Section 9.3 at the request of Bradley in order to
(x) maximize the portion of the Section 9.2 Amount that may be distributed to
Bradley hereunder without causing Bradley to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code, (y) improve Bradley's chances of
securing a favorable ruling described in this Section 9.3(b) or (z) assist
Bradley in obtaining a favorable legal opinion from its counsel as described
in this Section 9.3(b); provided that Bradley's legal counsel has rendered a
legal opinion to Bradley to the effect that such amendment would not cause
Bradley to fail to meet the requirements of Section 856(c)(2) or (3) of the
Code. The escrow agreement shall also provide that any portion of the Section
9.2 Amount held in escrow for five years shall be released by the escrow agent
to MDI. MDI shall not be a party to such escrow agreement and shall not bear
any cost of or have liability resulting from the escrow agreement.
9.4 Extension; Waiver. At any time prior to the Effective Time, any party
hereto, by action taken by its Board of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of
such party.
ARTICLE 10
10. GENERAL PROVISIONS.
10.1 Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Merger,
provided, however, that the agreements contained in Article 4, the last
sentence of Section 7.4, the last sentence of Section 7.8 and Sections 7.10,
7.12, 7.13 and 7.14 and this Article 10 shall survive the Merger.
10.2 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be delivered
personally, sent by overnight courier (providing proof of delivery) to the
parties or sent by telecopy (providing confirmation of transmission) at the
following addresses or telecopy numbers (or at such other address or telecopy
number for a party as shall be specified by like notice):
If to Bradley: Thomas P. D'Arcy
Bradley Real Estate, Inc.
40 Skokie Boulevard, Suite 600
Northbrook, IL 60062
Fax No. (847) 480-1893
With copies to: William B. King, P.C.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Fax No. (617) 523-1231
If to MDI: Dennis G. Gethmann
Mid-America Realty Investments, Inc.
11506 Nichols Street, Suite 100
Omaha, Nebraska 68154
Fax No. (402) 341-0216
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With copies to: David L. Hefflinger
McGrath, North, Mullin & Kratz, P.C.
Suite 1400, One Central Park Plaza
222 South Fifteenth Street
Omaha, Nebraska 68102
Fax No. (402) 341-0216
or to such other address as any party shall specify by written notice so
given, and such notice shall be deemed to have been delivered as of the date
so delivered.
10.3 Assignment; Binding Effect; Benefit. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Article 4 and Sections 7.9, 7.11, 7.12 and 7.13, nothing in this Agreement,
expressed or implied, is intended to confer on any Person other than the
parties hereto or their respective heirs, successors, executors,
administrators and assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
10.4 Entire Agreement. This Agreement, the Exhibits, the MDI Disclosure
Letter and the Bradley Disclosure Letter and any documents delivered by the
parties in connection herewith constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be
binding upon any party hereto unless made in writing and signed by all parties
hereto.
10.5 Confidentiality.
(a) As used herein, "Confidential Material" means, with respect to either
party hereto (the "Providing Party"), all information, whether oral, written
or otherwise, furnished to the other party hereto (the "Receiving Party") or
such Receiving Party's directors, officers, partners, Affiliates (as defined
in Rule 12b-2 under the Exchange Act), employees, agents or representatives
(collectively, "Representatives"), by the Providing Party and all reports,
analyses, compilations, studies and other material prepared by the Receiving
Party or its Representatives (in whatever form maintained, whether
documentary, computer storage or otherwise) containing, reflecting or based
upon, in whole or in part, any such information. The term "Confidential
Material" does not include information which (i) is or becomes generally
available, to the public other than as a result of a disclosure by the
Receiving Party, its Representatives or anyone to whom the Receiving Party or
any of its Representatives transmit any Confidential Material in violation of
this Agreement, (ii) is or becomes known or available to the Receiving Party
on a non-confidential basis from a source (other than the Providing Party or
one of its Representatives) who is not, to the knowledge of the Receiving
Party after reasonable inquiry, prohibited from transmitting the information
to the Receiving Party or its Representatives by a contractual, legal,
fiduciary or other obligation or (iii) is contained in the Form S-4.
(b) Subject to paragraph (c) below or except as required by law, the
Confidential Material will be kept confidential and will not, without the
prior written consent of the Providing Party, be disclosed by the Receiving
Party or its Representatives, in whole or in part, and will not be used by the
Receiving Party or its Representatives, directly or indirectly, for any
purpose other than in connection with this Agreement, the Merger or the
evaluating, negotiating or advising with respect to a transaction contemplated
herein. Moreover, each Receiving Party agrees to transmit Confidential
Material to its Representatives only if and to the extent that such
Representatives need to know the Confidential Material for purposes of such
transaction and are informed by such Receiving Party of the confidential
nature of the Confidential Material and of the terms of this Section. In any
event, each Receiving Party will be responsible for any actions by its
Representatives which are not in accordance with the provisions hereof.
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(c) In the event that either Receiving Party, its Representatives or anyone
to whom such Receiving Party or its Representatives supply the Confidential
Material, are requested (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand, any informal
or formal investigation by any government or governmental agency or authority
or otherwise in connection with legal process) to disclose any Confidential
Material, such Receiving Party agrees (i) to immediately notify the Providing
Party of the existence, terms and circumstances surrounding such a request,
(ii) to consult with the Providing Party on the advisability of taking legal
available steps to resist or narrow such request and (iii) if disclosure of
such information is required, to furnish only that portion of the Confidential
Material which, in the opinion of such Receiving Party's counsel, such
Receiving Party is legally compelled to disclose and to cooperate with any
action by the Providing Party to obtain an appropriate protective order or
other reliable assurance that confidential treatment will be accorded the
Confidential Material (it being agreed that the Providing Party shall,
reimburse the Receiving Party for all reasonable out-of-pocket expenses
incurred by the Receiving Party in connection with such cooperation).
(d) In the event of the termination of this Agreement in accordance with its
terms, promptly upon request from either Providing Party, the Receiving Party
shall, except to the extent prevented by law, redeliver to the Providing Party
or destroy all tangible Confidential Material and will not retain any copies,
extracts or other reproductions thereof in whole or in part. Any such
destruction shall be certified in writing to the Providing Party by an
authorized officer of the Receiving Party supervising the same.
Notwithstanding the foregoing, each Receiving Party and one Representative
designated by each Receiving Party shall be permitted to retain one permanent
file copy of each document constituting Confidential Material.
(e) MDI and Bradley agree that prior to and within one year after the
termination of this Agreement they shall not solicit for employment, whether
as an employee or independent contractor, any Person who is (or has been
within a period of one year) employed by the other, without the written
consent of the other.
10.6 Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Board of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
stockholders of MDI and Bradley, but after any such stockholder approval, no
amendment shall be made which by law requires the further approval of
stockholders without obtaining such further approval. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
10.7 Governing Law; Jurisdiction and Venue. This Agreement shall be governed
by and construed in accordance with the laws of the State of Maryland without
regard to its rules of conflict of laws. Each of MDI and Bradley hereby
irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of Maryland and of the United States
of America located in the State of Maryland (the "Maryland Courts") for any
litigation arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any litigation relating
thereto except in such courts), waives any objection to the laying of venue of
any such litigation in the Maryland Courts and agrees not to plead or claim in
any Maryland Court that such litigation brought therein has been brought in
any inconvenient forum. Each of the parties hereto agrees, (a) to the extent
such party is not otherwise subject to service of process in the State of
Maryland, to appoint and maintain an agent in the State of Maryland as such
party's agent for acceptance of legal process, and (b) that service of process
may also be made on such party by prepaid certified mail with a proof of
mailing receipt validated by United States Postal Service constituting
evidence of valid service. Service made pursuant to (a) or (b) above shall
have the same legal force and effect as if served upon such party personally
with the State of Maryland. For purposes of implementing the parties'
agreement to appoint and maintain an agent for service of process in the State
of Maryland, each such party does hereby appoint The Corporation Trust
Company, 300 East Lombard Street, Baltimore, Maryland 21202, as such agent.
10.8 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
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10.9 Headings. Headings of the Articles and Sections of this Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
10.10 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and
vice versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
10.11 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation
by or on behalf of any party, shall be deemed to constitute a waiver by the
party taking such action of compliance with any representations, warranties,
covenants or agreements contained in this Agreement. The waiver by any party
hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
10.12 Incorporation. The MDI Disclosure Letter and the Bradley Disclosure
Letter and all Exhibits and Schedules attached hereto and thereto and referred
to herein and therein are hereby incorporated herein and made a part hereof
for all purposes as if fully set forth herein.
10.13 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
10.14 Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
was not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions thereof in any Maryland Court, this
being in addition to any other remedy to which they are entitled at law or in
equity.
10.15 Certain Definitions.
(a) As used in this Agreement, the word "Subsidiary" or "Subsidiaries" when
used with respect to any party means any corporation, partnership, joint
venture, business trust or other entity, of which such party directly or
indirectly owns or controls at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of
the board of directors or others performing similar functions with respect to
such corporation or other organization.
(b) As used in this Agreement, the word "Person" means an individual, a
corporation, a partnership, an association, a joint-stock company, a trust, a
limited liability company, any unincorporated organization or any other
entity.
(c) As used in this Agreement, the word "affiliate" shall have the meaning
set forth in Rule 12b-2 of the Exchange Act.
[Remainder of this page intentionally left blank.]
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IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
ATTEST: BRADLEY REAL ESTATE, INC.
By: /s/ William B. King______________ By: /s/ Thomas P. D'Arcy_____________
Name: Name:
Title: Secretary Title: Chairman and Chief
Executive Officer
ATTEST: MID-AMERICA REALTY INVESTMENTS, INC.
By: /s/ Jerome L. Heinrichs__________ By: /s/ Dennis G. Gethmann___________
Name: Name:
Title: Secretary Title: President
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ANNEX B
BRADLEY REAL ESTATE, INC.
ARTICLES SUPPLEMENTARY
8.4% SERIES A CONVERTIBLE PREFERRED STOCK
Bradley Real Estate, Inc., a Maryland corporation (the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of
Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Directors of
the Corporation by Article VII of the charter of the Corporation (the
"Charter"), the Board of Directors as required by Section 2-208(a) of the
Maryland General Corporation Law (the "MGCL") at a meeting duly called and
held on May 27, 1998 has classified and designated 3,570,301 shares of the
Preferred Stock of the Corporation as 8.4% Series A Convertible Preferred
Stock, with the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption as follows, which upon
any restatement of the Charter shall be made part of Article VII of the
Charter, with any necessary or appropriate changes to the enumeration or
lettering of the provisions thereof:
8.4% SERIES A CONVERTIBLE PREFERRED STOCK
1. DESIGNATION, AMOUNT AND RANKING.
The designation of the Preferred Stock described in Article First hereof
shall be "8.4% Series A Convertible Preferred Stock," par value $.01 per share
(the "Series A Preferred Stock"). The number of shares of the Series A
Preferred Stock shall be 3,570,301.
The Series A Preferred Stock shall, with respect to dividend rights and
rights upon liquidation, dissolution or winding up of the Corporation, rank
(a) senior to all classes or series of common stock, par value $.01 per share
of the Corporation (the "Common Stock"), and to all equity securities the
terms of which specifically provide that such equity securities rank junior to
such Series A Preferred Stock; (b) on parity with all equity securities issued
by the Corporation the terms of which specifically provide that such equity
securities rank on a parity with the Series A Preferred Stock; and (c) junior
to all other equity securities issued by the Corporation. The term "equity
securities" shall not include convertible debt securities.
2. DIVIDEND RIGHTS.
(a) The holders of record of outstanding shares of Series A Preferred Stock
shall be entitled to receive, when, as and if authorized by the Board of
Directors, out of funds legally available therefor, cash dividends which are
(1) cumulative, (2) preferential to the dividends paid on the Corporation's
Common Stock and (3) payable quarterly in arrears at the rate of 8.4% of the
$25.00 liquidation preference per annum (equivalent to a fixed quarterly
amount of $.525 per share) (the "Dividend Amount") and no more, on or before
the last day (or, if not a business day, the next succeeding business day) of
each March, June, September and December (each, a "Dividend Payment Date")
following the date of original issuance of the Series A Preferred Stock (the
"Original Issue Date"). Each calendar quarter immediately preceding the
Dividend Payment Date (or if the Original Issue Date is not on the first day
of a calendar quarter, the period beginning on the date of issuance and ending
on the Dividend Payment Date) is referred to hereinafter as a "Dividend
Period." Dividends will be payable to holders of record as they appear in the
stock records of the Corporation at the close of business on the applicable
record date, which shall be the same day as the record date for any dividend
payable on the Common Stock with respect to the same period or, if no such
Common Stock dividend is payable, then the record date for such Dividend
Payment Date shall be the 20th day of the calendar month in which the
applicable Dividend Payment Date falls or on such earlier date designated on
at least 10 days notice by the Board of Directors of the Corporation as the
record date for such Dividend Payment Date that is not more than 30 nor less
than 10 days prior to such Dividend Payment Date (each, a "Dividend Record
Date"). Notwithstanding anything in the terms of the Series A Preferred Stock
to the contrary, the Dividend Amount for the initial Dividend Period and, if
applicable, for the next succeeding Dividend Period(s) shall be reduced in the
aggregate by the amount
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(calculated to the nearest one-tenth of one cent) obtained by (x) dividing (i)
the amount of the "Merger Dividend," if any, paid to the holders of common
stock, par value $.01 per share of Mid-America Realty Investments, Inc.
("MDI"), prior to its merger with and into the Corporation by (ii) the number
of shares of such common stock of MDI with respect to which the Merger
Dividend was paid and (y) dividing (i) the quotient so obtained by (ii) the
Exchange Ratio. For the purposes of the preceding sentence, the Merger
Dividend shall have the meaning set forth in Section 7.14(b) of the Agreement
and Plan of Merger dated as of May 30, 1988 by and between MDI and the
Corporation, as amended from time to time (the "Merger Agreement"), and the
Exchange Ratio shall be 0.42 (or such other amount as is provided in Section
4.1(b) of the Merger Agreement).
(b) No dividends on shares of Series A Preferred Stock shall be authorized
by the Board of Directors of the Corporation or paid or set apart for payment
by the Corporation at any such time as the terms and provisions of any
agreement of the Corporation, including any agreement relating to its
indebtedness, prohibits such authorization, payment or setting apart for
payment or provides that such authorization, payment or setting apart for
payment would constitute a breach thereof or a default thereunder, or to the
extent that such authorization or payment shall be restricted or prohibited by
law. In determining whether a distribution (other than upon voluntary or
involuntary liquidation), by dividend, redemption or other acquisition of
shares of stock of the Corporation or otherwise, is permitted under the MGCL,
amounts that would be needed, if the Corporation were to be dissolved at the
time of the distribution, to satisfy the preferential rights upon dissolution
of holders of shares of Series A Preferred Stock will not be added to the
Corporation's total liabilities.
(c) Notwithstanding the foregoing, dividends on the Series A Preferred Stock
shall accrue whether or not the terms and provisions set forth in Section 2(b)
hereof at any time prohibit the current payment of dividends, whether or not
the Corporation has earnings, whether or not there are funds legally available
for the payment of such dividends and whether or not such dividends are
declared. Accrued but unpaid dividends on the Series A Preferred Stock will
accumulate as of the Dividend Payment Date on which they first become payable.
(d) The Corporation shall not (i) declare or pay or set apart for payment
any dividends or distributions on any stock ranking as to dividends junior to
the Series A Preferred Stock (other than dividends paid in shares of such
junior stock) or (ii) make any purchase or redemption of, or any sinking fund
payment for the purchase or redemption of, any stock ranking as to dividends
junior to the Series A Preferred Stock (other than a purchase or redemption
made by issue or delivery of such junior stock) unless all dividends payable
on all outstanding shares of Series A Preferred Stock for all past Dividend
Periods shall have been paid in full or declared and a sufficient sum set
apart for payment thereof; provided, however, that any moneys theretofore
deposited in any sinking fund with respect to any preferred stock of the
Corporation in compliance with the provisions of such sinking fund may
thereafter be applied to the purchase or redemption of such preferred stock in
accordance with the terms of such sinking fund.
(e) All dividends declared on shares of any other class of preferred stock
or series thereof ranking on a parity as to dividends with the Series A
Preferred Stock shall be declared pro rata, so that the amounts of dividends
declared per share on the Series A Preferred Stock for the Dividend Period of
the Series A Preferred Stock ending either on the same day or within the
dividend period of such other stock, shall, in all cases, bear to each other
the same ratio that accrued dividends per share on the Series A Preferred
Stock and such other class or series of stock bear to each other.
(f) Any dividend payment made on shares of the Series A Preferred Stock
shall first be credited against the earliest accrued but unpaid dividend due
with respect to such shares which remains payable. Holders of the Series A
Preferred Stock shall not be entitled to any dividend, whether payable in
cash, property or stock, in excess of full cumulative dividends on the Series
A Preferred Stock as described above.
3. LIQUIDATION RIGHTS.
(a) Subject to any prior rights of any class or series of stock, in the
event of any liquidation, dissolution, or winding up of the Corporation,
either voluntary or involuntary, the holders of Series A Preferred Stock then
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outstanding shall be entitled to receive out of the assets of the Corporation
legally available for distribution, on a prior basis and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of Common Stock by reason of their ownership of such stock, a
liquidation preference of $25.00 per share, plus an amount equal to all
accrued but unpaid dividends as determined in accordance with Section 2(c) for
each share of Series A Preferred Stock then held by them. If, upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series A Preferred Stock shall be insufficient to permit the
payment to such holders and the holders of any other class or series of stock
on parity with the Series A Preferred Stock of the full aforesaid amounts to
which they are entitled, then, subject to any prior rights of any classes or
series of stock, the entire assets and funds of the Corporation legally
available for distribution shall be distributed ratably to the holders of
Series A Preferred Stock and any other shares of stock on a parity for
liquidation purposes in proportion to the aggregate amounts to which each such
holder would otherwise be respectively entitled.
(b) After payment of the full amount of the liquidating distributions to
which they are entitled pursuant to Section 3(a) hereof, the holders of Series
A Preferred Stock will have no right or claim to any of the remaining assets
of the Corporation.
(c) Written notice of any such liquidation, dissolution or winding up of the
Corporation, stating the payment date or dates when, and the place or places
where, the amounts distributable in such circumstances shall be payable, shall
be given by first class mail, postage pre-paid, not less than 30 nor more than
60 days prior to the payment date stated therein, to each record holder of the
Series A Preferred Stock at the respective addresses of such holders as the
same shall appear on the stock transfer records of the Corporation.
(d) The consolidation or merger of the Corporation with or into any other
corporation, partnership, limited liability company, trust or other entity or
of any other corporation, partnership, limited liability company, trust or
other entity with or into the Corporation, or the sale, lease, transfer or
conveyance of all or substantially all of the property or business of the
Corporation or a statutory share exchange, shall not be deemed to constitute a
liquidation, dissolution or winding up of the Corporation.
4. CONVERSION.
4.1 Right to Convert.
Each holder of shares of Series A Preferred Stock shall be entitled, at any
time and from time to time after the Dividend Record Date for the first
Dividend Period for which the Dividend Amount is not subject to being reduced
in accordance with the last two sentences of Section 2(a) hereof, to cause any
or all of his, her or its shares of Series A Preferred Stock to be converted
(without taking into account any accumulated, accrued but unpaid dividends)
into shares of Common Stock as follows; provided, however, that no holder of
Series A Preferred Stock shall be entitled to convert shares of such Series A
Preferred Stock into Common Stock pursuant to the foregoing provision, if,
immediately after such conversion, such person would be in violation of
Section 9.2 of the Charter as supplemented by Section 9 hereof. The number of
shares of Common Stock to which a holder of Series A Preferred Stock shall be
entitled to receive upon conversion shall be the product obtained by
multiplying the Conversion Rate (as defined below) by the number of shares of
Series A Preferred Stock being converted at such time. The Conversion Rate
shall be the quotient obtained by dividing $25.00 by the Conversion Price. The
Conversion Price shall, except as adjusted pursuant to Section 4.4 below, be
$24.49. The right to convert shares of Series A Preferred Stock which have
been called for redemption pursuant to Section 5 hereof, however, shall
terminate at the close of business on the Series A Preferred Redemption Date
(as defined in Section 5(b)), unless the Corporation shall default in making
payment of any cash payable upon such redemption under Section 5 hereof.
4.2 Procedure for Conversion.
In order to exercise its right to convert shares of Series A Preferred Stock
into Common Stock, the holder of shares of Series A Preferred Stock shall
surrender the certificate(s) therefor, duly endorsed if the Corporation
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shall so require, or accompanied by appropriate instruments of transfer
satisfactory to the Corporation, at the office of any transfer agent for the
Series A Preferred Stock or if there is no such transfer agent, at the
principal offices of the Corporation, or at such other office as may be
designated by the Corporation, together with written notice that such holder
elects to convert such shares. Such notice shall also state the name(s) and
address(es) in which such holder wishes the certificate(s) for the shares of
Common Stock issuable upon conversion to be issued. As soon as practicable
after a conversion, the Corporation shall issue and deliver at said office a
certificate or certificates for the number of whole shares of Common Stock
issuable upon conversion of the shares of Series A Preferred Stock duly
surrendered for conversion to the person(s) entitled to receive the same.
Shares of Series A Preferred Stock shall be deemed to have been converted
immediately prior to the close of business on the date on which the
certificates therefor and notice of intention to convert the same are duly
received by the Corporation in accordance with the foregoing provisions, and
the person(s) entitled to receive the Common Stock issuable upon such
conversion shall be deemed for all purposes as record holder(s) of such Common
Stock as of the close of business on such date (hereinafter, the "Conversion
Date").
Holders of shares of Series A Preferred Stock at the close of business on a
Dividend Record Date shall be entitled to receive the dividend payable on such
shares on the corresponding Dividend Payment Date notwithstanding the
conversion thereof following such Dividend Record Date and prior to such
Dividend Payment Date. Except as provided above, the Corporation shall make no
payment or allowances for unpaid dividends, whether or not in arrears, on
converted shares or for dividends on the shares of Common Stock issued upon
such conversion.
4.3 No Fractional Shares.
No fractional shares shall be issued upon conversion of the Series A
Preferred Stock into Common Stock, and, in lieu thereof, the Corporation shall
pay a cash adjustment in an amount equal to the same fraction of the last sale
price (or bid price if there were no sales) per share of Common Stock on the
New York Stock Exchange on the business day which immediately precedes the
Conversion Date or, if such Common Stock is not then listed on the New York
Stock Exchange, of the market price per share (as determined in a manner
prescribed by the Board of Directors of the Corporation) at the close of
business on the business day which immediately precedes the Conversion Date.
If a certificate or certificates representing more than one share shall be
surrendered for conversion at one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on
the basis of the aggregate number of shares of Series A Preferred Stock so
surrendered.
4.4 Adjustments; Change in Control Transactions.
(a) In the event the Corporation shall at any time (i) pay a dividend or
make a distribution to holders of Common Stock in shares of Common Stock, (ii)
subdivide its outstanding shares of Common Stock into a larger number of
shares, or (iii) combine its outstanding shares of Common Stock into a smaller
number of shares, the Conversion Price shall be adjusted by multiplying the
Conversion Price by a fraction, the denominator of which shall be the number
of shares of Common Stock outstanding immediately after such dividend,
distribution, subdivision or combination and the numerator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
dividend, distribution, subdivision or combination. An adjustment made
pursuant to this subparagraph (a) shall become effective immediately upon the
opening of business on the day next following the record date in the case of a
dividend or distribution (except as provided in paragraph (h) of this Section
4.4 below) and shall become effective immediately upon the opening of business
on the day next following the effective date in the case of a subdivision,
combination or reclassification.
(b) In the event the Corporation shall at any time distribute to all holders
of its Common Stock (i) any rights or warrants to subscribe for or purchase
any security of the Corporation (excluding those rights and warrants issued to
all holders of Common Stock entitling them for a period expiring within 45
days after the record date referred to in subparagraph (c) below to subscribe
for or purchase Common Stock, which rights and warrants are referred to in and
treated under subparagraph (c) below), or any evidence of indebtedness or
other
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securities of the Corporation (other than Common Stock) or (ii) cash or other
assets (excluding cash dividends or distributions in an amount not in excess
of the greater of either (x) with respect to all cash dividends or
distributions paid on Common Stock after December 31, 1997, the cumulative
amount of funds from operations reported for the Corporation after December
31, 1997, or (y) with respect to cash dividends or distributions paid on
Common Stock for any fiscal year, the taxable income as reflected on the
Corporation's federal income tax return on Form 1120 REIT (or successor form)
for such fiscal year), then in each such case the Conversion Price shall be
adjusted so that the same shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the close of business on the
record date for the determination of the stockholders entitled to receive such
distribution by a fraction, the denominator of which shall be the Fair Market
Value of the Common Stock and the numerator of which shall be the Fair Market
Value of the Common Stock less the then fair market value (as determined in
good faith by the Board of Directors of the Corporation or a duly authorized
committee thereof, which determination shall be conclusive) of the portion of
the rights, warrants, evidence of indebtedness or other securities, cash or
other assets so distributed applicable to one share of Common Stock. Such
adjustment shall become effective immediately upon the opening of business on
the day next following the record date for the determination of stockholders
entitled to receive such distribution.
(c) In the event the Corporation shall at any time issue rights, options or
warrants to all holders of Common Stock entitling them (for a period expiring
within 45 days after the record date mentioned below) to subscribe for or
purchase Common Stock at a price per share less than the Fair Market Value of
Common Stock on the record date for the determination of stockholders entitled
to receive such rights, options or warrants, then the Conversion Price shall
be adjusted so that the same shall equal the price determined by multiplying
the Conversion Price in effect immediately prior to the close of business on
such record date by a fraction, the numerator of which shall be the sum of (i)
the number of shares of Common Stock outstanding on the close of business on
such record date and (ii) the number of shares of Common Stock that the
aggregate proceeds to the Corporation from the exercise of such rights,
options or warrants for shares of Common Stock would purchase at the Fair
Market Value and the denominator of which will be the sum of number of shares
of Common Stock outstanding on the close of business on such record date and
the number of additional shares of Common Stock offered for subscription or
purchase pursuant to such rights, options or warrants. Such adjustment shall
become effective immediately upon the opening of business on the day next
following the record date for the determination of stockholders entitled to
receive such rights, options or warrants.
(d) Whenever the Conversion Price shall be adjusted as herein provided, the
Corporation shall cause to be mailed by first class mail, postage prepaid, as
soon as practicable to each holder of record of shares of Series A Preferred
Stock a notice stating that the Conversion Price has been adjusted and setting
forth the adjusted Conversion Price, together with an explanation of the
calculation of the same.
(e) No adjustment in the Conversion Price shall be required unless such
adjustment would require a cumulative increase or decrease of at least 1% in
such price; provided, however, that any adjustment that by reason of this
subparagraph (e) is not required to be made shall be carried forward and taken
into account in any subsequent adjustment until made; and provided, further,
that any adjustment shall be required and made in accordance with the
provisions of this Section 4.4 (other than this subparagraph (e)) not later
than such time as may be required in order to preserve the tax-free nature of
a distribution to the holders of shares of Common Stock. Notwithstanding any
other provisions of this Section 4.4, the Corporation shall not be required to
make any adjustment of the Conversion Price for the issuance of any shares of
Common Stock pursuant to any plan providing for the reinvestment of dividends
or interest payable on securities of the Corporation and the investment of
additional optional amounts in shares of Common Stock under such plan. All
calculations under this Section 4.4 shall be made to the nearest cent with
$.005 being rounded upward or to the nearest one-tenth of a share (with .05 of
a share being rounded upward), as the case may be. Anything in this Section
4.4 to the contrary notwithstanding, the Corporation shall be entitled, to the
extent permitted by law, to make such reductions in the Conversion Price, in
addition to those required by this Section 4.4, as in its discretion, it shall
determine to be advisable in order that any stock dividends, subdivision of
shares, reclassification or combination of shares, distribution of rights,
options or warrants to purchase stock or securities, or a distribution of
other assets (other than cash dividends) hereafter made by the Corporation to
its stockholders shall not be taxable.
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(f) If the Corporation shall be party to, or shall have entered into an
agreement for, any transaction (including, without limitation, a merger,
consolidation, statutory share exchange or sale of all or substantially all of
its assets), in each case as a result of which shares of Common Stock
generally shall be converted into the right to receive stock, securities or
other property (including cash or any combination thereof) (a "Transaction"),
the terms of the Agreement for such Transaction shall provide, in connection
with such Transaction, that each share of Series A Preferred Stock shall be
converted into the number and kind of shares of stock, securities or other
property receivable upon such Transaction by a holder of the number of shares
of Common Stock issuable upon conversion of such share of Series A Preferred
Stock immediately prior to such Transaction. The Corporation shall not be
party to any Transaction unless the terms of such Transaction are consistent
with the provisions of this Section 4.4(f).
(g) For the purposes of this Section 4.4, "Fair Market Value" shall mean the
average of the last reported sale price (or bid price if there were no sales)
per share of Common Stock as reported on the New York Stock Exchange (or such
other national securities exchange or NASDAQ National Market on which the
Common Stock is traded at the time of such computation) during 5 consecutive
trading days selected by the Corporation commencing not more than 20 trading
days before, and ending not later than the day immediately prior to the "ex"
date with respect to the issuance or distribution requiring such computation.
The term " "ex' date," when used with respect to any issuance or distribution,
means the first day on which the Common Stock trades regular way, without the
right to receive such issuance or distribution, on the exchange or in the
market, as the case may be, used to determine the Fair Market Value. In the
event that, at any time, the Common Stock is not then traded on a national
securities exchange or the NASDAQ National Market then "Fair Market Value"
shall be determined in good faith by the Board of Directors of the
Corporation.
(h) In any case in which this Section 4.4 provides that an adjustment shall
become effective on the date next following the record date for an event, the
Corporation may defer until the occurrence of such event (A) issuing to the
holder of any shares of Series A Preferred Stock converted after such record
date and before the occurrence of such event the additional shares of Common
Stock issuable upon such conversion by reason of the adjustment required by
such event over and above the shares of Common Stock issuable upon such
conversion before giving effect to such adjustment and (B) fractionalizing any
shares of Series A Preferred Stock and/or paying to such holder any amount of
cash in lieu of any fraction pursuant to Section 4.3. Any adjustment of the
Conversion Price in accordance with either paragraph (b) or (c) of this
Section 4.4 shall be disregarded if, as, and when the rights to acquire shares
of Common Stock upon exercise or conversion of the rights, warrants, options
which give rise to such adjustment expire or are cancelled without having been
exercised, so that the Conversion Price effective immediately upon such
cancellation or expiration shall be equal to the Conversion Price in effect
immediately prior to the time of the issuance of the expired or cancelled
rights, warrants or options, with such additional adjustments as would have
been made to the Conversion Price had the expired or cancelled rights,
warrants or options never been issued.
(i) There shall be no adjustment of the Conversion Price in case of the
issuance of any shares of Common Stock of the Corporation in a reorganization,
acquisition or other similar transaction except as specifically set forth in
this Section 4.4. If any action or transaction would require adjustment of the
Conversion Price pursuant to more than one paragraph of this Section 4.4, only
one adjustment shall be made, and such adjustment shall be the amount of
adjustment that has the highest absolute value. Notwithstanding anything in
this Section 4.4 to the contrary, no adjustment shall be made to the
Conversion Price as a result of the issuance of rights by the Company in
connection with the establishment of a shareholder rights plan (or other
comparable plan) so long as the terms of such plan provide that such rights
will attach to the shares of Common Stock into which the Series A Preferred
Stock may be converted at the time of such conversion.
4.5 Other.
(a) The Corporation shall at all times reserve and keep available out of its
authorized but unissued Common Stock the maximum number of shares of Common
Stock issuable upon the conversion of all shares of Series A Preferred Stock
then outstanding, and if at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the conversion of all
then outstanding shares of the Series A Preferred
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Stock, in addition to such other remedies as shall be available to the holders
of such Series A Preferred Stock, the Corporation shall take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes.
(b) The Corporation shall pay any taxes that may be payable in respect of
the issuance of shares of Common Stock upon conversion of shares of Series A
Preferred Stock, but the Corporation shall not be required to pay any taxes
which may be payable in respect of any transfer of shares of Series A
Preferred Stock or any transfer involved in the issuance of shares of Common
Stock in a name other than that in which the shares of Series A Preferred
Stock so converted are registered, and the Corporation shall not be required
to transfer any such shares of Series A Preferred Stock or to issue or deliver
any such shares of Common Stock unless and until the person(s) requesting such
transfer or issuance shall have paid to the Corporation the amount of any such
taxes, or shall have established to the satisfaction of the Corporation that
such taxes have been paid.
(c) Holders of Series A Preferred Stock shall be entitled to receive copies
of all communications by the Corporation to its holders of Common Stock,
concurrently with the distribution of such communications to such
stockholders.
5. REDEMPTION.
(a) At any time and from time to time following the fifth anniversary of the
Original Issue Date, the Corporation may, in its sole and absolute discretion,
redeem all of the outstanding shares of Series A Preferred Stock; provided,
however, that the Corporation may only exercise this redemption right so long
as (i) the average of the last sale price (or bid price for days on which
there were no sales) per share of Common Stock on the New York Stock Exchange
for the twenty trading-day period preceding the date on which the Corporation
exercises such redemption right, or (ii) if such Common Stock is not then
listed on the New York Stock Exchange, the market price per share (as
determined in a manner prescribed by the Board of Directors of the
Corporation) at the close of business on the business day which immediately
precedes the date on which the Corporation exercises such redemption right,
equals or exceeds the Conversion Price. Notwithstanding anything in this
Section 5 to the contrary, the Series A Preferred Stock shall at all times
remain subject to the provisions of Article IX of the Charter and Section 9
hereof relating to Excess Stock.
(b) The Corporation may exercise its right of redemption pursuant to clause
(a) of this Section 5 by giving written notice by first class mail, postage
pre-paid, to each of the record holders of Series A Preferred Stock at the
respective addresses of such holders as the same shall appear on the stock
transfer records of the Corporation. This redemption shall become effective,
without any further action by the Corporation, on the 30th day following the
date on which the Corporation mails the written notice of redemption to the
holders of the Series A Preferred Stock (such 30th day being referred to as
the "Series A Preferred Redemption Date"). The written notice shall specify
the date of the Series A Preferred Redemption Date. Each holder of Series A
Preferred Stock may exercise the conversion rights described in Section 4 for
any share of Series A Preferred Stock at any time prior to the Series A
Preferred Redemption Date.
(c) On a Series A Redemption Date, each share of Series A Preferred Stock so
redeemed shall be redeemed in cash or immediately available funds at a price
per share equal to $25.00, plus all accrued but unpaid dividends (such amount
being referred to as the "Series A Preferred Redemption Amount").
(d) In the event that the funds of the Corporation legally available for
redemption of the Series A Preferred Stock on any Series A Preferred
Redemption Date are insufficient to redeem the number of shares of Series A
Preferred Stock to be so redeemed on such date, the holders of Series A
Preferred Stock shall share ratably in any funds legally available for
redemption of such shares according to the respective amounts which would be
payable with respect to the number of shares owned by them if the shares to be
so redeemed on such Series A Preferred Redemption Date were redeemed in full
and the number of shares of Series A Preferred Stock held by each holder shall
be reduced in an amount which shall bear the same ratio to the actual number
of shares of Series A Preferred Stock required to be redeemed on such Series A
Preferred Redemption Date as the number of shares of Series A Preferred Stock
then held by such holder bears to the aggregate number of shares of Series A
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Preferred Stock then outstanding. The Corporation shall in good faith use
reasonable efforts as expeditiously as possible to eliminate, or obtain an
exception, waiver or exemption from, any and all restrictions under applicable
law that prevented the Corporation from redeeming all of the shares of Series
A Preferred Stock to be redeemed hereunder. At any time thereafter when
additional funds of the Corporation are legally available for the redemption
of shares of Series A Preferred Stock, such funds will be used to redeem the
balance of such shares, or such portion thereof for which funds are available
on the basis set forth above. If any shares of Series A Preferred Stock are
not redeemed for the foregoing reason or because the Corporation otherwise
failed to pay or tender to pay the aggregate Series A Preferred Redemption
Consideration on the shares of Series A Preferred Stock required to be
redeemed, all shares which have not been redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein.
(e) Upon receipt of payment of the Series A Preferred Redemption
Consideration, each holder of shares of Series A Preferred Stock to be
redeemed shall surrender the certificate or certificates representing such
shares to the Corporation, duly assigned or endorsed for transfer (or
accompanied by duly executed stock powers relating thereto), at the principal
executive office of the Corporation or the offices of the transfer agent for
the Series A Preferred Stock or such office or offices in the continental
United States of an agent for redemption as may from time to time be
designated by notice to the holders of Series A Preferred Stock.
(f) Notwithstanding anything in this Section 5 to the contrary, no shares of
Series A Preferred Stock may be redeemed except from proceeds from the sale of
other equity securities of the Corporation, including, but not limited to,
shares of Common Stock, shares of preferred stock, depositary shares,
interests, participations or other ownership interests (however designated)
and any rights (other than debt securities convertible into or exchangeable
for equity securities) or options to purchase any of the foregoing.
6. VOTING RIGHTS.
(a) The holders of Series A Preferred Stock shall have the right, with the
holders of Common Stock and any other equity securities so authorized, to vote
in the election of directors of the Corporation and upon each other matter
coming before any meeting of the stockholders on which the holders of Common
Stock are entitled to vote, on the basis of one vote for each share of Common
Stock into which the shares of Series A Preferred Stock held by such holders
are then convertible (rounded to the nearest whole number of shares). The
holders of Series A Preferred Stock and Common Stock shall vote together as
one class except as otherwise set forth herein.
(b) If six quarterly dividends (whether or not consecutive) payable on
shares of Series A Preferred Stock or on any class or series of preferred
stock which ranks pari passu with the Series A Preferred Stock as to dividends
("Parity Stock") are in arrears, the number of directors then constituting the
Board of Directors of the Corporation will be automatically increased by two,
and the holders of the shares of Series A Preferred Stock, voting together as
a class with the holders of shares of any other class or series of Parity
Stock entitled to such voting rights (the Series A Preferred Stock and any
such other class or series, the "Voting Preferred Stock"), will have the right
to elect at any annual meeting of stockholders or a properly called special
meeting of the holders of Voting Preferred Stock two additional directors who
are nominees of any holder of Voting Preferred Stock to serve on the
Corporation's Board of Directors until all such accrued but unpaid dividends
have been authorized and paid or set aside for payment. At such time as all
such accrued but unpaid dividends have been authorized and paid or set aside
for payment, the right of the holders of the Voting Preferred Stock to elect
such additional two directors shall cease (but subject always to the same
provision for the vesting of such voting rights in the case of any similar
future arrearages in six quarterly dividends), and the terms of office of all
persons elected as directors by the holders of the Voting Preferred Stock
shall forthwith terminate and the number of the Board of Directors shall
automatically be reduced accordingly. At any time after such voting power
shall have been so vested in the holders of shares of Voting Preferred Stock
and prior to the termination of such voting power, the Secretary of the
Corporation may, and upon the written request of any holder of Series A
Preferred Stock (addressed to the Secretary at the principal office of the
Corporation) shall, call a special meeting of the holders of the Voting
Preferred Stock for the election of the two directors to be elected by them as
herein provided; such call to be made by notice similar to that provided in
the Bylaws of the Corporation for a special meeting of the stockholders or as
required by law. If any such special meeting required to be called as above
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provided shall not be called by the Secretary within 20 days after receipt of
any such request, then any holder of shares of Voting Preferred Stock may call
such meeting, upon the notice above provided, and for that purpose shall have
access to the stock books of the Corporation. The directors elected at any
such special meeting shall serve until the next annual meeting of the
stockholders or special meeting held in lieu thereof and until their
respective successors are duly elected and qualified, if such directorship
shall not have previously terminated as above provided. If any vacancy shall
occur among the directors elected by the holders of the Voting Preferred
Stock, a successor shall be elected by the Board of Directors upon the
nomination of the then-remaining director elected by the holders of the Voting
Preferred Stock or (if there is no such remaining director or successor
thereto, by the holders of the Voting Preferred Stock) the successor of such
remaining director, to serve until the next annual meeting of the stockholders
or special meeting held in place thereof and until their successor is duly
elected and qualified if such directorship shall not have previously
terminated as provided above.
(c) The approval of the holders of two-thirds of the outstanding shares of
Series A Preferred Stock voting as a single class is required in order to (i)
approve any amendment of the terms of the Series A Preferred Stock which
affects materially and adversely the rights, preferences, privileges or voting
power of shares of Series A Preferred Stock, or (ii) authorize or create or
increase the authorized amount of, any shares of any class or series or any
security convertible into shares of any class or series ranking senior to the
Series A Preferred Stock in the distribution of assets on any liquidation,
dissolution or winding up of the Corporation and/or in the payment of
dividends. For purposes of the foregoing and without limitation of the
foregoing, (i) the increase or decrease in the amount of authorized stock of
any class or series of equity securities of the Corporation, including the
Series A Preferred Stock, (ii) the creation of a new class or series of stock
having rights, preferences, privileges or voting power on a parity with or
junior to the rights, preferences or privileges of the Series A Preferred
Stock in the distribution of assets on any liquidation, dissolution or winding
up of the Corporation and/or in the payment of dividends and (iii) the
entering into of any agreement providing for the actions in (i) or (ii) above
and the taking of any actions in connection with the consummation of any such
agreement shall not be deemed to materially and adversely affect the rights,
preferences, privileges or voting power of the Series A Preferred Stock, and
the holders of Series A Preferred Stock shall not have any right to vote as a
single class on or consent to such actions. Notwithstanding anything in the
terms of the Series A Preferred Stock to the contrary, the holders of Series A
Preferred Stock are not entitled to vote as a single class on (i) any
Transaction, (ii) any transaction (including, without limitation, a merger,
consolidation, statutory share exchange or sale of all or substantially all of
its assets) in which the Corporation would be the surviving corporation (an
"Acquisition Transaction"), or (iii) on any other matter except as
specifically provided in this Section 6, irrespective of the effect such
Transaction, Acquisition Transaction, or other matter may have on the rights,
preferences, privileges or voting power of the Series A Preferred Stock or of
Voting Preferred Stock.
7. NO PREEMPTIVE OR OTHER RIGHTS.
The holders of Series A Preferred Stock shall have no preemptive rights,
including preemptive rights with respect to any shares of stock or other
securities of the Corporation convertible into or carrying rights or options
to purchase any such shares.
8. REACQUIRED SHARES.
Shares of Series A Preferred Stock converted, redeemed or otherwise
purchased or acquired by the Corporation shall be authorized but unissued
shares of preferred stock without designation as to series and may after such
restoration be reclassified by the Board of Directors as provided in Section
7.5 of the Charter.
9. OWNERSHIP LIMIT.
(a) The provisions of Article IX of the Charter (including without
limitation the authority of the Board of Directors set forth in such Article)
are applicable to the Series A Preferred Stock and the holders thereof and are
supplemented as provided in this Section 9.
(b) No person may directly or indirectly own a number of shares of Series A
Preferred Stock (i) whose value is in excess of 9.8% of the aggregate value of
all outstanding Stock of the Corporation or (ii) which when
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converted as provided in Section 4.1 hereof (without giving effect as to
whether such Series A Preferred Stock is then convertible) would result in
such person being the beneficial owner of in excess of 9.8% of the number of
shares of Common Stock of the Corporation that would be outstanding after the
conversion of such person's (but not of other holders') shares of Series A
Preferred Stock.
(c) For purposes of applying the Ownership Limit contained in Section 9.2 of
the Charter to holders of Common Stock of the Corporation, shares of Series A
Preferred Stock shall be deemed to have no value, the effect of this provision
being that the Ownership Limit with respect to Common Stock shall be 9.8% of
the number of outstanding shares of Common Stock.
SECOND: These Articles Supplementary have been approved by the Board of
Directors in the manner and by the vote required by law.
THIRD: The undersigned President of the Corporation acknowledges these
Articles Supplementary to be the corporate act of the Corporation and, as to
all matters or facts required to be verified under oath, the undersigned
President acknowledges that to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and that
this statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary
to be executed under seal in its name and on its behalf by its President and
attested to by its Secretary on this of , 1998.
ATTEST: BRADLEY REAL ESTATE, INC.
- ------------------------------------- By: ___________________________(SEAL)
William B. King Thomas P. D'Arcy
Secretary President and Chief Executive
Officer
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[LETTERHEAD OF SBC WARBURG DILLON READ INC. CORPORATE FINANCE]
May 30, 1998
Board of Directors
Mid-America Realty Investments, Inc.
11506 Nicholas Street
Suite 100
Omaha, Nebraska 68154
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the common stock, $0.01 par value (the "Common Stock")
of Mid-America Realty Investments, Inc. (the "Company") of the consideration
(the "Consideration") to be paid to the holders of Common Stock in connection
with the proposed merger (the "Merger") of the Company with and into Bradley
Real Estate, Inc. ("BTR") pursuant to an Agreement and Plan of Merger dated as
of May 30, 1998 (the "Merger Agreement").
The Merger Agreement provides that, upon consummation of the Merger, each
issued and outstanding share of Common Stock will be converted into 0.42
shares of newly issued convertible preferred stock, with a stated value of
$25.00 and a fixed dividend of 8.4% of the stated value (the "Preferred
Stock") of BTR. The terms of the Preferred Stock and the terms and conditions
of the Merger are more fully set forth in the Merger Agreement.
SBC Warburg Dillon Read ("SBCWDR") was retained by the Company in April 1995
to conduct a review of strategic alternatives for the Company. Pursuant to
this engagement, SBCWDR analyzed potential courses of action including the
raising of additional equity or debt financing, liquidation of the assets of
the Company, merger with another public REIT or merger with a private company.
Subsequent to this analysis, we were directed by you, to engage in
conversation with various third parties who might have had an interest in
combining with the Company. This latter process resulted in the BTR proposal
for the Merger.
In arriving at our opinion, among other things, we reviewed the Merger
Agreement and certain business and financial information relating to the
Company, including certain financial forecasts provided to us by the Company,
and we reviewed and discussed the business and prospects of the Company with
the management of the Company. We considered certain financial and stock
market data related to the Company and its common stock and compared that
information to similar data for publicly held companies in businesses
generally comparable to that of the Company. We reviewed and analyzed certain
publicly available business and financial information relating to BTR and
discussed the business and prospects of BTR with BTR's management. In
connection with our opinion, we considered the financial terms of certain
other transactions, including business combinations, which have recently been
effected and such other information, financial studies and analyses, and
financial, economic and market criteria as we deemed relevant. We reviewed and
analyzed the terms of the convertible preferred stock to be issued by BTR and
compared them to certain other similar securities issued by companies in
businesses generally comparable to that of BTR.
In connection with our review, with your consent, we have not assumed any
responsibility for independent verification of any of the information reviewed
by us for the purpose of this opinion and have, at your direction, relied upon
its being complete and accurate in all material respects. We have not been
requested to and have not made an independent evaluation or appraisal of any
assets or liabilities (contingent or otherwise) of the Company or BTR, nor
have we been furnished with any such evaluation or appraisal. Further, we have
assumed with your consent, that all of the information, including the
financial forecasts, estimates, pro forma effects and projections, provided to
us by management of the Company were reasonably prepared on a basis reflecting
the best currently
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available estimates and judgments of the management of the Company as to the
Company's future performance. In addition, our opinion necessarily is based on
economic, monetary, market and other conditions as in effect on, and made
available to us as of the date hereof.
In rendering this opinion, we have assumed that the current market price
(the current last reported sale price as reported in New York Stock Exchange
composite transactions) of BTR common stock represents the fair market value
for such stock, and we are not rendering any opinion as to its current value
or the prospects for BTR's business or making any recommendation to the
holders of Common Stock in respect of the advisability of disposing of or
retaining shares of the Preferred Stock received pursuant to the Merger. In
addition, we are not rendering any opinion as to the tax consequences of the
Merger to any holder of Common Stock.
In addition, our opinion does not address the Company's underlying decision
to effect the Merger or constitute a recommendation to any shareholder of the
Company as to how to vote with respect to the Merger.
Based upon and subject to the foregoing, it is our opinion that the
Consideration to be received by holders of Common Stock in the Merger is fair,
from a financial point of view, to such holders as of the date hereof.
Yours truly,
SBC WARBURG DILLON READ INC. SBC WARBURG DILLON READ INC.
Corporate Finance Corporate Finance
/s/ William S. Brenizer /s/ Edward M. Casal
William S. Brenizer Edward M. Casal
Managing Director Executive Director
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Maryland General Corporation Law ("MGCL") permits a Maryland corporation
to include in its charter a provision limiting the liability of its directors
and officers to the corporation and its stockholders for money damages except
for liability resulting from (i) actual receipt of an improper benefit or
profit in money, property or services or (ii) active and deliberate dishonesty
material to the cause of action as established by a final judgment. The
Articles of Amendment and Restatement (the "Bradley Charter") of Bradley Real
Estate, Inc. ("Bradley") contains such a provision which eliminates such
liability to the maximum extent permitted by Maryland law.
The Bradley Charter authorizes Bradley, to the maximum extent permitted by
Maryland law, to obligate itself to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (i) any
present or former director, officer, agent, employee or plan administrator of
Bradley or of its predecessor Bradley Real Estate Trust (the "Trust") or (ii)
any individual who, at the request of Bradley, serves or has served in any of
these capacities with another corporation, partnership, joint venture, trust,
employee benefit plan or any other enterprise. Unless the Bradley Board
otherwise determines prospectively, the Bylaws of Bradley obligate Bradley, to
the maximum extent permitted by Maryland law, to indemnify (i) any present or
former director or officer of Bradley; (ii) any individual who, at the request
of Bradley, serves or has served another corporation, partnership, joint
venture, trust or other enterprise as a director or officer; or (iii) any
present or former trustee or officer of the Trust.
The MGCL requires a corporation (unless its charter provides otherwise,
which the Bradley Charter does not) to indemnify a director or officer who has
been successful, on the merits or otherwise, in the defense of any proceeding
to which he is made a party by reason of his service in that capacity against
reasonable expenses incurred in connection with the proceeding. The MGCL
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any
proceeding to which they may be made a party by reason of their service in
those or other capacities unless it is established that (a) the act or
omission of the director or officer was material to the matter giving rise to
the proceeding and (i) was committed in bad faith or (ii) was the result of
active and deliberate dishonesty; (b) the director or officer actually
received an improper personal benefit in money, property or services; or (c)
in the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. However, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation unless ordered by a court of appropriate jurisdiction
and then only for expenses. In addition, the MGCL requires a Maryland
corporation, as a condition to advancing expenses, to obtain (i) a written
affirmation by the director or officer of good faith belief that he has met
the statutory standard of conduct necessary for indemnification by the
corporation and (ii) a written undertaking by or on his behalf to repay the
amount paid or reimbursed by the corporation if it shall ultimately be
determined that the standard of conduct was not met.
Bradley has a claims-made directors and officers liability insurance policy
that insures the directors and officers of Bradley against loss from claimed
wrongful acts and insures Bradley for indemnifying the directors and officers
against such loss. The policy limit of liability is $5,000,000 each policy
year, plus a $5,000,000 excess liability policy, and is subject to a retention
of $150,000 of loss by Bradley.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
*2.1 Agreement and Plan of Merger, dated as of May 30, 1998, between Mid-
America Realty Investments, Inc. and Bradley Real Estate, Inc. (the
"Merger Agreement"), attached as Annex A to the Proxy
Statement/Prospectus included in Part I of this Registration Statement
and incorporated herein by reference. The following Exhibits to the
Merger Agreement are included as separate Exhibits to this Registration
Statement: Form of Articles Supplementary (See Exhibit 3.3); and Form
of Affiliate Letter (see Exhibit 10.1). The other Exhibits to the
Merger Agreement are not included as Exhibits to this Registration
Statement either because they do not contain information that is
material to an investment decision or because they contain only
information that is disclosed in the Merger Agreement or this
Registration Statement. A list briefly identifying the contents of all
omitted Exhibits is incorporated by reference to page (iv) of the
Merger Agreement. Bradley agrees to furnish supplementally to the
Commission, upon request, a copy of any omitted Exhibit. Pursuant to
Item 601(b)(2) of Regulation S-K, the Schedules and the Disclosure
Letters to the Merger Agreement are omitted. Bradley hereby undertakes
to furnish supplementally a copy of any omitted Schedule to the
Commission upon request.
3.1 Articles of Amendment and Restatement of Bradley Real Estate, Inc.,
incorporated by reference to Exhibit 3.1 of Bradley's Current Report on
Form 8-K dated October 17, 1994.
3.2 Articles of Merger between Bradley Real Estate Trust and Bradley Real
Estate, Inc., incorporated by reference to Exhibit 3.2 of Bradley's
Current Report on Form 8-K dated October 17, 1994.
3.3 Articles of Merger between Tucker Properties Corporation and Bradley
Real Estate, Inc., incorporated by reference to Exhibit 3.3 of
Bradley's Annual Report on Form 10-K dated March 25, 1996.
3.4 By-laws of Bradley Real Estate, Inc., incorporated by reference to
Exhibit 3.3 of Bradley's Current Report on Form 8-K dated October 17,
1994.
3.5 Articles of Incorporation of Mid-America Realty Investments, Inc. as
amended, incorporated by reference to Exhibit 3.1 of Mid-America's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1994.
3.6 By-laws of Mid-America Realty Investments, Inc., incorporated by
reference to Exhibit 3.2 of Mid-America's Annual Report on Form 10-K
for the year ended December 31, 1997.
*4.1 Specimen Certificate for shares of 8.4% Series A Convertible Preferred
Stock, par value $.01 per share, of Bradley Real Estate, Inc.
*4.2 Form of Articles Supplementary Establishing and Fixing the Rights and
Preferences of a Series of Shares of Preferred Stock for the 8.4%
Series A Convertible Preferred Stock of Bradley Real Estate, Inc.
attached as Annex B to the Proxy Statement/Prospectus included in Part
I to this Registration Statement and incorporated herein by reference.
4.3 Form of stock certificate for shares of Common Stock, par value $.01
per share, of Bradley Real Estate, Inc., incorporated by reference to
Exhibit 4.1 of Bradley's Current Report on Form 8-K dated October 17,
1994.
4.4.1 Text of Indenture dated as of November 24, 1997 by and between Bradley
Operating Limited Partnership and LaSalle National Bank relating to the
Senior Debt Securities of Bradley Operating Limited Partnership,
incorporated by reference to Exhibit 4.1 to Bradley Operating Limited
Partnership's Registration Statement on Form S-3 (File No. 333-36577)
dated September 26, 1997.
4.4.2 Definitive Supplemental Indenture No. 1 dated as of November 24, 1997
between Bradley Operating Limited Partnership and LaSalle National
Bank, incorporated by reference to Exhibit 4.1 of Bradley Operating
Limited Partnership's Current Report on Form 8-K dated November 24,
1997.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
4.4.3 Definitive Supplemental Indenture No. 2 dated as of January 28, 1998
between Bradley Operating Limited Partnership and LaSalle National
Bank, incorporated by reference to Exhibit 4.1 of Bradley Operating
Limited Partnership's Current Report on Form 8-K dated January 28,
1998.
*5.1 Opinion of Goodwin, Procter & Hoar LLP, as to legality of the
securities being offered.
*8.1 Opinion of Goodwin, Procter & Hoar LLP, regarding tax consequences of
the merger.
*8.2 Opinion of Goodwin, Procter & Hoar LLP, regarding REIT tax matters.
*10.1 Form of Affiliate Letter.
10.2 Second Amended and Restated Agreement of Limited Partnership of Bradley
Operating Limited Partnership dated as of September 2, 1997,
incorporated by reference to Exhibit 3.1 of Bradley Operating Limited
Partnership's Registration Statement on Form 10 dated September 8,
1997.
10.3.1 Unsecured Revolving Credit Agreement dated as of December 23, 1997
among Bradley Operating Limited Partnership, as Borrower and The First
National Bank of Chicago, BankBoston, N.A. and certain other banks, as
Lenders, and The First National Bank of Chicago, as Administrative
Agent and BankBoston, N.A., as Documentation Agent and Bank of America
National Trust & Savings Association and Fleet National Bank as Co-
Agents, incorporated by reference to Exhibit 99.1 of Bradley's Current
Report on Form 8-K dated December 19, 1997.
10.3.2 Form of Guaranty made as of December 23, 1997 by Bradley Financing
Partnership and Bradley Real Estate, Inc. for the benefit of The First
National Bank of Chicago, incorporated by reference to Exhibit 99.4 of
Bradley's Current Report on Form 8-K dated December 19, 1997.
10.4 1993 Stock Option and Incentive Plan, as amended and restated on
September 9, 1996, incorporated by reference to Exhibit 10.4 of
Bradley's Annual Report on Form 10-K405 dated March 19, 1997.
10.5 Executive Employment Agreement between Bradley Real Estate, Inc. and
Thomas P. D'Arcy dated as of April 30, 1998 incorporated by reference
to Exhibit 10.1 of Bradley's Current Report on Form 8-K dated June 17,
1998.
*12.1 Statement regarding computation of ratio of earnings to combined fixed
charges and preferred stock dividends of Bradley Real Estate, Inc.
21.1 Subsidiaries of Bradley Real Estate, Inc., incorporated by reference to
Exhibit 21.1 of Bradley's Annual Report on Form 10-K for the year ended
December 31, 1997.
*23.1 Consent of KPMG Peat Marwick LLP.
*23.2 Consent of Deloitte & Touche LLP.
*23.3 Consent of Goodwin, Procter & Hoar LLP, (included in Exhibits 5.1 and
8.1).
*23.4 Consent of SBC Warburg Dillon Read Inc.
24.1 Powers of Attorney (included in Part II of this Registration
Statement).
*99.1 Form of Mid-America Realty Investments, Inc. Proxy.
</TABLE>
- --------
* Filed herewith.
(B) FINANCIAL STATEMENT SCHEDULES
None.
(C) ITEM 4(B) INFORMATION
The opinion of SBC Warburg Dillon Read Inc. will be included as Annex C to
the Proxy Statement/Prospectus included in this Registration Statement.
II-3
<PAGE>
ITEM 22. UNDERTAKINGS.
(a) The registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, as amended (the "Securities Act")
each filing of the registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities and Exchange Act of 1934, as amended (the "Exchange
Act"), that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(b) The registrant hereby undertakes as follows: that prior to any public
reoffering of the securities registered hereunder through use of a prospectus
which is a part of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings by persons
who may be deemed underwriters, in addition to the information called for by
the other items of the applicable form.
(c) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (b) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(e) The registrant hereby undertakes to respond to requests for information
that are incorporated by reference into the prospectus pursuant to Item 4,
10(b), 11, or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the
date of responding to the request.
(f) The registrant hereby undertakes to supply by means of post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS
ALL OF THE REQUIREMENTS FOR FILING ON FORM S-4 AND HAS DULY CAUSED THIS
REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED, IN THE CITY OF NORTHBROOK, STATE OF ILLINOIS ON THE
18TH DAY OF JUNE, 1998.
Bradley Real Estate, Inc.
/s/ Thomas P. D'Arcy
By: _________________________________
THOMAS P. D'ARCY, CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED, EACH OF WHOM ALSO CONSTITUTES AND
APPOINTS IRVING E. LINGO, JR. AND THOMAS P. D'ARCY, AND EACH OF THEM SINGLY,
HIS TRUE AND LAWFUL ATTORNEY-IN-FACT AND AGENT, FOR HIM, WITH FULL POWER OF
SUBSTITUTION AND RESUBSTITUTION, FOR HIM AND IN HIS NAME, PLACE AND STEAD, IN
ANY AND ALL CAPACITIES, TO SIGN ANY AND ALL AMENDMENTS TO THIS REGISTRATION
STATEMENT AND TO FILE THE SAME AND ALL EXHIBITS THERETO, AND ANY OTHER
DOCUMENTS IN CONNECTION THEREWITH WITH THE SECURITIES AND EXCHANGE COMMISSION,
GRANTING UNTO EACH ATTORNEY-IN-FACT AND AGENT FULL POWER AND AUTHORITY TO DO
AND PERFORM EACH AND EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE,
AS FULLY TO ALL INTENTS AND PURPOSES AS HE MIGHT OR COULD DO IN PERSON, HEREBY
RATIFYING AND CONFIRMING ALL THAT EACH ATTORNEY-IN-FACT AND AGENT OR HIS
SUBSTITUTE OR SUBSTITUTES MAY LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE
HEREOF.
<TABLE>
<S> <C>
NAME TITLE
DATE
/s/ Thomas P. D'Arcy Chairman, President, June 18, 1998
- ------------------------------------- Chief Executive
THOMAS P. D'ARCY Officer and Director
/s/ Irving E. Lingo, Jr. Executive Vice June 18, 1998
- ------------------------------------- President, Chief
IRVING E. LINGO, JR. Financial Officer
and Treasurer
/s/ William L. Brown Director June 18, 1998
- -------------------------------------
WILLIAM L. BROWN
/s/ Joseph E. Hakim Director June 18, 1998
- -------------------------------------
JOSEPH E. HAKIM
/s/ Stephen G. Kasnet Director June 18, 1998
- -------------------------------------
STEPHEN G. KASNET
/s/ Paul G. Kirk, Jr. Director June 18, 1998
- -------------------------------------
PAUL G. KIRK, JR.
/s/ W. Nicholas Thorndike Director June 18, 1998
- -------------------------------------
W. NICHOLAS THORNDIKE
/s/ A. Robert Towbin Director June 18, 1998
- -------------------------------------
A. ROBERT TOWBIN
/s/ David M. Garfinkle Controller June 18, 1998
- -------------------------------------
DAVID M. GARFINKLE
</TABLE>
II-5
<PAGE>
EXHIBIT LIST
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
*2.1 Agreement and Plan of Merger, dated as of May 30, 1998, between Mid-
America Realty Investments, Inc. and Bradley Real Estate, Inc. (the
"Merger Agreement"), attached as Annex A to the Proxy
Statement/Prospectus included in Part I of this Registration Statement
and incorporated herein by reference. The following Exhibits to the
Merger Agreement are included as separate Exhibits to this Registration
Statement: Form of Articles Supplementary (See Exhibit 3.3); and Form
of Affiliate Letter (see Exhibit 10.1). The other Exhibits to the
Merger Agreement are not included as Exhibits to this Registration
Statement either because they do not contain information that is
material to an investment decision or because they contain only
information that is disclosed in the Merger Agreement or this
Registration Statement. A list briefly identifying the contents of all
omitted Exhibits is incorporated by reference to page (iv) of the
Merger Agreement. Bradley agrees to furnish supplementally to the
Commission, upon request, a copy of any omitted Exhibit. Pursuant to
Item 601(b)(2) of Regulation S-K, the Schedules and the Disclosure
Letters to the Merger Agreement are omitted. Bradley hereby undertakes
to furnish supplementally a copy of any omitted Schedule to the
Commission upon request.
3.1 Articles of Amendment and Restatement of Bradley Real Estate, Inc.,
incorporated by reference to Exhibit 3.1 of Bradley's Current Report on
Form 8-K dated October 17, 1994.
3.2 Articles of Merger between Bradley Real Estate Trust and Bradley Real
Estate, Inc., incorporated by reference to Exhibit 3.2 of Bradley's
Current Report on Form 8-K dated October 17, 1994.
3.3 Articles of Merger between Tucker Properties Corporation and Bradley
Real Estate, Inc., incorporated by reference to Exhibit 3.3 of
Bradley's Annual Report on Form 10-K dated March 25, 1996.
3.4 By-laws of Bradley Real Estate, Inc., incorporated by reference to
Exhibit 3.3 of Bradley's Current Report on Form 8-K dated October 17,
1994.
3.5 Articles of Incorporation of Mid-America Realty Investments, Inc. as
amended, incorporated by reference to Exhibit 3.1 of Mid-America's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1994.
3.6 By-laws of Mid-America Realty Investments, Inc., incorporated by
reference to Exhibit 3.2 of Mid-America's Annual Report on Form 10-K
for the year ended December 31, 1997.
*4.1 Specimen Certificate for shares of 8.4% Series A Convertible Preferred
Stock, par value $.01 per share, of Bradley Real Estate, Inc.
*4.2 Form of Articles Supplementary Establishing and Fixing the Rights and
Preferences of a Series of Shares of Preferred Stock for the 8.4%
Series A Convertible Preferred Stock of Bradley Real Estate, Inc.
attached as Annex B to the Proxy Statement/Prospectus included in Part
I to this Registration Statement and incorporated herein by reference.
4.3 Form of stock certificate for shares of Common Stock, par value $.01
per share, of Bradley Real Estate, Inc., incorporated by reference to
Exhibit 4.1 of Bradley's Current Report on Form 8-K dated October 17,
1994.
4.4.1 Text of Indenture dated as of November 24, 1997 by and between Bradley
Operating Limited Partnership and LaSalle National Bank relating to the
Senior Debt Securities of Bradley Operating Limited Partnership,
incorporated by reference to Exhibit 4.1 to Bradley Operating Limited
Partnership's Registration Statement on Form S-3 (File No. 333-36577)
dated September 26, 1997.
4.4.2 Definitive Supplemental Indenture No. 1 dated as of November 24, 1997
between Bradley Operating Limited Partnership and LaSalle National
Bank, incorporated by reference to Exhibit 4.1 of Bradley Operating
Limited Partnership's Current Report on Form 8-K dated November 24,
1997.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<C> <S>
4.4.3 Definitive Supplemental Indenture No. 2 dated as of January 28, 1998
between Bradley Operating Limited Partnership and LaSalle National
Bank, incorporated by reference to Exhibit 4.1 of Bradley Operating
Limited Partnership's Current Report on Form 8-K dated January 28,
1998.
*5.1 Opinion of Goodwin, Procter & Hoar LLP, as to legality of the
securities being offered.
*8.1 Opinion of Goodwin, Procter & Hoar LLP, regarding tax consequences of
the merger.
*8.2 Opinion of Goodwin, Procter & Hoar LLP, regarding REIT tax matters.
*10.1 Form of Affiliate Letter.
10.2 Second Amended and Restated Agreement of Limited Partnership of Bradley
Operating Limited Partnership dated as of September 2, 1997,
incorporated by reference to Exhibit 3.1 of Bradley Operating Limited
Partnership's Registration Statement on Form 10 dated September 8,
1997.
10.3.1 Unsecured Revolving Credit Agreement dated as of December 23, 1997
among Bradley Operating Limited Partnership, as Borrower and The First
National Bank of Chicago, BankBoston, N.A. and certain other banks, as
Lenders, and The First National Bank of Chicago, as Administrative
Agent and BankBoston, N.A., as Documentation Agent and Bank of America
National Trust & Savings Association and Fleet National Bank as Co-
Agents, incorporated by reference to Exhibit 99.1 of Bradley's Current
Report on Form 8-K dated December 19, 1997.
10.3.2 Form of Guaranty made as of December 23, 1997 by Bradley Financing
Partnership and Bradley Real Estate, Inc. for the benefit of The First
National Bank of Chicago, incorporated by reference to Exhibit 99.4 of
Bradley's Current Report on Form 8-K dated December 19, 1997.
10.4 1993 Stock Option and Incentive Plan, as amended and restated on
September 9, 1996, incorporated by reference to Exhibit 10.4 of
Bradley's Annual Report on Form 10-K405 dated March 19, 1997.
10.5 Executive Employment Agreement between Bradley Real Estate, Inc. and
Thomas P. D'Arcy dated as of April 30, 1998 incorporated by reference
to Exhibit 10.1 of Bradley's Current Report on Form 8-K dated June 17,
1998.
*12.1 Statement regarding computation of ratio of earnings to combined fixed
charges and preferred stock dividends of Bradley Real Estate, Inc.
21.1 Subsidiaries of Bradley Real Estate, Inc., incorporated by reference to
Exhibit 21.1 of Bradley's Annual Report on Form 10-K for the year ended
December 31, 1997.
*23.1 Consent of KPMG Peat Marwick LLP.
*23.2 Consent of Deloitte & Touche LLP.
*23.3 Consent of Goodwin, Procter & Hoar LLP (included in Exhibits 5.1 and
8.1).
*23.4 Consent of SBC Warburg Dillon Read Inc.
24.1 Powers of Attorney (included in Part II of this Registration
Statement).
*99.1 Form of Mid-America Realty Investments, Inc. Proxy.
</TABLE>
- --------
* Filed herewith.
<PAGE>
Exhibit 4.1
TEMPORARY CERTIFICATE-EXCHANGEABLE FOR DEFINITIVE ENGRAVED CERTIFICATE WHEN
READY FOR DELIVERY
[THIS CERTIFICATE IS TRANSFERABLE IN BOSTON OR NEW YORK CITY]
8.4% SERIES A [LOGO] 8.4% SERIES A
CONVERTIBLE PREFERRED STOCK CONVERTIBLE PREFERRED STOCK
BRADLEY REAL ESTATE, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 104580 20 4
This certifies that
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF THE 8.4% SERIES A CONVERTIBLE PREFERRED
STOCK, $.01 PAR VALUE PER SHARE, OF
Bradley Real Estate, Inc. (the "Corporation") transferable on the books of the
Corporation by the holder hereof in person or by his or her duly authorized
attorney, upon surrender of this Certificate properly endorsed. This
Certificate and the shares represented hereby are issued and shall be held
subject to all of the provisions of the Articles of Incorporation of the
Corporation (the "Charter") and to the Bylaws of the Corporation, as from time
to time amended (copies of each of which are on file with the Secretary of the
Corporation), to all of which the holder by acceptance hereof assents. This
certificate is not valid until countersigned and registered by the Transfer
Agent and Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
/s/ /s/
SECRETARY CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
BANKBOSTON, N.A.
TRANSFER AGENT AND REGISTRAR
BY AUTHORIZED SIGNATURE
<PAGE>
BRADLEY REAL ESTATE, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND
8.4% SERIES A CONVERTIBLE PREFERRED STOCK
The shares represented by this certificate are subject to restrictions on
ownership and transfer for the purpose of maintaining the Corporation's status
as a real estate investment trust under the Internal Revenue Code of 1986, as
amended. With limited exceptions, no person may beneficially or constructively
own shares of any class or series with an aggregate value in excess of 9.8% of
all outstanding shares of stock of the Corporation. Each stockholder of the
Corporation shall, upon demand by the Corporation, disclose in writing to the
Corporation such information with respect to his or her direct and indirect
beneficial ownership of the Corporation's stock as the Board of Directors deems
necessary or appropriate. A copy of the Corporation's Charter, including the
restrictions on ownership and transfer, will be sent without charge to each
stockholder who so requests in writing to the Secretary of the Corporation at
its principal office. If the restrictions on ownership and transfer are
violated, the shares represented in excess of the allowable amount will be
exchanged for Excess Stock (as defined in the Corporation's Charter) and will be
automatically transferred and held in a special trust by a trustee appointed by
the Corporation for the benefit of one or more charitable beneficiaries, and the
rights of the purported transferee or holder whose purported acquisition or
ownership caused such violation will be limited to receiving certain proceeds
following disposition by said trustee as provided in the Charter. The Excess
Stock may be purchased by the Corporation at its sole discretion. The foregoing
description of restrictions on ownership and transfer is qualified in its
entirety by reference to the applicable provisions of the Charter.
The Corporation is authorized to issue more than one class of stock. The
Corporation will furnish to any stockholder upon request and without charge a
full statement of the designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption of the
stock of each class which the Corporation has authority to issue and, with
respect to any preferred or special classes of stock which may be issued in
series, (i) the differences in the relative rights and preferences between the
shares of each series to the extent set, and (ii) the authority of the Board of
Directors of the Corporation to set the relative rights and preferences of
subsequent series. Such requests may be made to the Secretary of the
Corporation at its principal office.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT - ___________ Custodian __________
(Cust) (Minor)
under Uniform Gifts to Minors
Act _____________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, _________________________ hereby sell, assign and transfer
unto
<PAGE>
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
__(______)Shares
of the 8.4% Series A Convertible Preferred Stock represented by this
Certificate, and do hereby irrevocably constitute and appoint
____________________________________________________________________ Attorney
to transfer the said shares of stock on the books of the Corporation with full
power of substitution in the premises.
Dated ____________________________
(Signature(s)) ________________________________________________
NOTICE: Signature must correspond with the name as written upon
the face of the certificate in every particular, without
alteration or enlargement or any change whatever.
Signature (s) Guaranteed: ______________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY
AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
EXHIBIT 5.1
-----------
[Goodwin, Procter & Hoar Letterhead]
June 18, 1998
Bradley Real Estate, Inc.
40 Skokie Boulevard, Suite 600
Northbrook, IL 60062-1626
Mid-America Realty Investments, Inc.
11506 Nicholas St., Suite 100
Omaha, NE 68154
Re: Legality of Securities to be Registered
under Registration Statement on Form S-4
----------------------------------------
Ladies and Gentlemen:
We have acted as counsel for Bradley Real Estate, Inc., a Maryland
corporation ("Bradley"), in connection with the proposed merger of Mid-America
Realty Investments, Inc., a Maryland corporation ("Mid-America"), with and into
Bradley with Bradley being the surviving corporation (the "Merger") pursuant to
an Agreement and Plan of Merger between Bradley and Mid-America dated May 30,
1998 (the "Merger Agreement").
The Merger Agreement provides that at the Effective Time of the Merger,
each share of common stock of Mid-America will be exchanged for the right to
receive 0.42 of a share of 8.4% Series A Convertible Preferred Stock, par value
$.01 per share (the "Series A Preferred Stock"), of Bradley having the terms set
forth in the Articles Supplementary (the "Articles Supplementary") that will be
filed in Maryland substantially in the form attached as an exhibit to the Merger
Agreement. Under the proposed Articles Supplementary, shares of the Series A
Preferred Stock are convertible into common stock, par value $.01 per share, of
Bradley ("Bradley Common Stock"). In connection with the Merger, Bradley has
filed a registration statement on Form S-4 (the "Registration Statement") under
the Securities Act of 1933, as amended, which Registration Statement covers the
shares of Series A Preferred Stock issuable pursuant to the Merger and the
shares of the Bradley Common Stock issuable upon conversion thereof.
In connection with rendering this opinion, we have examined the Merger
Agreement, the Amended and Restated Articles of Incorporation of Bradley, as
amended through the date
<PAGE>
Bradley Real Estate, Inc.
Mid-America Realty Investments, Inc.
June 18, 1998
Page 2
hereof and on file with the State Department of Assessments and Taxation of the
State of Maryland, the proposed Articles Supplementary, the Bylaws of Bradley,
such records of the corporate proceedings of Bradley as we deemed material, the
Registration Statement and the exhibits thereto, and such other certificates,
receipts, records and documents as we considered necessary for the purposes of
this opinion. In our examination, we have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as certified, photostatic or facsimile copies, the
authenticity of the originals of such copies and the authenticity of telephonic
confirmations of public officials and others. As to facts material to our
opinion, we have relied upon certificates or telephonic confirmations of public
officials and certificates, documents, statements and other information of
Bradley or representatives or officers thereof.
We are attorneys admitted to practice in the Commonwealth of Massachusetts.
We express no opinion concerning the laws of any other jurisdiction other than
the laws of the United States of America and the Maryland General Corporation
Law, and also express no opinion with respect to the blue sky or securities laws
of any state.
Based upon the foregoing, we are of the opinion that under the Maryland
General Corporation Law, pursuant to which Bradley is incorporated, upon the
issuance of the shares of Series A Preferred Stock in accordance with the terms
of the Merger Agreement, such shares of Series A Preferred Stock will be duly
authorized, validly issued, fully paid and nonassessable, and upon the issuance
of shares of Bradley Common Stock upon conversion of shares of Series A
Preferred Stock in accordance with the terms of the Articles Supplementary, such
shares of Bradley Common Stock will be duly authorized, validly issued, fully
paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us with respect to this opinion
under the heading "Legal Matters" in the Proxy Statement/Prospectus which is a
part of this Registration Statement.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
GOODWIN, PROCTER & HOAR LLP
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF GOODWIN, PROCTER & HOAR LLP APPEARS HERE]
June 18, 1998
Bradley Real Estate, Inc.
40 Skokie Boulevard, Suite 600
Northbrook, IL 60062
Mid-America Realty Investments, Inc.
11506 Nicholas Street, Suite 100
Omaha, NE 68154
Ladies and Gentlemen:
We have acted as counsel to Bradley Real Estate, Inc. (the "Company"), a
Maryland corporation, in connection with the proposed merger (the "Merger") of
Mid-America Realty Investments, Inc. ("MDI") with and into the Company pursuant
to an Agreement and Plan of Merger dated as of May 30, 1998 (the "Merger
Agreement") by and between the Company and MDI. At your request, and pursuant
to Section 8.1(g) of the Merger Agreement, we are rendering our opinion
concerning certain federal income tax consequences of the Merger. Capitalized
terms contained herein and not otherwise defined herein have the same meanings
given such terms in the Proxy Statement/Prospectus as defined herein.
For purposes of the opinion set forth below, we have reviewed and relied
upon the Merger Agreement (including all attachments thereto), the Proxy
Statement/Prospectus (the "Proxy Statement/Prospectus") of Bradley and MDI
included in the Registration Statement on Form S-4 (the "Registration
Statement") filed by the Company with the Securities and Exchange Commission
(the "Commission") on or about the date hereof in connection with the issuance
of shares of Bradley's 8.4% Series A Convertible Preferred Stock, par value $.01
per share (the "Series A Preferred Stock") in the Merger, and such other
documents, records and instruments as we have deemed necessary or appropriate as
a basis for our opinion. In addition, in rendering our opinion we have relied
upon certain statements, representations and warranties made by Bradley and MDI
(including, without limitation, those contained in certain certified
representations and in the Proxy Statement/Prospectus, the Registration
Statement and those contained in or made pursuant to the Merger Agreement),
which we have neither investigated nor verified. We have assumed that such
statements, representations and warranties are true, correct, complete and not
breached and will continue to be so through the date of the Merger (the "Closing
Date"), and that no actions that are inconsistent with such statements,
representations and warranties will be taken. We also have assumed that all
<PAGE>
GOODWIN, PROCTER & HOAR LLP
Bradley real estate, Inc
Mid-America Realty Investments, Inc.
June 18, 1998
page 2
representations made "to the best knowledge of" any person(s) or party(ies) or
with similar qualification are and will be true, correct and complete as if made
without such qualification.
In addition, we have assumed that (i) the Merger will be consummated in
accordance with the Merger Agreement and as described in the Proxy
Statement/Prospectus and Registration Statement (including satisfaction of all
covenants and conditions to the obligations of the parties without amendment or
waiver thereof); (ii) the Merger will qualify as a merger under the applicable
laws of the State of Maryland; (iii) each of Bradley and MDI will comply with
all reporting obligations with respect to the Merger required under the Internal
Revenue Code of 1986, as amended (the "Code"), and the Treasury regulations
thereunder; and (iv) the Merger Agreement and all other documents and
instruments referred to therein or in the Proxy Statement/Prospectus and
Registration Statement are valid and binding in accordance with their terms.
Any inaccuracy in, or breach of, any of the aforementioned statements,
representations, warranties and assumptions or any change after the date hereof
in applicable law could adversely affect our opinion. No ruling has been (or
will be) sought from the Internal Revenue Service by Bradley as to the federal
income tax consequences addressed in this opinion.
* * * *
Based upon and subject to the foregoing, it is our opinion, under currently
applicable United States federal income tax law, that the Merger will constitute
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code.
* * * *
No opinion is expressed as to any matter not specifically addressed above.
No opinion is expressed as to the tax consequences of any of the transactions
under any foreign, state, or local tax law. Furthermore, our opinion is based
on current federal income tax law and administrative practice, and we do not
undertake to advise you as to any changes after the Closing Date in federal
income tax law or administrative practice that may affect our opinion unless we
are specifically retained to do so.
<PAGE>
GOODWIN, PROCTER & HOAR LLP
Bradley real estate, Inc
Mid-America Realty Investments, Inc.
June 18, 1998
Page 3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
Goodwin, Procter & Hoar LLP
<PAGE>
EXHIBIT 8.2
[LETTERHEAD OF GOODWIN, PROCTER & HOAR LLP APPEARS HERE]
June 18, 1998
Bradley Real Estate, Inc.
40 Skokie Boulevard, Suite 600
Northbrook, IL 60062
Re: Certain Federal Income Tax Matters
Ladies and Gentlemen:
This opinion is furnished to you in our capacity as counsel to Bradley Real
Estate, Inc. (the "Company"), a Maryland corporation, regarding the Company's
qualification for federal income tax purposes as a real estate investment trust
("REIT") within the meaning of Sections 856-860 of the Internal Revenue Code of
1986, as amended. This opinion is rendered in connection with the Registration
Statement on Form S-4 (the "Registration Statement") filed by the Company with
the Securities and Exchange Commission (the "Commission") on or about the date
hereof regarding the merger (the "Merger") of Mid-America Realty Investments,
Inc. ("MDI") with and into the Company pursuant to an Agreement and Plan of
Merger dated as of May 30, 1998 (the "Merger Agreement") by and between the
Company and MDI, and the issuance of the Company's 8.4% Series A Convertible
Preferred Stock, par value $.01 per share (the "Series A Preferred Stock") in
the Merger.
In rendering the following opinion, we have examined the Registration
Statement, the Company's Charter (including the Declaration of Trust of Bradley
Real Estate Trust) and Bylaws, the Merger Agreement and such other records,
certificates and documents as we have deemed necessary or appropriate for
purposes of rendering the opinion set forth herein. We also have relied upon
the representations of the Company regarding the manner in which the Company has
been and will continue to be owned and operated. We have neither independently
investigated nor verified such representations, and we assume that such
representations are true, correct and complete and that all representations made
"to the best of the knowledge and belief" of any person(s) or party(ies) or with
similar qualification are and will be true, correct and complete as if made
without such qualification. We assume, and rely upon such assumption, that the
Company has been and will be operated in accordance with applicable laws and the
terms and conditions of applicable documents. With respect to MDI, we assume,
as represented by MDI pursuant to the Merger Agreement, that MDI has been
organized and has operated in compliance with the requirements for qualification
and taxation
<PAGE>
GOODWIN, PROCTER & HOAR LLP
Bradley Real Estate, Inc.
June 18, 1998
Page 2
as a REIT since January 1, 1990 and will continue to so qualify as of the close
of its short taxable year ending on the closing date of the Merger (the "Closing
Date"). We further assume that Deloitte & Touche LLP will render an opinion on
or prior to the Closing Date to that effect in substantially the form attached
as Exhibit E to the Merger Agreement. In addition, we have relied on certain
additional facts and assumptions described below.
In rendering the opinion set forth herein, we have assumed (i) the
genuineness of all signatures on documents we have examined, (ii) the
authenticity of all documents submitted to us as originals, (iii) the conformity
to the original documents of all documents submitted to us as copies, (iv) the
conformity of final documents to all documents submitted to us as drafts, (v)
the authority and capacity of the individual or individuals who executed any
such documents on behalf of any person (vi) the accuracy and completeness of all
records made available to us, and (vii) the factual accuracy of all
representations, warranties and other statements made by all parties. We also
have assumed, and rely upon such assumption, without investigation, that all
documents, certificates, warranties and covenants on which we have relied in
rendering the opinion set forth below and that were given or dated earlier than
the date of this letter continue to remain accurate, insofar as relevant to the
opinions set forth herein, from such earlier date, through and including the
date of this letter.
The discussion and conclusions set forth below are based upon the Code, the
Income Tax Regulations and Procedure and Administration Regulations promulgated
thereunder and existing administrative and judicial interpretations thereof, all
of which are subject to change. No assurance can therefore be given that the
federal income tax consequences described below will not be altered in the
future.
Based upon and subject to the foregoing, and provided that the Company
continues to meet the applicable asset composition, source of income,
shareholder diversification, distribution and other requirements of the Code
necessary for a corporation to qualify as a REIT, we are of the opinion that:
1. For all years as to which the Company's tax returns remain open for
adjustment by the Internal Revenue Service, the Company has been organized
in conformity with the requirements for qualification as a "real estate
investment trust" under the Code, and the Company's method of operation, as
described in the representations referred to above, has been such as to
enable it to meet, and to continue to meet, the requirements for
qualification and taxation as a "real estate investment trust" under the
Code.
<PAGE>
GOODWIN, PROCTER & HOAR LLP
Bradley Real Estate, Inc.
June 18, 1998
Page 3
2. The statements in the Registration Statement set forth under the caption
"Federal Income Tax Considerations," to the extent such information
constitutes matters of law, summaries of legal matters or legal
conclusions, have been reviewed by us and are accurate in all material
respects.
We express no opinion with respect to the transactions described in the
Registration Statement other than those expressly set forth herein. You should
recognize that our opinion is not binding on the Internal Revenue Service and
that the Internal Revenue Service may disagree with the opinion contained
herein. Although we believe that our opinion will be sustained if challenged,
there can be no assurance that this will be the case. The opinion expressed
herein is based upon the law as it currently exists. Consequently, future
changes in the law may cause the federal income tax treatment of the
transactions described herein to be materially and adversely different from that
described above.
We consent to being named as counsel to the Company in the Registration
Statement, to the references in the Registration Statement to our firm and to
the inclusion of a copy of this opinion letter as an exhibit to the Registration
Statement.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
Goodwin, Procter & Hoar LLP
<PAGE>
Exhibit 10.1
------------
Form of Affiliate Letter
------------------------
Bradley Real Estate, Inc.
40 Skokie Boulevard, Suite 600
Northbrook, IL 60062-1626
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of Mid-America Realty Investments, Inc., a Maryland
corporation ("Mid-America"), as the term "affiliate" is (i) defined for purposes
of paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), or (ii) used in and
for purposes of Accounting Series, Releases 130 and 135, as amended, of the
Commission. Pursuant to the terms of the Agreement and Plan of Merger dated as
of May 30, 1998 (the "Agreement"), between Mid-America and Bradley Real Estate,
Inc., a Maryland corporation ("Bradley"), Mid-America will be merged with and
into Bradley.
As a result of the Merger, I may receive shares of 8.4% Series A
Convertible Preferred Stock, par value $.01 per share, of Bradley (the "Series A
Preferred Stock") in exchange for shares owned by me of common stock, par value
$.01 per share, of Mid-America ("Mid-America Shares"). Any shares of Series A
Preferred Stock so received will be convertible in accordance with the terms
thereof, at my option, into shares of common stock, par value $.01 per share, of
Bradley (together with the Series A Preferred Stock, the "Bradley Securities").
I represent, warrant and covenant to Bradley that in the event I receive
any Bradley Securities as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
Bradley Securities in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed the
requirements of such documents and other applicable limitations upon my ability
to sell, transfer or otherwise dispose of the Bradley Securities to the extent I
felt necessary, with my counsel or counsel for Mid-America.
C. I have been advised that the issuance of Bradley Securities to me
pursuant to the Merger or upon conversion has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However, I
have also been advised that, since at the time the Merger was submitted for a
vote of the stockholders of Mid-America, I may be deemed to have been an
affiliate of Mid-America and the distribution by me of the Bradley Securities
has
<PAGE>
not been registered under the Act, I may not sell, transfer or otherwise dispose
of the Bradley Securities issued to me in the Merger or upon conversion unless
(i) such sale, transfer or other disposition has been registered under the Act,
(ii) such sale, transfer or other disposition is made in conformity with Rule
145 promulgated by the Commission under the Act, or (iii) in the opinion of
counsel reasonably acceptable to Bradley, or a "no action" letter obtained by
the undersigned from the staff of the Commission, such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
D. I understand that Bradley is under no obligation to register the sale,
transfer or other disposition of the Bradley Securities by me or on my behalf
under the Act or, except as expressly set forth in the Agreement, to take any
other action necessary in order to make compliance with an exemption from such
registration available.
E. I also understand that stop transfer instructions will be given to
Bradley's transfer agent with respect to the Bradley Securities and that there
will be placed on the certificates for the Bradley Securities issued to me, or
any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN
A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, APPLIES. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF AN AFFILIATE AGREEMENT BETWEEN
THE REGISTERED HOLDER HEREOF AND BRADLEY, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF BRADLEY."
F. I also understand that unless the transfer by me of my Bradley
Securities has been registered under the Act or is a sale made in conformity
with the provisions of Rule 145, Bradley reserves the right to put the following
legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145
PROMULGATED UNDER THE SECURITIES ACT APPLIES. THE SHARES
HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR
RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT AND MAY NOT BE SOLD,
<PAGE>
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH
AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT."
G. I have set forth below the exact numbers of Mid-America Shares which I
own of record only, beneficially only and of record and beneficially.
H. My ownership is free and clear of any security interest, lien,
encumbrance, charge, equity, claim or restriction whatsoever, except as set
forth below and as may be imposed by reason of the Act or the Rules and
Regulations thereunder.
It is understood and agreed that the legend set forth in paragraphs E and F
above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or this Agreement.
It is understood and agreed that such legends and the stop orders referred to
above will be removed if (i) one year shall have elapsed from the date the
undersigned first acquired any Bradley Securities received in connection with
the Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the undersigned
first acquired any Bradley Securities received in connection with the Merger and
the provisions of Rule 145(d)(3) are then applicable to the undersigned, or
(iii) Bradley has received either an opinion of counsel, which opinion and
counsel shall be reasonably satisfactory to Bradley, or a "no action" letter
obtained by the undersigned from the staff of the Commission, to the effect that
the restrictions imposed by Rule 145 under the Act no longer apply to the
undersigned.
<PAGE>
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of Mid-America as described in the first paragraph of
this letter or as a waiver of any rights I may have to object to any claim that
I am such an affiliate on or after the date of this letter.
Very truly yours,
___________________________________
Name:
Mid-America Shares Owned of
Record Only: _______
Mid-America Shares Owned
Beneficially Only: _______
Mid-America Shares Owned
Beneficially and of Record: _______
Accepted this ____ day of _____, 1998.
BRADLEY REAL ESTATE, INC.
By:___________________________________
Name:
Title:
<PAGE>
Exhibit 12.1
BRADLEY REAL ESTATE, INC.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
Quarter Ended Year Ended Year Ended Year Ended Year Ended Year Ended
3/31/98 12/31/97 12/31/96 12/31/95 12/31/94 12/31/93
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Earnings, as defined $12,520,000 $48,106,000 $41,626,000 $13,630,000 $13,559,000 $8,667,000
----------- ----------- ----------- ----------- ----------- ----------
Fixed charges:
Interest expense 5,558,000 16,562,000 13,404,000 4,705,000 4,524,000 2,947,000
Interest capitalized
during the period -- 30,000 150,000 137,000 89,000 58,000
Amortization of deferred
debt issuance costs 220,000 670,000 715,000 494,000 408,000 185,000
----------- ----------- ----------- ----------- ----------- ----------
5,778,000 17,262,000 14,269,000 5,336,000 5,021,000 3,190,000
Ratio of earnings
to combined fixed
charges and preferred stock
dividends 2.17:1 2.79:1 2.92:1 2.55:1 2.70:1 2.72:1
=========== =========== =========== =========== =========== ==========
</TABLE>
<PAGE>
EXHIBIT 23.1
[LETTERHEAD OF KPMG PEAT MARWICK LLP]
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors of Bradley Real Estate, Inc:
We consent to the use of our report dated January 28, 1998, relating to the
consolidated balance sheets of Bradley Real Estate, Inc. and subsidiaries as
of December 31, 1997 and 1996, and the related consolidated statements of
income, changes in share owners' equity and cash flows for each of the years
in the three-year period ended December 31, 1997 and related schedule, which
report appears in the December 31, 1997, annual report on Form 10-K of Bradley
Real Estate, Inc. incorporated herein by reference and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
June 18, 1998
<PAGE>
EXHIBIT 23.2
[LETTERHEAD OF DELOITTE & TOUCHE LLP]
CONSENT OF DELOITTE & TOUCHE LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Bradley Real Estate, Inc. on Form S-4 of our reports, dated January 28,
1998, appearing in the Annual Report on Form 10-K of Mid-America Realty
Investments, Inc. and subsidiary for the year ended December 31, 1997 and to
the reference to us under the heading "Experts" in the Proxy
Statement/Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
June 17, 1998
<PAGE>
EXHIBIT 23.4
[LETTERHEAD OF SBC WARBURG DILLON READ INC.]
CONSENT OF SBC WARBURG DILLON READ INC.
We hereby consent to the use of Appendix C containing our opinion letter
dated May 30, 1998 to the Board of Directors of Mid-America Realty Investments,
Inc. (the "Company") in the Proxy Statement/Prospectus constituting a part of
the Registration Statement on Form S-4 relating to the proposed combination of
the Company and Bradley Real Estate, Inc. and to the references to our firm in
such Proxy Statement/Prospectus. In giving this consent, we do not admit that
we come within the category of persons whose consent is required under Section
7 of the Securities Act of 1933, as amended, or the rules and regulations of
the Securities and Exchange Commission promulgated thereunder.
SBC WARBURG DILLON READ INC.
/s/ SBC Warburg Dillon Read Inc.
By: _________________________________
New York, New York
June 8, 1998
<PAGE>
EXHIBIT 99.1
MID-AMERICA REALTY INVESTMENTS, INC.
Proxy for the Special Meeting of Stockholders to be held on July __, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MID-AMERICA
REALTY INVESTMENTS, INC.
The undersigned hereby constitutes and appoints Jerome L. Heinrichs and Dennis
G. Gethmann, or either of them singly, with full power of substitution in each
of them, for and on behalf of the undersigned to vote as proxies, as directed
and permitted herein, at the Special Meeting of Stockholders of Mid-America
Realty Investments, Inc. to be held at __________________, Omaha, Nebraska, on
_______, July ___, 1998 at 9:00 a.m., local time, and at any adjournments or
postponements thereof, upon matters set forth in the Proxy Statement/Prospectus
and, in their judgment and discretion, upon such other business as may properly
come before the meeting.
(Please mark this Proxy and sign and date it on the
reverse side hereof and return it in the enclosed
envelope.)
<PAGE>
PLEASE MARK VOTE IN SQUARE IN THE FOLLOWING MANNER USING DARK INK ONLY [X]
<TABLE>
<S> <C> <C> <C>
Item 1. Merger Proposal - To approve the
merger of Mid-America Realty Investments,
Inc. ("Mid-America") with and into Bradley Vote for Vote Against Abstain
Real Estate, Inc. ("Bradley") and the Merger Merger
Agreement and Plan of Merger, dated as of [_] [_] [_]
May 30, 1998, by and between Bradley and
Mid-America.
Item 2. To transact such other business as
may properly come before the meeting or
any adjournments of postponments thereof.
</TABLE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN
THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1.
Dated ____________________________________ , 1998
__________________________________________________
(Signature of Shareholder)
__________________________________________________
(Signature of Shareholder)
PLEASE DATE AND SIGN NAME EXACTLY AS IT APPEARS ON
THIS CARD AND RETURN THIS PROXY PROMPTLY IN THE
ENCLOSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
Joint owners should each sign. Executors,
administrators, trustees, guardians and corporate
officers should give title.
The undersigned aknowledges receipt of a Notice of
Special Meeting dated the ___ day of July, 1998 and
the Proxy Statement/Prospectus related thereto prior
to the execution of this proxy.
