<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
CALIFORNIA REAL ESTATE INVESTMENT TRUST
(Name of Issuer)
COMMON SHARES OF BENEFICIAL INTEREST, PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
130559-10-7
(CUSIP Number)
GREGORY T. DAVIDSON, ESQ.
GIBSON, DUNN & CRUTCHER LLP
ONE MONTGOMERY STREET, TELESIS TOWER
SAN FRANCISCO, CALIFORNIA 94104
(Name, Address, and Telephone Number of Person
Authorized to Receive Notices and Communications)
SEPTEMBER 18, 1996
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box / /.
Check the following box if a fee is being paid with this statement /X/.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 (the "Act") or otherwise subject to the liabilities of that section of the
Act but shall be subject to all other provisions of the Act.
Page 1 of 52
The Exhibit Index is on page 25
<PAGE>
SCHEDULE 13D Page 2 of 52
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON MDC REIT Holdings LLC
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE
PERSON
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A (a) /X/
GROUP (b) / /
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS OO,AF
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL / /
PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) OR 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER -0-
SHARES
BENEFICIALLY 8. SHARED VOTING POWER 6,959,593
OWNED BY
EACH 9. SOLE DISPOSITIVE POWER -0-
REPORTING
PERSON WITH 10. SHARED DISPOSITIVE POWER 6,959,593
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY
EACH REPORTING PERSON 6,959,593
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW / /
(11) EXCLUDES CERTAIN SHARES
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN 76.0%
ROW (11)
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON HC, OO
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D Page 3 of 52
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON MDC REIT
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE Management
PERSON Company
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A (a) /X/
GROUP (b) / /
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS OO,AF
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL / /
PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) OR 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER -0-
SHARES
BENEFICIALLY 8. SHARED VOTING POWER 6,959,593
OWNED BY
EACH 9. SOLE DISPOSITIVE POWER -0-
REPORTING
PERSON WITH 10. SHARED DISPOSITIVE POWER 6,959,593
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY
EACH REPORTING PERSON 6,959,593
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW / /
(11) EXCLUDES CERTAIN SHARES
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN 76.0%
ROW (11)
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON HC, CO
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D Page 4 of 52
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON MDC Management
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE Co. IIA, L.P.
PERSON
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A (a) /X/
GROUP (b) / /
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS OO,AF
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL / /
PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) OR 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION California
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER -0-
SHARES
BENEFICIALLY 8. SHARED VOTING POWER 6,959,593
OWNED BY
EACH 9. SOLE DISPOSITIVE POWER -0-
REPORTING
PERSON WITH 10. SHARED DISPOSITIVE POWER 6,959,593
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY
EACH REPORTING PERSON 6,959,593
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW / /
(11) EXCLUDES CERTAIN SHARES
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN 76.0%
ROW (11)
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON PN
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D Page 5 of 52
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON Mc Cown DeLeeuw
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE & Co. Offshore
PERSON (Asia) L.P.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A (a) /X/
GROUP (b) / /
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS OO,AF
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL / /
PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) OR 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION Bermuda
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER -0-
SHARES
BENEFICIALLY 8. SHARED VOTING POWER 6,959,593
OWNED BY
EACH 9. SOLE DISPOSITIVE POWER -0-
REPORTING
PERSON WITH 10. SHARED DISPOSITIVE POWER 6,959,593
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY
EACH REPORTING PERSON 6,959,593
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW / /
(11) EXCLUDES CERTAIN SHARES
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN 76.0%
ROW (11)
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON PN
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D Page 6 of 52
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON MDC Management
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE Co. IIE, L.P.
PERSON
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A (a) /X/
GROUP (b) / /
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS OO,AF
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL / /
PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) OR 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION California
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER -0-
SHARES
BENEFICIALLY 8. SHARED VOTING POWER 6,959,593
OWNED BY
EACH 9. SOLE DISPOSITIVE POWER -0-
REPORTING
PERSON WITH 10. SHARED DISPOSITIVE POWER 6,959,593
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY
EACH REPORTING PERSON 6,959,593
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW / /
(11) EXCLUDES CERTAIN SHARES
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN 76.0%
ROW (11)
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON PN
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D Page 7 of 52
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON McCown Deleeuw
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE & Co. Offshore
PERSON (Europe), L.P.
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A (a) /X/
GROUP (b) / /
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS OO,AF
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL / /
PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) OR 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION Bermuda
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER -0-
SHARES
BENEFICIALLY 8. SHARED VOTING POWER 6,959,593
OWNED BY
EACH 9. SOLE DISPOSITIVE POWER -0-
REPORTING
PERSON WITH 10. SHARED DISPOSITIVE POWER 6,959,593
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY
EACH REPORTING PERSON 6,959,593
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW / /
(11) EXCLUDES CERTAIN SHARES
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN 76.0%
ROW (11)
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON PN
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D Page 8 of 52
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON MDC Management
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE Co. II, L.P.
PERSON
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A (a) /X/
GROUP (b) / /
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS OO,AF
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL / /
PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) OR 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION California
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER -0-
SHARES
BENEFICIALLY 8. SHARED VOTING POWER 6,959,593
OWNED BY
EACH 9. SOLE DISPOSITIVE POWER -0-
REPORTING
PERSON WITH 10. SHARED DISPOSITIVE POWER 6,959,593
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY
EACH REPORTING PERSON 6,959,593
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW / /
(11) EXCLUDES CERTAIN SHARES
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN 76.0%
ROW (11)
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON PN
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D Page 9 of 52
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON McCown DeLeeuw
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE Associates, L.P.
PERSON
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A (a) /X/
GROUP (b) / /
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS OO,AF
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL / /
PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) OR 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION California
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER -0-
SHARES
BENEFICIALLY 8. SHARED VOTING POWER 6,959,593
OWNED BY
EACH 9. SOLE DISPOSITIVE POWER -0-
REPORTING
PERSON WITH 10. SHARED DISPOSITIVE POWER 6,959,593
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY
EACH REPORTING PERSON 6,959,593
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW / /
(11) EXCLUDES CERTAIN SHARES
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN 76.0%
ROW (11)
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON PN
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D Page 10 of 52
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON McCown DeLeeuw
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE & Co. II, L.P.
PERSON
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A (a) /X/
GROUP (b) / /
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS OO,AF
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL / /
PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) OR 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION California
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER -0-
SHARES
BENEFICIALLY 8. SHARED VOTING POWER 6,959,593
OWNED BY
EACH 9. SOLE DISPOSITIVE POWER -0-
REPORTING
PERSON WITH 10. SHARED DISPOSITIVE POWER 6,959,593
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY
EACH REPORTING PERSON 6,959,593
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW / /
(11) EXCLUDES CERTAIN SHARES
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN 76.0%
ROW (11)
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON PN
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D Page 11 of 52
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON Mr. George McCown
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE
PERSON
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A (a) /X/
GROUP (b) / /
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS N/A
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL / /
PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) OR 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION United States
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER -0-
SHARES
BENEFICIALLY 8. SHARED VOTING POWER 6,959,593
OWNED BY
EACH 9. SOLE DISPOSITIVE POWER -0-
REPORTING
PERSON WITH 10. SHARED DISPOSITIVE POWER 6,959,593
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY
EACH REPORTING PERSON 6,959,593
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW / /
(11) EXCLUDES CERTAIN SHARES
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN 76.0%
ROW (11)
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON I
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D Page 12 of 52
- --------------------------------------------------------------------------------
1. NAME OF REPORTING PERSON Mr. David DeLeeuw
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE
PERSON
- --------------------------------------------------------------------------------
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A (a) /X/
GROUP (b) / /
- --------------------------------------------------------------------------------
3. SEC USE ONLY
- --------------------------------------------------------------------------------
4. SOURCE OF FUNDS N/A
- --------------------------------------------------------------------------------
5. CHECK BOX IF DISCLOSURE OF LEGAL / /
PROCEEDINGS IS REQUIRED PURSUANT TO ITEM
2(d) OR 2(e)
- --------------------------------------------------------------------------------
6. CITIZENSHIP OR PLACE OF ORGANIZATION United States
- --------------------------------------------------------------------------------
NUMBER OF 7. SOLE VOTING POWER -0-
SHARES
BENEFICIALLY 8. SHARED VOTING POWER 6,959,593
OWNED BY
EACH 9. SOLE DISPOSITIVE POWER -0-
REPORTING
PERSON WITH 10. SHARED DISPOSITIVE POWER 6,959,593
- --------------------------------------------------------------------------------
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY
EACH REPORTING PERSON 6,959,593
- --------------------------------------------------------------------------------
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW / /
(11) EXCLUDES CERTAIN SHARES
- --------------------------------------------------------------------------------
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN 76.0%
ROW (11)
- --------------------------------------------------------------------------------
14. TYPE OF REPORTING PERSON I
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 13D Page 13 of 52
ITEM 1. SECURITY AND ISSUER.
(a) NAME AND ADDRESS OF PRINCIPAL EXECUTIVE OFFICES OF ISSUER:
California Real Estate Investment Trust,
a California Business Trust ("CalREIT")
705 University Ave
Sacramento, California 95825
(b) TITLE AND CLASS OF EQUITY SECURITIES:
Common Shares of Beneficial Interest, par value $1.00 per share
("Common Shares")
ITEM 2. IDENTITY AND BACKGROUND.
(a) & (f) NAME OF PERSON FILING; STATE OF INCORPORATION;
CITIZENSHIP.
This statement is being filed on behalf of (1) Mr. David DeLeeuw,
a United States citizen ("Mr. DeLeeuw"), (2) Mr. George E. McCown, a United
States citizen ("Mr. McCown"), (3) McCown DeLeeuw & Co. II, L.P., a California
limited partnership ("MDP"), (4) McCown DeLeeuw Associates, L.P., a California
limited partnership ("MDA"), (5) MDC Management Co. II, L.P., a California
limited partnership ("MDC II"), (6) McCown DeLeeuw & Co. Offshore (Europe),
L.P., a Bermuda limited partnership ("MDPE") (7) MDC Management Co. IIE, L.P., a
California limited partnership ("MDC IIE"), (8) McCown DeLeeuw & Co. Offshore
(Asia), L.P., a Bermuda limited partnership ("MDPA"), (9) MDC Management Co.
IIA, L.P., a California limited partnership ("MDC IIA"), (10) MDC Reit
Management Company, a Delaware corporation ("Services") and (11) MDC REIT
Holdings LLC, a Delaware limited liability company ("Holdings"). Mr. McCown,
Mr. DeLeeuw, MDP, MDA, MDC II, MDPE, MDC IIE, MDPA, MDC IIA, Services and
Holdings are sometimes collectively referred to herein as the "Reporting
Persons."
This statement on Schedule 13D relates to the right to purchase
Common Shares held by Holdings. Services is filing in its capacity
as a member of Holdings with a priority return. MDP, MDA, MDP IIE and MDP IIA
are filing in their capacity as majority shareholders of Services as a group.
MDC II, MDC IIE and MDC IIA are filing in their capacity as sole general
partners of MDP, MDA, MDP IIE and MDP IIA. Mr. McCown and Mr. DeLeeuw are
filing in their capacities as managing general partners of each of MDC II, MDC
IIE and MDC IIA, and who together have more than the required two-thirds-in-
interest vote in such partnerships necessary to effect voting and dispositive
decisions regarding the Common Shares held by Holdings.
See Appendix A for certain other information concerning the
Reporting Persons.
(b) & (c) PRINCIPAL BUSINESS AND ADDRESS OF PRINCIPAL BUSINESS
AND PRINCIPAL OFFICE.
Holdings was formed for the primary purpose of acquiring and
holding a 76% interest in CalREIT Common Shares. The address of Holdings'
principal place of business is 3000 Sand Hill Road, Building 3, Suite 290, Menlo
Park, California 94025.
Services was formed for the primary purpose of providing
management services to CalREIT and holding a membership in Holdings. The
address of Services' principal place of business is 3000 Sand Hill Road,
Building 3, Suite 290, Menlo Park, California 94025.
<PAGE>
SCHEDULE 13D Page 14 of 52
The principal business of each of MDP, MDA, MDP IIE and MDP IIA
is that of private investment fund, engaged in the purchase and sale of
securities for investment for its own respective accounts. The principal
business of each of MDC II, MDC IIE and MDC IIA is that of sole general partner
of MDP, MDA, MDP IIE and MDP IIA. The address of the principal place of
business of each person referred to in this paragraph is 3000 Sand Hill Road,
Building 3, Suite 290, Menlo Park, California 94025.
The principal occupation of each of Mr. McCown and Mr. DeLeeuw is
managing general partner of MDC II, MDC IIE and MDC IIA and other private
investment partnerships. The principal office of Mr. McCown is 3000 Sand Hill
Road, Building 3, Suite 290, Menlo Park, California 94025. The principal office
of Mr. DeLeeuw is 101 East 52nd Street, New York, New York 10022.
(d) CRIMINAL PROCEEDINGS:
None of the persons referred to in paragraph (a) above has,
during the last five years, been convicted in a criminal proceeding.
(e) CIVIL PROCEEDINGS:
None of the persons referred to in paragraph (a) above, and no
officer, director or general partner of such person, has, during the last five
years, been party to any civil proceeding of a judicial or administrative body
of competent jurisdiction as a result of which such person would have been
subject to any judgment, decree or final order enjoining future violations of or
prohibiting or mandating activities subject to Federal or State securities laws
or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Holdings has the right to acquire the 6,959,593 Common Shares of
CalREIT pursuant to a Stock Purchase Agreement, dated September 18, 1996 ("Stock
Purchase Agreement"), between Holdings and the Peregrine Real Estate Trust, a
California business trust. The purchase price of the Common Shares will be
$20,500,000 plus a contingent additional cash payment by Holdings based upon the
value of a promissory note owned by CalREIT. The closing of the Stock Purchase
Agreement is subject to the satisfaction of certain conditions, including
Holdings' obtaining permanent financing for the purchase price. The Reporting
Persons currently anticipate obtaining permanent debt and/or equity financing
from third parties, and are currently engaged in discussions with third parties
in this regard. The Reporting Persons will file an amendment to this Schedule
13D when additional information regarding the source of funds becomes available.
ITEM 4. PURPOSE OF THE TRANSACTION.
After completing the purchase of the 6,959,593 Common Shares
pursuant to the Stock Purchase Agreement, the Reporting Persons will hold a
majority interest in CalREIT. As noted above, the Reporting Persons have
acquired their right to purchase the Common Shares through the Stock Purchase
Agreement. Such parties intend to hold the Common Shares for investment and
have no current intention to increase or decrease their ownership interest in
CalREIT. The purchase of the Common Shares will result in a change in control
of CalREIT. The Reporting Persons plan to install their own representatives on
the CalREIT Board of Trustees, subject to the provisions of CalREIT's
Declaration of Trust, which require a majority of independent trustees, and plan
to convert CalREIT from an equity real estate investment trust to a mortgage
real estate investment trust. Except as set
<PAGE>
SCHEDULE 13D Page 15 of 52
forth above, none of the Reporting Persons has any present plans or proposals
with respect to the issuer that relate to or that could result in the occurrence
of any of the events set forth in paragraphs (a) through (j) of Item 4 of
Schedule 13D.
ITEM 5. INTERESTS IN SECURITIES OF THE ISSUER.
(a) NUMBER OF SHARES BENEFICIALLY OWNED.
Under the Stock Purchase Agreement, the Reporting Persons are
holders of a right to purchase a total of 6,959,593 Common Shares representing
approximately 76.0% of the total number of such shares outstanding. Holdings
will be the holder of record with respect to all of the shares to be
beneficially owned by the Reporting Persons. The Reporting Persons do not have
any right to acquire additional shares.
(b) SOLE POWER TO VOTE, DIRECT THE VOTE OF, OR DISPOSE OF SHARES.
Mr. McCown and Mr. DeLeeuw together have more than the two-
thirds-in-interest vote required to make decisions on behalf of MDC II, MDC IIE
and MDC IIA, which are the general partners of MDP and MDA, MDPE, and MDPA,
respectively. MDP, MDA, MDPE and MDPA together are the majority shareholders of
Services, and are members in Holdings. Services will be a member of Holdings
with a priority return. Thus, Mr. McCown and Mr. DeLeeuw together may be deemed
to have shared power to direct the voting and disposition of the Common Shares
to be held for the account of Holdings.
(c) RECENT TRANSACTIONS.
Except for the transactions described in this Schedule 13D, there
have been no transactions with respect to the Common Shares during the past 60
days by any of the Reporting Persons.
(d) RIGHTS WITH RESPECT TO DIVIDENDS OR SALES PROCEEDS.
No person other than Holdings has the right to receive or the
power to direct the receipt of dividends from, or the proceeds from the sale of,
the shares of Common Stock beneficially owned by Holdings.
(e) DATE OF CESSATION OF FIVE PERCENT BENEFICIAL OWNERSHIP.
N/A
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER.
Other than the Stock Purchase Agreement and the agreements
described in Item 7 below, there are no contracts, understandings or
relationships (legal or otherwise) among the Reporting Persons and between such
persons or any person with respect to any securities of CalREIT, including but
not limited to transfer or voting of any of the Common Shares, finder's fees,
joint ventures, loan or option arrangements, puts or calls, guarantees of
profits, division of profits or loss or the giving or withholding of proxies.
It is expected that the providers of permanent financing and members of
management of Services will receive indirect minority interests in the Common
Shares.
<PAGE>
SCHEDULE 13D Page 16 of 52
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1. Written agreement relating to the filing of joint
acquisition statements, as required by Rule 13d-1(f)(1) of the Securities
Act of 1934.
Exhibit 2. Stock Purchase Agreement, dated September 18,
1996, between MDC REIT Holdings LLC, a Delaware limited liability company, and
Peregrine Real Estate Trust, a California business trust.
<PAGE>
SCHEDULE 13D Page 17 of 52
SIGNATURE
After reasonable inquiry and to the best of their knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Dated as of September 27, 1996.
By: /S/ David DeLeeuw
-------------------------------------
Mr. David DeLeeuw
By: /S/ George McCown
-------------------------------------
Mr. George McCown
McCown DeLeeuw & Co. II, L.P.
By: /S/ David DeLeeuw
-------------------------------------
Name: David DeLeeuw
Title: Partner
McCown DeLeeuw Associates, L.P.
By: /S/ David DeLeeuw
-------------------------------------
Name: David DeLeeuw
Title: Partner
MDC Management Co. II, L.P.
By: /S/ David DeLeeuw
-------------------------------------
Name: David DeLeeuw
Title: Partner
<PAGE>
SCHEDULE 13D Page 18 of 52
McCown DeLeeuw & Co. Offshore
(Europe), L.P.
By: /S/ David DeLeeuw
-------------------------------------
Name: David DeLeeuw
Title: Partner
MDC Management Co. IIE, L.P.
By: /S/ David DeLeeuw
-------------------------------------
Name: David DeLeeuw
Title: Partner
McCown DeLeeuw & Co. Offshore
(Asia), L.P.
By: /S/ David DeLeeuw
-------------------------------------
Name: David DeLeeuw
Title: Partner
MDC Management Co. IIA, L.P.
By: /S/ David DeLeeuw
-------------------------------------
Name: David DeLeeuw
Title: Partner
MDC Reit Management Company
By: /S/ David DeLeeuw
-------------------------------------
Name: David DeLeeuw
Title: President
<PAGE>
SCHEDULE 13D Page 19 of 52
MDC REIT Holdings LLC
By: /S/ David DeLeeuw
-------------------------------------
Name: David DeLeeuw
Title: President
<PAGE>
SCHEDULE 13D Page 20 of 52
APPENDIX A
GENERAL PARTNERS
MDC is the sole General Partner of MDP and MDA. MDC IIE is the sole
General Partner of MDPE. MDC IIA is the sole General Partner of MDPA. The
following is a list of all general partners of MDC, MDC IIE and MDC IIA.
Name: David DeLeeuw
Business Address: 101 East 52nd Street,
New York, New York 10022
Principal Occupation: Partner, McCown DeLeeuw & Co.
Name, principal business and McCown DeLeeuw & Co., an investment
address of corporation or management company
other organization on which 3000 Sand Hill Road,
employment is conducted: Building 3, Suite 290,
Menlo Park, California 94025
Citizenship: United States
Name: George McCown
Business Address: 3000 Sand Hill Road, Building 3,
Suite 290, Menlo Park, California 94025
Principal Occupation: Partner, McCown DeLeeuw & Co.
Name, principal business and McCown DeLeeuw &Co., an investment
address of corporation or other management company
organization on which employment 3000 Sand Hill Road,
is conducted: Building 3, Suite 290,
Menlo Park, California 94025
Citizenship: United States
Name: David E. King
Business Address: 3000 SandHill Road, Building3, Suite
290, Menlo Park, California 94025
Principal Occupation: Partner, McCown DeLeeuw & Co.
Name, principal business and McCown DeLeeuw & Co., an investment
address of corporation or other management company
organization on which 3000 Sand Hill Road,
employment is conducted: Building 3, Suite 290,
Menlo Park, California 94025
Citizenship: United States
<PAGE>
SCHEDULE 13D Page 21 of 52
Name: Robert B. Hellman
Business Address: 3000 Sand Hill Road,Building 3,
Suite 290, Menlo Park, California 94025
Principal Occupation: Partner, McCown DeLeeuw & Co.
Name, principal business and McCown DeLeeuw & Co., an investment
address of corporation or management company
other organization on which 3000 Sand Hill Road,
employment is conducted: Building 3, Suite 290,
Menlo Park, California 94025
Citizenship: United States
Name: Charles Ayres
Business Address: 3000 Sand Hill Road, Building 3,
Suite 290, Menlo Park, California 94025
Principal Occupation: Partner, McCown DeLeeuw & Co.
Name, principal business and McCown DeLeeuw & Co., an investment
address of corporation or management company
other organization on which 3000 Sand Hill Road,
employment is conducted: Building 3, Suite 290,
Menlo Park, California 94025
Citizenship: United States
Name: Steven Zuckerman
Business Address: 3000 Sand Hill Road, Building 3,
Suite 290, Menlo Park, California 94025
Principal Occupation: Partner, McCown DeLeeuw & Co.
Name, principal business and McCown DeLeeuw & Co. an investment
address of corporation or management company
other organization on which 3000 Sand Hill Road,
employment is conducted: Building 3, Suite 290,
Menlo Park, California 94025
Citizenship: United States
<PAGE>
SCHEDULE 13D Page 22 of 52
APPENDIX B
DIRECTORS OF MDC REIT MANAGEMENT COMPANY
Name: David DeLeeuw
Business Address: 101 East 52nd Street
New York, New York 10022
Principal Occupation: Partner, McCown DeLeeuw & Co.
Name, principal business and McCown DeLeeuw & Co. an investment
address of corporation or other management company
organization on which 3000 Sand Hill Road,
employment is conducted: Building 3, Suite 290,
Menlo Park, California 94025
Citizenship: United States
Name: George McCown
Business Address: 3000 Sand Hill Road,
Building 3, Suite 290,
Menlo Park, California 94025
Principal Occupation: Partner, McCown DeLeeuw & Co.
Name, principal business and McCown DeLeeuw & Co. an investment
address of corporation or management company
other organization on which 3000 Sand Hill Road,
employment is conducted: Building 3, Suite 290,
Menlo Park, California 94025
Citizenship: United States
Name: Brian Kerester
Business Address: 3000 Sand Hill Road,
Building 3, Suite 290,
Menlo Park, California 94025
Principal Occupation: Operating Affiliate, McCown
DeLeeuw & Co.
Name, principal business and McCown DeLeeuw & Co. an investment
address of corporation or management company
other organization on which 3000 Sand Hill Road,
employment is conducted: Building 3, Suite 290,
Menlo Park, California 94025
Citizenship: United States
<PAGE>
SCHEDULE 13D Page 23 of 52
EXECUTIVE OFFICERS
The only executive officers of MDC Reit Management Company are David DeLeeuw,
George McCown and Brian Kerester, who are also directors.
<PAGE>
SCHEDULE 13D Page 24 of 52
APPENDIX C
MANAGER OF MDC REIT HOLDINGS LLC
Name: MDC Reit Management Company
Business Address: 3000 Sand Hill Road,
Building 3, Suite 290,
Menlo Park, California 94025
<PAGE>
SCHEDULE 13D Page 25 of 52
EXHIBIT INDEX
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DOCUMENT PAGE
- ----------- ----------------------------------------------- ---------------
Exhibit 1 Written agreement relating to the filing of 26
joint acquisition statements, as required by
Rule 13d-1(f)(1) of the Securities Act of 1934
Exhibit 2 Stock Purchase Agreement, dated September 18, 29
1996, between MDC REIT Holdings LLC, a Delaware
limited liability company, and Peregrine Real
Estate Trust, a California business trust
<PAGE>
SCHEDULE 13D Page 26 of 52
EXHIBIT 1
The undersigned acknowledge and agree that the foregoing statement on
Schedule 13D, as amended, is filed on behalf of each of the undersigned and that
all subsequent amendments to this statement on Schedule 13D, as amended, shall
be filed on behalf of each of the undersigned without the necessity of filing
additional joint acquisition statements. The undersigned acknowledge that each
shall be responsible for the timely filing of such amendments, and for the
completeness and accuracy of the information concerning him or it contained
therein, but shall not be responsible for the completeness and accuracy of the
information concerning the other, except to the extent that he or it knows or
has reason to believe that such information is inaccurate.
By: /S/ David DeLeeuw
-------------------------------------
Mr. David DeLeeuw
By: /S/ George McCown
-------------------------------------
Mr. George McCown
McCown DeLeeuw & Co. II, L.P.
By: /S/ David DeLeeuw
-------------------------------------
Name: David DeLeeuw
Title: Partner
McCown DeLeeuw Associates, L.P.
By: /S/ David DeLeeuw
-------------------------------------
Name: David DeLeeuw
Title: Partner
MDC Management Co. II, L.P.
By: /S/ David DeLeeuw
-------------------------------------
Name: David DeLeeuw
Title: Partner
<PAGE>
SCHEDULE 13D Page 27 of 52
McCown DeLeeuw & Co. Offshore
(Europe), L.P.
By: /S/ David DeLeeuw
-------------------------------------
Name: David DeLeeuw
Title: Partner
MDC Management Co. IIE, L.P.
By: /S/ David DeLeeuw
-------------------------------------
Name: David DeLeeuw
Title: Partner
McCown DeLeeuw & Co. Offshore
(Asia), L.P.
By: /S/ David DeLeeuw
-------------------------------------
Name: David DeLeeuw
Title: Partner
MDC Management Co. IIA, L.P.
By: /S/ David DeLeeuw
-------------------------------------
Name: David DeLeeuw
Title: Partner
MDC Reit Management Company
By: /S/ David DeLeeuw
-------------------------------------
Name: David DeLeeuw
Title: President
<PAGE>
SCHEDULE 13D Page 28 of 52
MDC REIT Holdings LLC
By: /S/ David DeLeeuw
-------------------------------------
Name: David DeLeeuw
Title: President
<PAGE>
EXHIBIT 2 Page 29 of 52
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of the 18th day
of September, 1996, between MDC REIT HOLDINGS LLC, a Delaware limited liability
company ("Buyer"), and THE PEREGRINE REAL ESTATE TRUST, a California business
trust ("Seller").
W I T N E S S E T H
WHEREAS, Seller owns 6,959,593 common shares of beneficial interest (the
"Shares") of California Real Estate Investment Trust ("CalREIT");
WHEREAS, the Shares represent approximately seventy-six percent (76%) of
the outstanding common shares of beneficial interest of CalREIT;
WHEREAS, Buyer has experience in the real estate industry and in the
operation of REITs and has presented to Seller the Business Plan, which is
designed to increase value for all shareholders of CalREIT and which is
contingent upon Buyer's purchase of the Shares; and
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to sell
to Buyer, the Shares;
NOW, THEREFORE, in consideration of the premises and of their mutual
covenants and agreements set forth in this Agreement, Buyer and Seller hereby
agree as follows:
ARTICLE 1
Section 1.1 CERTAIN DEFINED TERMS. Capitalized terms not otherwise
defined in this Agreement shall have the meanings specified in EXHIBIT 1.1 to
this Agreement.
Section 1.2 AGREEMENT TO SELL AND TO PURCHASE. On the terms and subject
to the conditions of this Agreement, Seller shall sell, convey, assign, transfer
and deliver to Buyer, and Buyer shall purchase, acquire and accept from Seller,
at the Closing, the Shares.
ARTICLE 2
PURCHASE PRICE AND PAYMENT
Section 2.1 PURCHASE PRICE. In consideration for the Shares, upon the
terms and subject to the conditions of this Agreement, Buyer shall pay to Seller
the Purchase Price. The "Purchase Price" shall consist of (a) Twenty Million
Five Hundred Thousand Dollars ($20,500,000) in immediately available funds (the
"Cash Payment"), together with (b) the South Coast Note Payment. Buyer shall
pay the Cash Payment at the Closing by wire transfer pursuant to written
instructions of Seller delivered at lease two (2) days prior to the Closing.
The South Coast Note Payment shall be paid as set forth in SECTION 3.4 (South
Coast Note) of this Agreement.
<PAGE>
ARTICLE 3 Page 30 of 52
CLOSING
Section 3.1 CLOSING DATE. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place in the offices of Farella
Braun & Martel LLP, 235 Montgomery Street, 30th Floor, San Francisco, California
94104, on or before the Schedule Date (as the Schedule Date may be extended
pursuant to SECTION 9.2(b) (Extension of Schedule Date) of this Agreement), or
at such other place or time as the parties may agree (the "Closing Date").
Section 3.2 SELLER'S DELIVERIES AT CLOSING. At the Closing, in addition
to any other documents specifically required to be delivered pursuant to this
Agreement, Seller shall deliver or cause to be delivered to Buyer the following:
(a) A stock certificate or certificates representing all of the
Shares, accompanied by a stock power or stock powers duly executed in blank or
duly executed instruments of transfer and any other documents necessary to
transfer title to the Shares to Buyer;
(b) A certificate of the Secretary of Seller dated as of the
Closing Date certifying the resolutions of the Board of Trustees of Seller
authorizing and approving this Agreement and the transactions contemplated by
this Agreement;
(c) A receipt, executed by Seller, acknowledging receipt of the
Cash Payment; and
(d) Such other documents, officers' certificates, other
certificates or instruments consistent with this Agreement as are reasonably
requested by Buyer.
Section 3.3 BUYER'S DELIVERIES AT CLOSING. At the Closing, in addition
to any other documents specifically required to be delivered pursuant to this
Agreement, Buyer shall deliver or cause to be delivered to Seller:
(a) The Cash Payment;
(b) A certificate of the Secretary of Buyer dated as of the
Closing Date certifying the resolutions of the Board of Directors of Buyer
authorizing and approving this Agreement and the transactions contemplated by
this Agreement;
(c) A receipt, executed by Buyer, acknowledging receipt of the
documents by which the Sellers sell, convey, assign, transfer and deliver the
Shares to Buyer; and
(d) Such other documents, officers' certificates, other
certificates or instruments consistent with this Agreement as are reasonably
requested by Seller.
<PAGE>
Page 31 of 52
Section 3.4 SOUTH COAST NOTE.
(a) BUYER'S CONTROL OF CALREIT. After the Closing, Buyer shall
use its best efforts to cause CalREIT to take or refrain from such actions as
are necessary to carry out the provisions of this SECTION 3.4.
(b) DETERMINATION OF SOUTH COAST NOTE VALUE BY SALE. Prior to
the South Coast Note Determination Date, CalREIT will make a commercially
reasonable effort to market the South Coast Note, PROVIDED, that CalREIT shall
not sell or transfer any portion of the South Coast Note before the South Coast
Note Determination Date other than in an arms-length, all-cash sale of all of
CalREIT's interest in the South Coast Note. The proceeds of any sale of the
South Coast Note which closes before the South Coast Note Determination Date,
net of reasonable and customary actual broker and escrow fees and other closing
costs, shall be deemed to be the South Coast Note Value.
(c) DETERMINATION OF SOUTH COAST NOTE VALUE BY THE PARTIES. If,
on the South Coast Determination Date, the South Coast Note has not been sold as
set forth in subsection (b) of this SECTION 3.4, then CalREIT and Seller shall
determine the South Coast Note Value, as of the South Coast Determination Note
Date, by the following procedure: CalREIT shall promptly provide Seller with
access to all documents or information within the control of CalREIT or Buyer
related to the South Coast Note, the obligor thereunder and the collateral
therefor. Within fifteen (15) Business Days of the South Coast Note
Determination Date, CalREIT and Seller shall each submit to the other in writing
a proposed valuation of the South Coast Note and any justification for such
valuation. If Seller's proposed valuation is equal to or less than one hundred
ten percent (110%) of CalREIT's proposed valuation, then the South Coast Note
Value shall be deemed to be equal to the average of the proposed valuations. If
Seller's proposed valuation is greater than one hundred ten percent (110%) of
CalREIT's proposed valuation, then the parties shall attempt to determine the
South Coast Note Value by good faith negotiation, failing which either party may
elect that the matter be submitted to binding arbitration, as set forth in
subsection (d) of this SECTION 3.4.
(d) DETERMINATION OF SOUTH COAST NOTE VALUE BY ARBITRATION. If
determination of the South Coast Note Value has been submitted to binding
arbitration by either party pursuant to subsection (c) of this SECTION 3.4, the
arbitration shall be conducted by a single arbitrator in San Francisco,
California, under the rules of the American Arbitration Association (the "AAA"),
modified as provided in this Agreement. The arbitrator shall be limited to an
award equal to one or the other of the proposed valuations submitted by the
parties pursuant to subsection (c), by choosing the proposed valuation closest
to the arbitrator's own valuation of the South Coast Note. The arbitrator shall
have at least five (5) years experience in the valuation of promissory notes
secured by real property and shall be selected in accordance with the rules of
the AAA. The arbitration award may be confirmed in any court of competent
jurisdiction. Notwithstanding the provisions of SECTION 11.10 (Attorney's Fees)
of this Agreement, each party shall bear the expense of its own attorney's fees,
witness fees, and costs for the preparation and presentation of evidence related
to the arbitration, except that fees and expenses payable to AAA shall be borne
by the parties equally.
<PAGE>
Page 32 of 52
(e) SOUTH COAST NOTE PAYMENT. Within ten (10) Business Days
after the South Coast Note Value has been determined pursuant to this
SECTION 3.4, Buyer shall make the South Coast Note Payment to Seller.
ARTICLE 4
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
Except to the extent expressly waived in writing by Buyer, all obligations
of Buyer under this Agreement are subject to the fulfillment, at or before the
Closing, of all of the following conditions:
Section 4.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. Each of the
representations and warranties of Seller contained in this Agreement shall be
true in all material respects on and as of the Closing Date with the same effect
as though made on and as of such date.
Section 4.2 PERFORMANCE. Seller shall have performed in all material
respects each of the obligations of Seller to be performed on or prior to the
Closing pursuant to this Agreement.
Section 4.3 CALREIT BOARD APPROVAL. The Trustees of CalREIT shall have
duly (a) approved transfer of the Shares to Buyer on the records of CalREIT
promptly upon the Closing, and (b) exempted from the "Limit" (as defined in the
CalREIT Declaration of Trust) and from the filing requirements of Section
4.10(f) of the CalREIT Declaration of Trust the ownership by Buyer of the Shares
following the Closing.
Section 4.4 CALREIT SECRETARY'S CERTIFICATE. Buyer shall have received
a certificate of the Secretary of CalREIT, dated as of the Closing Date,
certifying the resolutions of the Board of Trustees of CalREIT which satisfy the
conditions set forth in SECTION 4.3 (CalREIT Board Approval) of this Agreement.
Section 4.5 OPINION OF CALREIT'S COUNSEL. Buyer shall have received an
opinion of counsel to CalREIT, Greenberg Glusker Fields Claman & Machtinger LLP,
dated as of the Closing Date, reasonably satisfactory to Buyer, covering the
matters set forth on EXHIBIT 4.5 attached to this Agreement (the "Greenberg
Letter").
Section 4.6 OPINION OF CALREIT'S AUDITOR. Buyer shall have received an
opinion of CalREIT's auditor, Coopers & Lybrand L.L.P., dated as of the Closing
Date, reasonably satisfactory to Buyer, covering the matters set forth on
EXHIBIT 4.6 attached to this Agreement (the "Coopers Letter").
Section 4.7 OPINION OF SELLER'S COUNSEL. Buyer shall have received an
opinion of counsel to Seller, Farella Braun & Martel LLP, dated as of the
Closing Date, reasonably satisfactory to Buyer, covering the matters set forth
on EXHIBIT 4.7 attached to this Agreement (the "Farella Letter").
<PAGE>
Page 33 of 52
Section 4.8 NO MATERIAL ADVERSE CHANGE. From and after the date of this
Agreement, there shall not have been any change in or effect on the business of
CalREIT or any occurrence, development or event of any nature, that has had or
may reasonably be expected to have a material adverse effect on the financial
condition, results of operation or prospects of CalREIT.
Section 4.9 BUYER'S FINANCING. Buyer shall have arranged financing for
its acquisition of the Shares, on terms and conditions acceptable to Buyer.
Section 4.10 TRUSTEES' TENDER OF RESIGNATIONS. Each Trustee of CalREIT
who is also a Trustee of Peregrine shall have tendered his or her resignation as
a Trustee of CalREIT, effective as of the Closing Date.
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
Except to the extent expressly waived in writing by Seller, the obligations
of Seller set forth in this Agreement are subject to the fulfillment, at or
before the Closing, of all of the following conditions:
Section 5.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. Each of the
representations and warranties of Buyer contained in this Agreement shall be
true in all material respects on and as of the closing Date with the same effect
as though made on and as of such date.
Section 5.2 PERFORMANCE. Buyer shall have performed in all material
respects each of the obligations of Buyer to be performed on or prior to the
Closing pursuant to this Agreement.
Section 5.3 FAIRNESS OPINION. Seller shall have received a "bringdown,"
as of the Closing Date, to the opinion of Dillon, Read, previously delivered to
Seller, as to the fairness, from a financial point of view, of the Purchase
Price for the Shares.
Section 5.4 CONSENTS. Seller shall have received consents and approvals
regarding this Agreement and the transactions contemplated in this Agreement, in
form and substance satisfactory to Seller, from (a) Seller's secured lenders,
including but not limited to a release of the Shares and the proceeds of the
sale of the Shares to Buyer, and (b) CalREIT, including but not limited to
resolution of any existing business arrangements between CalREIT and Seller.
Section 5.5 OPINION OF BUYER'S COUNSEL. Seller shall have received an
opinion of counsel to Buyer, Gibson, Dunn & Crutcher LLP, dated as of the
Closing Date, reasonably satisfactory to Seller, covering the matters set forth
on EXHIBIT 5.5 attached to this Agreement (the "Gibson Letter").
<PAGE>
Page 34 of 52
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF BOTH PARTIES
The obligations of Seller and Buyer pursuant to this Agreement are subject
to the fulfillment at or prior to the Closing Date of each of the following
conditions:
Section 6.1 NO LEGAL IMPEDIMENTS. No law, rule, regulation, order,
judgment, decree or injunction (including any order entered in the Bankruptcy
Case) shall have been enacted, entered, promulgated, enforced or deemed
applicable by any court or governmental or regulatory authority which prohibits
the consummation of the transactions contemplated hereby; PROVIDED, HOWEVER,
that the parties shall use their best efforts, and shall have a reasonable
period of time not to exceed thirty (30) calendar days, to have any such order,
judgment, decree or injunction vacated or reversed; nor shall there be any
pending or threatened actions or proceedings by any person or entity challenging
or in any manner seeking to restrict or prohibit the transactions contemplated
hereby or seeking to obtain any damages against any person or entity as a result
of the transactions contemplated hereby.
Section 6.2 REIT STATUS. Neither the transfer of the Shares to Buyer
pursuant to the terms of this Agreement, nor the ownership of such Shares by
Buyer after the Closing, will jeopardize the qualification of CalREIT as a REIT.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
Section 7.1 TRUST EXISTENCE AND POWER. Seller is a business trust duly
organized, validly existing and in good standing under the laws of the State of
California. Seller has full power and authority to enter into this Agreement
and perform its obligations under this Agreement.
Section 7.2 TRUST AUTHORIZATION. Seller's execution, delivery and
performance of this Agreement and the consummation by Seller of the transactions
contemplated by this Agreement have been duly authorized by all requisite trust
action of Seller.
Section 7.3 BINDING EFFECT AND AUTHORITY. This Agreement has been duly
executed and delivered by Seller, and constitutes a valid and binding agreement
of Seller.
Section 7.4 CONSENTS AND APPROVALS; NO VIOLATION. Except as set forth
in SECTION 5.4 (Consents) and SECTION 4.3 (CalREIT Board Approval) of this
Agreement, neither the execution and delivery of this Agreement by Seller nor
the consummation by Seller of the transactions contemplated hereby will
(a) conflict with or result in any breach of any provision of Seller's
Declaration of Trust or the bylaws of Seller, or, to the best of Seller's
knowledge, the CalREIT Declaration of Trust or the bylaws of CalREIT,
(b) require any filing with, or the obtaining of any permit, authorization,
consent or approval of, any court or governmental or regulatory authority,
(c) to the best knowledge of Seller, result in a default (or give rise to any
right of termination,
<PAGE>
Page 35 of 52
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, agreement, lease or other
instrument or obligation to which Seller or CalREIT is a party or by which
Seller or CalREIT may be bound, except for defaults (or rights of termination,
cancellation or acceleration) as to which requisite waivers or consents have
been obtained, or (d) to the best knowledge of Seller, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Seller or CalREIT;
PROVIDED, that the foregoing clauses (b), (c) and (d) shall not apply to
requirements, defaults or violations which would not have a material adverse
effect on the business, operations or financial condition of Seller or CalREIT,
as the case may be.
Section 7.5 TITLE TO SHARES. At the Closing, Seller will convey the
Shares to Buyer free and clear of any and all Liens, except for restrictions on
transfer pursuant to federal or applicable state securities laws.
Section 7.6 BROKERS' FEES. Except for the engagement of Dillon, Read,
whose fees are the responsibility of Seller, no investment banker, broker,
finder or other intermediary has been retained by or is authorized to act on
behalf of Seller who might be entitled to any fee or commission from Buyer or
any of its Affiliates upon consummation of the transactions contemplated by this
Agreement.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
Section 8.1 EXISTENCE AND POWER. Buyer is a limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware, with full power and authority to enter into this Agreement
and perform its obligations under this Agreement.
Section 8.2 AUTHORIZATION. Buyer's execution, delivery and performance
of this Agreement and the consummation by Buyer of the transactions contemplated
by this Agreement have been duly authorized by all requisite action of Buyer.
Section 8.3 BINDING EFFECT. This Agreement has been duly executed and
delivered by Buyer, and constitutes a valid and binding agreement of Buyer.
Section 8.4 CONSENTS AND APPROVALS; NO VIOLATION. Neither the execution
and delivery of this Agreement by Buyer nor the consummation by Buyer of the
transactions contemplated hereby will (a) conflict with or result in any breach
of any provision of the certificate of formation or operating agreement of
Buyer; (b) require any filing with, or the obtaining of any permit,
authorization, consent or approval of, any court or governmental or regulatory
authority; (c) to the best knowledge of Buyer, result in a default (or give rise
to any right of termination, cancellation or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other instrument or obligation to which Buyer is a party or
by which Buyer or any of its assets may be bound, except for defaults (or rights
of termination, cancellation or acceleration) as to which requisite waivers or
consents have been
<PAGE>
Page 36 of 52
obtained; or (d) to the best knowledge of Buyer, violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Buyer, or any of
its assets; PROVIDED, that the foregoing clauses (b), (c) and (d) shall not
apply to requirements, defaults or violations which would not have a material
adverse effect on the business, operations or financial condition of Buyer.
Section 8.5 BROKERS' FEES. No investment banker, broker, finder or
other intermediary has been retained by or is authorized to act on behalf of
Buyer who might be entitled to any fee or commission from Seller, CalREIT or any
of Seller's other Affiliates upon consummation of the transactions contemplated
by this Agreement.
Section 8.6 INVESTMENT. Buyer is acquiring the Shares for investment
for its own account and not with a view to, or for resale in connection with,
any distribution of the Shares, and it has no present intention of selling or
distributing the Shares. Buyer understands that the Shares have not been
registered under the Securities Act by reason of a specific exemption from the
registration provisions of the Securities Act which depends upon, among other
things, the BONA FIDE nature of the investment intent as expressed herein.
Section 8.7 RULE 144. Buyer acknowledges that, because they have not
been registered under the Securities Act, the Shares constitute "restricted
securities" under Rule 144 and must be held indefinitely unless subsequently
registered under the Securities Act or an exemption from such registration is
available. Buyer is aware of the provisions of Rule 144 promulgated under the
Securities Act which permits limited resale of shares purchased in a private
placement subject to the satisfaction of certain conditions, including, among
other things, the existence of a public market for the shares, the availability
of certain current public information about CalREIT, the resale occurring not
less than two years after a party has purchased and paid for the security to be
sold, the sale being through a "broker's transaction" or in transactions
directly with a "market maker" (as provided by Rule 144(f)) and the number of
shares being sold during any three-month period not exceeding specified
limitations (unless the sale is within the requirements of Rule 144(k)).
Section 8.8 INVESTIGATION BY BUYER. Buyer has conducted its own
independent investigation, review and analysis of the business assets, financial
condition, legal and REIT status and prospects of CalREIT ("Buyer's
Investigation"). Buyer acknowledges that, to its knowledge, it has had full
access to all documents, records, reports, tax returns, properties, personnel
and other information relating to CalREIT that it has requested for purposes of
Buyer's Investigation. In entering into this Agreement, Buyer has relied solely
upon Buyer's Investigation, and Buyer acknowledges (a) that none of Seller, or
any of its respective trustees, directors, officers, employees, agents,
representatives, attorneys, advisers or shareholders, makes any representation
or warranty, either express or implied, as to the accuracy or completeness of
any of the information provided or made available to Buyer or its agents or
representatives, and (b) to the fullest extent permitted by law, that none of
Seller, or any of its respective trustees, directors, officers, employees,
agents, representatives, attorneys, advisers or shareholders, shall have any
liability or responsibility to Buyer or any of its agents or representatives on
any basis (including, without limitation, in contract or tort, under federal or
state securities laws) based upon any information provided or made available, or
statements made, to Buyer or its agents or representatives, except for the
specific representations and warranties of Seller set forth in
<PAGE>
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ARTICLE 7 (Representations and Warranties of Seller) of this Agreement. Nothing
in this SECTION 8.8 shall affect the liability of any party (i) for fraud or
intentional misrepresentations or (ii) with respect to the opinions to be
delivered to Buyer under Sections 4.5, 4.6 or 4.7 of this Agreement.
Section 8.9 TRANSFER OF SHARES TO BUYER. Neither the transfer of the
Shares to Buyer pursuant to the terms of this Agreement, nor the ownership and
operation of CalREIT after the Closing pursuant to the Business Plan, will
jeopardize the qualification of CalREIT as a REIT.
ARTICLE 9
COVENANTS AND AGREEMENTS
Section 9.1 COVENANT OF SELLER. Seller shall not, directly or
indirectly, initiate contact with, solicit or encourage any inquiries or
proposals by, or negotiations with, any person or entity (other than Buyer) in
connection with any possible proposal regarding a sale of all or any of the
Shares.
Section 9.2 COVENANTS OF BUYER.
(a) DEPOSIT. Concurrent with Buyer's execution of this
Agreement, Buyer shall deposit with the Escrow Agent pursuant to the Escrow
Agreement attached hereto as Exhibit 9.2 the sum of One Hundred Fifty Thousand
Dollars ($150,000) (the "Deposit") for the benefit of Seller.
(b) EXTENSION OF SCHEDULE DATE. If the IRS Letter has been
received and the parties have agreed on the final form of the REIT Status
Letters on or before 5:00 p.m., Pacific Time on Friday, October 4, 1996, then
(i) Buyer shall have the right, on or before the Schedule Date, to deposit with
the Escrow Agent for the benefit of Seller Fifty Thousand Dollars ($50,000) (the
"First Progress Payment") to extend the Schedule Date for fourteen (14) calendar
days, and (ii) Buyer shall have the right, on or before the end of such
extension period, to deposit with the Escrow Agent for the benefit of Seller an
additional Fifty Thousand Dollars ($50,000) (the "Second Progress Payment") to
extend the Schedule Date until the later of either the expiration of an
additional fourteen (14) calendar day period or October 15, 1996. If the IRS
Letter has not been received or the parties have not agreed upon the final form
of the REIT Status Letters on or before 5:00 p.m., Pacific Time on October 4,
1996, then Buyer shall have the right, on or before the Schedule Date, to
deposit with the Escrow Agent for the benefit of Seller the First Progress
Payment to extend the Schedule Date for fourteen (14) calendar days, but Buyer
shall not have the right to make the Second Progress Payment to obtain an
additional extension. In the event that any law, rule, regulation, order,
judgment, decree or injunction (including any order entered in the Bankruptcy
Case) has been enacted, entered, promulgated, enforced or deemed applicable by
any court or governmental or regulatory authority which prohibits the
consummation of the transactions contemplated by this Agreement, the time
periods set forth in this SECTION 9.2(b) shall be tolled one day for each day
(not to exceed thirty (30) calendar days) that such law, rule, regulation,
order, judgment, decree or injunction remains in force.
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(c) NO RECEIPT OF REIT STATUS LETTERS. If the IRS Letter has
not been received or the parties have not agreed upon the final form of the REIT
Status Letters on or before 5:00 p.m., Pacific Time on Tuesday, October 22,
1996, then either Buyer or Seller may terminate this Agreement by notice to the
other party.
(d) LIQUIDATED DAMAGES. The parties acknowledge that, in the
event Buyer defaults in the due and timely performance of its obligations under
this Agreement, or if any of its representations or warranties set forth in this
Agreement are untrue in any material respect (each, a "Buyer's Default"), or if
Buyer fails to satisfy the Financing Condition or the REIT Status Condition,
Seller's damages would be extremely difficult or impracticable to determine. If
the transactions contemplated by this Agreement fail to close on or before the
Schedule Date, as extended, due to Buyer's Default or to Buyer's failure to
satisfy either the Financing Condition or the REIT Status Condition, Seller
shall be entitled to receive from the Escrow Agent the Deposit and the First and
Second Progress Payments as liquidated damages. If the transactions
contemplated by this Agreement fail to close due to reasons other than Buyer's
Default or to Buyer's failure to satisfy either the Financing Condition or the
REIT Status Condition, then the Deposit and the First and Second Progress
Payments shall be promptly returned to Buyer by the Escrow Agent.
(e) BUYER'S BUSINESS PLAN. Buyer has delivered to Seller a true
and complete copy of the Business Plan. Pursuant to the Business Plan, after
the Closing Date, CalREIT intends to acquire, hold, and dispose of loans secured
by real property. Buyer (i) believes that the Business Plan is achievable and
intends to carry out the Business Plan as delivered and (ii) represents that the
Business Plan (including any amendment, modification or successor plan adopted
after the Closing Date by the Board of Trustees of CalREIT in its good faith
business judgment based upon changes in business, market, industry or economic
conditions) is designed to increase the value of common shares of beneficial
interest for all CalREIT shareholders.
Section 9.3 MUTUAL COVENANTS.
(a) CLOSING CONDITIONS. Seller and Buyer shall use their
respective reasonable best efforts to cause the conditions precedent to Closing
to be fulfilled.
(b) CONSENTS AND APPROVALS. Prior to the Closing, Seller and
Buyer shall use their respective reasonable efforts to obtain the
authorizations, consents, orders and approvals of federal, state, local and
foreign regulatory bodies and officials, courts and other third parties that may
be necessary for the performance of their respective obligations under this
Agreement and the consummation of the transactions contemplated by this
Agreement, and shall cooperate fully with each other in seeking promptly to
obtain such authorizations, consents, orders and approvals as may be necessary
for the performance of their respective obligations pursuant to this Agreement.
Seller and Buyer shall not take any action that is likely to have the effect of
delaying, impairing or impeding the receipt of any required approvals and shall
use all reasonable efforts to secure such approvals as promptly as possible.
(c) CONFIDENTIALITY; PUBLIC ANNOUNCEMENTS. Through the Closing,
the terms and conditions of the Confidentiality Agreement (which is incorporated
in full by this reference)
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shall continue to bind Seller and Buyer. Except to the extent required by
applicable law or stock exchange rules, and except for the press release to be
issued upon execution of this Agreement, in a form to be agreed upon by the
parties, neither party to this Agreement shall make any public announcement with
respect to this Agreement or the transactions contemplated in this Agreement or
otherwise communicate with any third party, including, without limitation, news
media, without prior notification to the other party, and the parties shall
cooperate as to the timing and contents of any such announcement.
(d) FURTHER ACTION. Each of the parties to this Agreement shall
execute such documents and other papers and take such further actions as may be
reasonably required or desirable to carry out the provisions of this Agreement
and the transactions contemplated in this Agreement or, at or after the Closing,
to evidence the consummation of the transactions contemplated in this Agreement.
ARTICLE 10
TERMINATION
Section 10.1 TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned on the earlier to occur of the
following:
(a) at any time, by mutual written agreement of Seller and
Buyer;
(b) by either Buyer or Seller, if within five (5) Business Days
after execution of this Agreement, the parties have not agreed on the final
form, including all qualifications and assumptions, of the Coopers Letter, the
Greenberg Letter, the Farella Letter, and the Gibson Letter;
(c) by either Buyer or Seller, if the Trustees of CalREIT have
not taken the actions described in SECTION 4.3 (CalREIT Board Approval) of this
Agreement on or before Monday, September 30, 1996;
(d) by Seller, if all conditions precedent to its obligations
have not been satisfied or waived as of the Closing Date;
(e) by Buyer, if all conditions precedent to its obligations
have not been satisfied or waived as of the Closing Date;
(f) by either Buyer or Seller, if the Closing has not occurred
on or before November 15, 1996;
(g) at any time, if Buyer shall default in the observance, or in
the due and timely performance, of any of the agreements or covenants contained
in this Agreement, or if any of Buyer's representations or warranties set forth
in this Agreement were untrue in any material respect as of the date of this
Agreement or became untrue in any material respect as of a subsequent date,
Seller may terminate this Agreement upon five (5) Business Days' notice to
Buyer, during which time Buyer shall have an opportunity to cure the default or
breach; and
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(h) at any time, if Seller shall default in the observance, or
in the due and timely performance, of any of the agreements or covenants
contained in this Agreement or Seller's representations or warranties set forth
in this Agreement were untrue in any material respect as of the date of this
Agreement or became untrue in any material respect as of a subsequent date,
Buyer may terminate this Agreement upon five (5) Business Days' notice to
Seller, during which time Seller shall have an opportunity to cure the default
or breach; and
Section 10.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement, (a) each party shall re-deliver all documents and information of the
other party relating to the transactions completed hereby and all confidential
information received by any party to this Agreement with respect to the other
party or to CalREIT shall be treated in accordance with SECTION 9.3(c)
(Confidentiality; Public Announcements) of this Agreement and the
Confidentiality Agreement; (b) to the extent practicable, all filings,
applications and other submissions with any court or governmental or regulatory
authority made pursuant to this Agreement shall, at the option of Seller, be
withdrawn from the court or governmental or regulatory authority to which made;
(c) if this Agreement has been terminated due to Buyer's Default or Buyer's
failure to satisfy the Financing Condition or the REIT Status Condition, the
parties' rights with respect to the Deposit and the First and the Second
Progress Payments shall be as set forth in SECTION 9.2(d) (Application of
Deposit) of this Agreement and Seller shall have no other remedies; (d) if this
Agreement has been terminated by either party for reasons other than Buyer's
Default or Buyer's failure to satisfy the Financing Condition or the REIT Status
Condition, the Deposit and the First and Second Progress Payments shall be
returned to Buyer and the parties shall retain all rights and remedies available
to each of them at law or in equity, including but not limited to the right to
bring an action against the defaulting party for specific performance.
ARTICLE 11
GENERAL
Section 11.1 SURVIVAL BEYOND CLOSING. Notwithstanding any other
provision of this Agreement, the representations, warranties and covenants made
by Seller and Buyer in this Agreement, and the provisions of this ARTICLE 11,
shall survive the Closing.
Section 11.2 BINDING EFFECT; ASSIGNMENT. All of the terms of this
Agreement shall be binding upon, inure to the benefit of and be enforceable by
and against the successors and permitted assigns of Seller and Buyer. Neither
Seller nor Buyer shall assign any of their respective rights or obligations
under this Agreement to any other person, firm or corporation without the prior
written consent of the other party to this Agreement.
Section 11.3 GOVERNING LAW. This Agreement shall be governed by the laws
of the State of California applicable to contracts entered into and to be
performed in California.
Section 11.4 NOTICES. All notices, requests, demands and other
communications to be given pursuant to the terms of this Agreement shall be in
writing and shall be delivered personally, telecopied or sent by recognized
overnight delivery service, and shall be deemed given and effective when so
delivered personally, telecopied or received, as follows:
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(a) If to Buyer:
MDC REIT Holdings LLC
c/o McCown De Leeuw & Co.
3000 Sand Hill Road
Building 3, Suite 280
Menlo Park, California 94025
Telecopier: (415) 854-0853
Attention: Brian Kerester
with a copy to:
Gibson, Dunn & Crutcher
One Montgomery Street, Telesis Tower
San Francisco, California 94104-4505
Telecopier: (415) 393-8333
Attention: Robert E. Mellor, Esq.
(b) If to Seller:
The Peregrine Real Estate Trust
1300 Ethan Way, Suite 200
Sacramento, California 95825-1211
Telecopier: (916) 929-1122
Attention: Joseph M. Mock, President
with a copy to:
Farella Braun & Martel LLP
235 Montgomery Street, 30th Floor
San Francisco, California 94104
Telecopier: (415) 954-4480
Attention: Morgan P. Guenther, Esq.
Any party may change its address or telecopier number by prior written
notice to the other party.
Section 11.5 COUNTERPARTS. This Agreement may be executed by facsimile
and in counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute one and the same
instrument.
Section 11.6 EXPENSES. Buyer and Seller shall pay their own respective
expenses, costs and fees (including, without limitation, attorney and
accountants' fees) incurred in connection with the negotiation, preparation,
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement.
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Section 11.7 ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement and understanding of Seller and Buyer with respect to the transactions
contemplated by this Agreement, and supersedes all prior agreements,
arrangements and understandings relating to the subject matter of this
Agreement.
Section 11.8 AMENDMENT AND WAIVER. This Agreement may be amended,
modified, superseded or canceled, and any of the terms, covenants,
representations, warranties or conditions of this Agreement may be waived, only
by a written instrument executed by Seller and Buyer or, in the case of a
waiver, by or on behalf of the party waiving compliance. The failure of any
party at any time to require performance of any provision of this Agreement
shall in no manner affect the right at a later time to enforce the same. No
waiver by any party of any condition or of any breach of any term, covenant,
representation or warranty contained in this Agreement, in any one or more
instances, shall be deemed to be or construed as a further or continuing waiver
of any such condition or of any breach of any such term, covenant,
representation or warranty or any other term, covenant, representation or
warranty set forth in this Agreement.
Section 11.9 HEADINGS. The headings of the sections and paragraphs of
this Agreement have been inserted for convenience of reference only and shall in
no way restrict or otherwise modify any of the terms or provisions of this
Agreement.
Section 11.10 ATTORNEY'S FEES. If any legal action or any arbitration or
other proceeding is brought for the enforcement of this Agreement or because of
any alleged dispute, breach, default, or misrepresentation in connection with
any of the provisions of this Agreement, the successful or prevailing party
shall be entitled to recover reasonable attorney's fees, witness fees, and other
costs incurred in such action or proceeding, in addition to any other relief to
which the party may be entitled.
Section 11.11 NO LIABILITY OF SELLER'S SHAREHOLDERS. Buyer acknowledges
that the shareholders of Seller are not personally liable for Seller's
obligations under this Agreement.
Section 11.12 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement is
intended to confer upon any third party any rights or remedies under or by
reason of this Agreement, except as expressly set forth in this Agreement.
IN WITNESS WHEREOF, each of Seller and Buyer have executed this Agreement
as of the day and year first above written.
BUYER: MDC REIT HOLDINGS LLC,
a Delaware limited liability company
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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SELLER: THE PEREGRINE REAL ESTATE TRUST, a
California business trust
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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EXHIBIT 1.1
CERTAIN DEFINED TERMS
"AFFILIATE" means an entity controlling, controlled by or under common
control with, a party and any agent, representative, attorney, successor,
assign, employee, trustee, officer, director and shareholder of such party or
such entity.
"AGREEMENT" has the meaning ascribed to it in the preamble to this
Agreement.
"BANKRUPTCY CASE" means the case captioned IN RE COMMONWEALTH EQUITY TRUST,
pending as case no. 93-26727-C11 in the Bankruptcy Court, in which Seller
currently is a post-reorganization debtor-in-possession.
"BANKRUPTCY COURT" means the United States Bankruptcy Court for the Eastern
District of California.
"BUSINESS DAY" means a day of the year on which banks are not closed and
are not authorized to be closed in San Francisco, California.
"BUSINESS PLAN" means the business plan for CalREIT developed by Buyer for
implementation after the Closing Date, as summarized in the "Summary Points on
Business Strategy" part of the "Discussion Materials," dated July 18, 1996, and
delivered by Buyer's Affiliate, McCown De Leeuw & Co., to Seller's Board of
Trustees.
"BUYER" has the meaning ascribed to it in the preamble to this Agreement.
"BUYER'S DEFAULT" has the meaning ascribed to it in SECTION 9.2 of this
Agreement.
"BUYER'S INVESTIGATION" has the meaning ascribed to it in SECTION 8.8 of
this Agreement.
"CALREIT" has the meaning ascribed to it in the Recitals to this Agreement.
"CALREIT DECLARATION OF TRUST" means the Declaration of Trust of CalREIT,
dated June 4, 1986, as amended.
"CASH PAYMENT" has the meaning ascribed to it in SECTION 2.1 of this
Agreement.
"CLOSING" has the meaning ascribed to it in SECTION 3.1 of this Agreement.
"CLOSING DATE" has the meaning ascribed to it in SECTION 3.1 of this
Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement previously
entered between Buyer's Affiliate, McCown De Leeuw & Co., and Seller with
respect to a possible sale of the Shares to an Affiliate of McCown De Leeuw &
Co.
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"COOPERS LETTER" has the meaning ascribed to it in SECTION 4.6 of this
Agreement.
"DEPOSIT" has the meaning ascribed to it in SECTION 9.2 (a) of this
Agreement.
"DILLON, READ" means Dillon, Read & Co. Inc., an investment banking firm.
"ESCROW AGENT" means Norwest Bank Colorado, N.A.
"FARELLA LETTER" has the meaning ascribed to it in SECTION 4.7 of this
Agreement.
"FINANCING CONDITION" means the condition precedent to the obligations of
Buyer set forth in SECTION 4.9 of this Agreement.
"FIRST PROGRESS PAYMENT" has the meaning ascribed to it in SECTION 9.2(b)
of this Agreement.
"GIBSON LETTER" has the meaning ascribed to it in SECTION 5.5 of this
Agreement
"GREENBERG LETTER" has the meaning ascribed to it in SECTION 4.5 of this
Agreement.
"IRS LETTER" means the closure letter or similar agreement from the
Internal Revenue Service which confirms that CalREIT's status as a REIT has not
been adversely affected by past failures to follow the "demand letter"
procedures set forth in Treasury Regulation Section 1.857-8.
"LIENS" means any assignment, chattel mortgage, pledge or other security
interest or any mortgage, deed of trust or other lien (including, without
limitation, any federal, state or local tax lien), or other charge or
encumbrance or interest in or upon property or rights (including after-acquired
property or rights), or any preferential arrangement with respect to property or
rights (including after-acquired property or rights) which has the practical
effect of constituting a security interest or lien.
"PURCHASE PRICE" has the meaning ascribed to it in SECTION 2.1 of this
Agreement.
"REIT" means a "real estate investment trust" as defined in Section 856 of
the Code.
"REIT STATUS CONDITION" means the condition precedent to the obligations of
both parties set forth in SECTION 6.2 (REIT Status) of this Agreement.
"REIT STATUS LETTERS" means, collectively (a) the Coopers Letter, (b) the
Greenberg Letter and (c) the Farella Letter.
"RULE 144" means Rule 144 promulgated under the Securities Act.
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"SCHEDULE DATE" means the first Business Day which is ten (10) calendar
days after the date by which the IRS Letter has been received and the parties
have agreed upon the final form of the REIT Status Letters .
"SECOND PROGRESS PAYMENT" has the meaning ascribed to it in SECTION 9.2(b)
of this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER" has the meaning ascribed to it in the preamble to this Agreement.
"SELLER'S DECLARATION OF TRUST" means the Restated Declaration of Trust of
Seller, dated as of October 7, 1994.
"SHARES" has the meaning ascribed to it in the Recitals to this Agreement.
"SOUTH COAST NOTE" means the Promissory Note, dated September 11, 1986, in
the stated original principal amount of $5,000,000, made by South Coast
Commercenter, a California limited partnership, to the order of CalREIT.
"SOUTH COAST NOTE DETERMINATION DATE" means the first Business Day which
occurs after the expiration of the six (6) month period commencing on the
Closing Date.
"SOUTH COAST NOTE PAYMENT" means a payment in immediately available funds
in an amount equal to seventy-six percent (76%) of the South Coast Note Value.
"SOUTH COAST NOTE VALUE" means the valuation of the South Coast Note
determined in accordance with SECTION 3.4 of this Agreement.
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EXHIBIT 4.5
MATTERS TO BE COVERED IN OPINION OF CALREIT'S COUNSEL
The opinion referenced in SECTION 4.5 will cover the following matters,
subject to appropriate and customary qualifications:
1. California Real Estate Investment Trust ("CalREIT") has all legal
right, power and authority necessary to qualify as a "real estate investment
trust" under the Internal Revenue Code of 1986, as amended (the "Code').
CalREIT is organized and is operating, and since at least January 1, 1991 has
operated, in conformity with the requirements for qualification as a "real
estate investment trust" under the Code for each taxable year after said date.
It is also our opinion that CalREIT's planned method of operation, including
without limitation the completion of the transactions contemplated by the
documents entered into in connection with the financing by Buyer of the purchase
of the Shares, will enable it to meet the requirements for qualification and
taxation as a REIT.
2. Neither the transfer of the Shares to Buyer pursuant to the terms of
the Stock Purchase Agreement, nor the ownership of such Shares by Buyer after
the Closing, will jeopardize the qualification of CalREIT as a "real estate
investment trust" under the Code so long as the beneficial ownership of Buyer
are not so changed as to cause five or fewer individuals to own, directly or
indirectly, fifty percent or more of the value of all CalREIT shares.
3. CalREIT is duly organized and validly existing as a business trust in
good standing in the state of California and is duly qualified in each other
jurisdiction where it owns assets, except where the failure so to qualify would
not have a material adverse effect on CalREIT.
4. The Board of Trustees of CalREIT has duly exempted from the "Limit"
provisions of Section 4.10 of the Declaration of Trust the ownership of the
Shares while owned by Buyer. Thus, the Shares will not be deemed to be "Excess
Shares" under Section 4.10 of the Declaration of Trust.
5. The authorized and issued capital stock of CalREIT consists of
unlimited shares of common stock of which ________________ shares are issued and
outstanding as of the Closing Date and unlimited shares of preferred stock, of
which no shares are issued and outstanding. As of the Closing Date, no options,
warrants or other rights to acquire shares of common stock were outstanding,
other than options to purchase an aggregate of 450,000 shares of common stock
under CalREIT's stock option plans, all of which options are canceled and of no
further force and effect unless the stock option plans are approved by the
shareholders on or before November 15, 1996.
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EXHIBIT 4.6
MATTERS TO BE COVERED IN OPINION OF CALREIT'S AUDITOR
The opinion referenced in SECTION 4.6 will cover the following matters,
subject to appropriate and customary qualifications:
Our firm was engaged to provide tax services to CalREIT on March 13, 1995.
Accordingly, the following comments are restricted only to the work we have
performed or to the information that came to our attention on or after such
date:
1. We prepared the CalREIT federal (U.S.) and Arizona income tax returns
and California franchise tax returns for calendar years 1994 and 1995. These
returns were delivered to CalREIT management prior to the statutory due dates
for such returns, and we understand from management of CalREIT that they were
timely filed. The federal income tax returns for both 1994 and 1995 showed a
zero tax liability. The Arizona income tax returns and the California franchise
tax returns showed only the annual minimum tax liabilities of $50 and $800,
respectively, for both 1994 and 1995.
2. We did not prepare the CalREIT income and franchise tax returns for
years prior to 1994; however, nothing has come to our attention that would cause
us to believe that such returns were not timely filed nor that income and
franchise taxes due, if any, were not timely paid.
3. To our knowledge, there are no actual or threatened assessments of
taxes by any taxing authority against CalREIT. This was confirmed to us by
Frank Morrow, CEO of CalREIT, on September ____, 1996.
4. CalREIT financial personnel have recently completed calculations for
calendar years 1991 through 1995 to verify compliance with the so-called asset
and income tests of Internal Revenue Code section 856(c) that must be satisfied
to maintain status as a real estate investment trust for income tax purposes.
We reviewed the calculations prepared by CalREIT financial personnel in
connection with the annual income tests and the quarterly asset tests for
calendar years 1991 through 1995. As a part of our review, we verified the
mathematical accuracy of the computations and the threshold percentages that
apply to each of the tests.
As described below, our review did not include procedures, or included only
limited procedures, to verify the following critical elements of the
calculations as required by Internal Revenue Code section 856(c):
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(a) we did not conduct any procedures to verify the fair market value of
CalREIT's assets on any of the testing dates,
(b) we conducted only limited procedures to verify whether CalREIT's
assets were properly categorized as qualifying or non-qualifying for purposes of
the asset and income tests, and
(c) we conducted only limited procedures to verify whether CalREIT's
income items were properly categorized as qualifying or non-qualifying for
purposes of the income tests.
The fair market values of assets used in the test calculations were
provided by CalREIT personnel and, accordingly, we express no opinion on them.
The identification of types of assets and types of income items were also
provided by CalREIT personnel and, accordingly, we express no opinion on them.
Our procedures did include a review of whether each type of asset and each type
of income item, as identified by CalREIT personnel without verification by us,
were properly categorized as qualifying or non-qualifying for purposes of the
asset and income tests.
From our review of the asset and income test calculations for 1991 through
1995, as prepared by CalREIT, nothing came to our attention indicating that
CalREIT was not in compliance throughout such periods with Internal Revenue Code
section 856(c) requirements.
5. We have recently become aware that CalREIT was not in compliance with
the requirements of section 1.857-8 of the U.S. Treasury Income Tax Regulations
to make a timely demand for shareholder information for calendar years 1994 and
1995 and possibly for some or all prior years. In this connection, we were
engaged by CalREIT to prepare and submit a request to enter into a closing
agreement with the Internal Revenue Service. The proposed closing agreement
would state that the failure of CalREIT to make a timely demand for shareholder
information pursuant to the requirements of section 1.857-8 of the U.S. Treasury
Income Tax Regulations would not affect its qualification as a real estate
investment trust for taxable years 1991 through 1995. The written request was
submitted to the Internal Revenue Service on or about August 1, 1996. We expect
to receive a response to such request on or before September 13, 1996.
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EXHIBIT 4.7
MATTERS TO BE COVERED IN OPINION OF SELLER'S COUNSEL
The opinion referenced in SECTION 4.7 will cover the following matters, subject
to appropriate and customary qualifications:
1. Peregrine is a business trust, duly organized, validly existing and in good
standing under the laws of the State of California. Peregrine has full
power and authority to execute, deliver and perform its obligations under
the Stock Purchase Agreement.
2. The Stock Purchase Agreement has been duly authorized by all trust and
shareholder action and is enforceable against Peregrine in accordance with
its terms.
3. Although Peregrine remains subject to bankruptcy court jurisdiction, under
the terms of the bankruptcy reorganization plan, and under subsequent
orders of the bankruptcy court which have been entered and which are
actually known to us, if any, no bankruptcy court approval is required in
connection with Peregrine's execution, delivery and performance under the
Stock Purchase Agreement.
4. All consents from third parties required under the material agreements
listed on EXHIBIT A attached hereto by which Peregrine or its assets are
bound have been obtained. Neither the execution and delivery by Peregrine
of the Stock Purchase Agreement nor the performance of all obligations of
Peregrine thereunder to be performed as of the date hereof, will constitute
a material default under, or material violation or material breach of, the
material agreements.
5. Upon receipt of the Cash Payment, Buyer shall receive the Shares free and
clear of any Liens, except for restrictions on transfer pursuant to federal
or applicable state securities laws.
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EXHIBIT 5.5
MATTERS TO BE COVERED IN OPINION OF BUYER'S COUNSEL
The opinion referenced in SECTION 5.5 will cover the following matters, subject
to appropriate and customary qualifications:
1. Buyer is a limited liability company, duly organized, validly existing and
in good standing under the laws of the State of Delaware. Buyer has full
power and authority to execute, deliver and perform its obligations under
the Stock Purchase Agreement.
2. The Stock Purchase Agreement has been duly authorized by all necessary
action under the organizational documents of Buyer and is enforceable
against Buyer in accordance with its terms.
3. Neither the transfer of the Shares to Buyer pursuant to the terms of the
Stock Purchase Agreement, nor the ownership of such Shares by Buyer after
the Closing, will jeopardize the qualification of CalREIT as a REIT.
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Page 52 of 52
EXHIBIT 9.2(a)
Escrow Agreement
