SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 23,
1996
AMERICAN INDUSTRIAL PROPERTIES REIT
(Exact name of registrant as specified in its charter)
Texas 1-9016 75-6335572
(State or Other Jurisdiction(Commission File (I.R.S. Employer
of Incorporation) Number) Number)
6220 North Beltline, Suite 205, Irving, Texas
(Address of principal executive offices)
75063
(zip code)
(972) 550-6053
(Registrant's telephone number, including area code)
Item 5. Other Events
On November 27, 1996, American Industrial Properties REIT
(the "Trust") announced that litigation in the U.S. District
Court for the Northern District of Texas (the "Court") between
the Trust and Pure World, Inc. and Robert Strougo, shareholders
of the Trust, has been settled pending final approval by the
Court and the satisfaction of certain conditions contained in the
Settlement Agreement executed by the parties on November 26, 1996
(the "Settlement"). A notice describing the terms of the
Settlement was approved by the Court on November 26, 1996, and
mailed on November 27, 1996, to shareholders of record on
November 13, 1996. A Summary Notice was published in the Wall
Street Journal on November 29, 1996.
A hearing was held before the Court, on December 19, 1996,
and the Court: (i) approved the Settlement as fair, reasonable,
and adequate; (ii) entered final judgment dismissing the actions
with prejudice; and (iii) granted the applications by counsel for
Pure World and Strougo for an award of attorneys' fees and
reimbursement of expenses as discussed below. There was no
shareholder objection to the Settlement expressed at the hearing.
The Shareholder Litigation
As previously reported, the Trust filed a lawsuit on January
8, 1996, against Pure World, Inc. and Paul O. Koether (the "Pure
World Litigation"). The suit alleged, among other things,
violations under federal and state securities law for material
misrepresentations and omissions made by the defendants in
filings made with the Securities and Exchange Commission,
including the failure to disclose meetings and correspondence
between the defendants and representatives of The Manufacturers
Life Insurance Company and The Manufacturers Life Insurance
Company (U.S.A.) (collectively "MLI"), the Trust's largest
unsecured creditor, regarding the proposed purchase at a discount
of the Trust's unsecured notes held by MLI. The Trust sought
injunctive relief preventing future discussions with MLI
regarding the purchase of the MLI notes, further attempts to gain
control of the Trust by the defendants and any further purchases
of shares in the Trust by the defendants until proper disclosures
are made. In addition, the Trust sought a declaratory judgment
regarding enforcement of the share ownership restrictions
contained in the Trust's Bylaws and injunctive relief preventing
the voting of shares accumulated in excess of the share ownership
limitations contained in the Bylaws. The Trust also sought
recovery of distributions paid on shares accumulated in excess of
these share ownership limitations.
On January 30, 1996, the defendants in the Pure World
Litigation filed an answer, counterclaims and a third party
complaint. The third party complaint was filed against William
H. Bricker and Charles W. Wolcott, the two Trust Managers of the
Trust during the time period complained of in the third party
complaint. In their counterclaims and third party claims, the
defendants requested that certain Bylaw amendments be stricken,
that the Court issue an injunction until an additional
independent Trust Manager was appointed, that a receiver be
appointed for the assets and business of the Trust, that the
Trust recover certain funds from the Trust Managers, and that the
defendants recover an unspecified amount of damages and
attorneys' fees. The Trust filed a Motion to Dismiss, which the
Court granted in part, requiring the defendants to replead their
counterclaim.
On February 22, 1996, a separate class action and derivative
complaint was filed against the Trust and its Trust Managers by a
shareholder of the Trust, Robert Strougo (the "Strougo
Litigation"). The Strougo complaint alleges, among other claims,
interference with shareholders' franchise rights and breach of
fiduciary duty and seeks recovery of unspecified damages and
attorneys' fees. The Court later granted the Trust's and the
Trust Managers' motion to dismiss the class action claim, ruling
that such claim was improper. In April 1996, the remaining
derivative claims of the Strougo Litigation were consolidated
with the Pure World Litigation (collectively the actions are
referred to as the "Shareholder Litigation").
On March 26, 1996, the Court denied Pure World's motion for
partial summary judgment to appoint a receiver for the Trust.
The Court ruled that the failure to elect new Trust Managers or
re-elect the current Trust Managers at the last two annual
shareholder meetings has not resulted in shareholder deadlock and
is insufficient grounds for the appointment of a receiver. On
September 9, 1996, the Court granted Pure World's motion for
partial summary judgment, ruling that the provisions of Article
IX of the Trust's bylaws limiting share ownership to 9.8% of the
Trust's shares is invalid under the Texas REIT Act. The Court
denied the Trust's motion for its reconsideration of its
September 9, 1996 ruling on October 28, 1996. Pure World also
filed an application to preliminarily enjoin the Trust from
enforcing Article IX and another bylaw provision (Article XIII)
adopted by the Trust following the Court's September 9, 1996
ruling. Article XIII also limits share ownership to ensure the
Trust continues to comply with REIT requirements under the
federal income tax laws and becomes effective in the event that
Article IX is finally adjudicated to be unenforceable or
otherwise invalid, including any and all appeals or other
appellate review, or the Trust is enjoined from enforcing Article
IX. On November 12, 1996, the Court granted defendants'
application for preliminary injunction.
The Settlement
On November 26, 1996, the Trust and the Trust Managers
executed the Settlement Agreement setting forth the terms and
conditions of the Settlement. The Trust Managers believe that
the Settlement is in the best interests of the Trust and its
shareholders because the settlement and dismissal of the
Shareholder Litigation will avoid further expense, dispose of
burdensome and potentially protracted litigation, permit
continued operation of the business of the Trust unhindered by
the distractions, interference and expense of litigation and
terminate all controversy involving the settled claims. The
Settlement will also allow the Trust to attempt to obtain
additional equity capital to allow the Trust to grow, with a view
to enhancing shareholder value. The Trust and the Trust Managers
deny any wrongdoing on their respective parts and their
participation in the Settlement does not, and should not be
understood to, constitute any admission to the contrary.
As approved by the Court on December 19, 1996, the terms of
the Settlement provides for the following:
0. The Trust and/or the Trust Managers have caused the Bylaws
of the Trust to be amended as follows:
( ) To provide that Trust Manager nominees who have not
been previously elected as Trust Managers by the shareholders of
the Trust (as well as Trust Managers who have been previously
elected as Trust Managers by the shareholders of the Trust) shall
be elected at the annual meeting of shareholders by the
affirmative vote of the holders of a majority of the outstanding
shares of the Trust.
(a) To provide that a vacancy on the Board of Trust
Managers may be filled by a majority of the remaining Trust
Managers, though less than a quorum, or by vote of the majority
of the outstanding shares of the Trust.
(b) To provide that the cash compensation of a Trust
Manager shall not be increased by more than 20% over the prior
year without the approval of the holders of a majority of the
shares cast at the annual meeting of shareholders of the Trust.
(c) To provide that, in the event the Trust receives an
offer to purchase all or substantially all of the assets of the
Trust, or if the Trust receives a proposal for a merger
transaction in which the Trust will not be the surviving entity,
the Board of Trust Managers will create a committee consisting
entirely of Independent Trust Managers (as defined in the Trust's
Declaration of Trust) who shall, consistent with their fiduciary
duties, review any such offer and make a recommendation to the
Board of Trust Managers.
(d) To provide that when making a determination of whether
to declare a dividend, the Trust Managers shall make their
decision consistent with their fiduciary duties as Trust
Managers.
(e) To provide that each of the foregoing provisions may be
amended only by the vote of the holders of a majority of the
outstanding shares of the Trust.
1. The Trust Managers repealed Article XIII of the Bylaws, and
will repeal Article IX of the Bylaws, limiting share ownership to
9.8%, not later than December 1, 1997, unless the Trust Managers
desire to retain a 9.8% limitation on share ownership, in which
case the Trust Managers will present a proposal to the Trust's
shareholders to amend the Declaration of Trust to provide for a
9.8% limitation on share ownership consistent with industry
standards.
2. The Trust increased the number of Trust Managers on the
Board of Trust Managers to five, with the additional two trust
managers being Independent Trust Managers, as defined in the
Trust's Declaration of Trust. The Trust Managers unanimously
voted to appoint Edward B. Kelley and T. Patrick Duncan to fill
the vacancies created by the increase in the number of trust
managers pursuant to the terms of a Share Purchase Agreement
dated December 13, 1996 (the "USAA Share Purchase Agreement"), by
and between the Trust and USAA Real Estate Company ("USAA
REALCO"), a third-party investor and the real estate acquisition
and management arm of parent company United Services Automobile
Association, an insurance and financial services association
based in San Antonio, Texas ("USAA").
Mr. Kelley is President of USAA REALCO. He joined
USAA REALCO in April 1989 as executive vice president and chief
operating officer before assuming his new title in August 1989.
Mr. Kelley received his Bachelor of Business Administration
degree from St. Mary's University in 1964 and a Masters in
Business Administration from Southern Methodist University in
1967, and is a Member of the Appraisal Institute (MAI). He is
past chairman of the North San Antonio Chamber of Commerce and
past board member of the Baptist Memorial Hospital System,
La Quinta Motor Inns, and the National Association of Industrial
and Office Parks.
Mr. Kelley is also a member of the board of
directors and executive committee of the Alamo Area Council of
Boy Scouts of America and a member of the Board of Trustees of
St. Mary's University, where he has served as past chairman of
the board. Mr. Kelley is also a member of the Board of Trustees
of the Baptist Children's Home in San Antonio and he is a member
of the Rotary Club of Downtown San Antonio and the Wednesday
Civil Breakfast Club of San Antonio. He was the 1992 chairman of
the Greater San Antonio Chamber of Commerce and is on the board
of directors of the San Antonio Economic Development Foundation.
Mr. Duncan joined USAA REALCO in November 1986 as
Chief Financial Officer. With over 24 years of experience, Mr.
Duncan serves as Senior Vice President of Real Estate Operations
with responsibilities which include the direction of all
acquisitions, sales, management and leasing of real estate for
USAA-affiliated companies.
Mr. Duncan received degrees from the University of
Arizona in Accounting and Finance. He is a Certified Public
Accountant, CCIM, and holds a Texas Real Estate Broker's License.
He currently holds memberships in the Texas and Arizona State
Boards of Accounting, the Texas and Arizona State Societies of
Certified Public Accountants, the International Council of
Shopping Centers, the Urban Land Institute, the National
Association of Real Estate Investment Trusts and the Pension Real
Estate Association, Vice-Chairman of the Board of the Daughters
of Charity, and a member of the Board of Directors for the North
San Antonio Chamber of Commerce.
3. In connection with the Settlement, USAA REALCO, purchased
all shares of the Trust previously held by Pure World, Jonathan
Tratt, Stanley D.I. Horwitz, David Bradley, Keith Sexton and C.J.
Scott in privately negotiated transactions. All shares
previously held by Black Bear Realty, Ltd. and Turkey Vulture
Fund XIII, Ltd., affiliates of Richard Osborne (the "Osborne
Shares") (998,100 shares), were purchased by the Trust through
American Industrial Properties REIT, Inc., a Maryland corporation
and affiliate of the Trust ("AIP Inc.") for an aggregate price of
$2,744,775.00 ($2.75 per share). The proceeds of a loan to AIP
Inc. from USAA REALCO were utilized to acquire the Osborne
Shares, which loan is evidenced by a Promissory Note dated
November 25, 1996, by AIP Inc. for the benefit of USAA REALCO.
The Trust has satisfied the loan from USAA REALCO under the terms
of the Promissory Note by transferring the Osborne Shares to USAA
REALCO and paying $17,106 in accrued interest. Under the terms
of the Promissory Note, interest accrued on a daily basis for 60
days from the inception of the note at a rate equal to 9% per
annum. The transfer of the Osborne Shares to USAA REALCO was
made in accordance with the terms and conditions of a Share
Purchase Agreement dated December 20, 1996 (the "Osborne Share
Purchase Agreement"), by and among the Trust, AIP Inc. and USAA
REALCO. All of the above entities selling shares to USAA REALCO
or AIP Inc., along with Messrs. Koether and Osborne, have agreed
not to purchase any of the Trust's shares or otherwise attempt to
influence the Trust or its shareholders for a period of five (5)
years.
4. Pure World will receive the sum of $825,000.00 in
consideration for the releases and standstill agreement given by
Pure World and Mr. Koether in connection with the Settlement
Agreement, for the undertaking of Pure World to sell its shares
of the Trust to USAA REALCO, and for attorneys' fees incurred by
Pure World in connection with the Shareholder Litigation and
prior disputes. The Trust will also pay Pure World all dividends
previously withheld from Pure World, plus accrued interest. Pure
World's counsel applied with the Court for, and was granted, an
award of attorneys' fees and expenses in the amount of
$390,000.00, which amount is included in the $825,000.00 total.
AIP Inc. also paid $25,000.00 to Black Bear Realty, Ltd. and
other affiliates of Mr. Osborne in consideration of the
standstill agreement given upon transfer of the Osborne Shares.
5. Strougo's counsel applied to the Court for, and was granted,
an award of attorneys' fees of $120,000.00, and reimbursement of
expenses incurred in connection with the Shareholder Litigation
in the amount of $10,000.00.
6. The liability insurer providing director and officer
insurance for the Trust Managers will reimburse the Trust
$625,000.00 for amounts paid to Pure World and Strougo in
settlement of the litigation.
7. While final approval of the Settlement was pending, the
Court stayed the Shareholder Litigation and the effect of its
November 12, 1996 Order granting Pure World's Application for
Preliminary Injunction (except as to shares acquired between
September 9, 1996 and November 20, 1996). In connection with
approving the Settlement, the Court dissolved the injunction.
Sale of Unissued Trust Shares to USAA REALCO
On December 19, 1996, the Trust sold its remaining
authorized, but previously unissued, shares of beneficial
interest (924,600 shares) to USAA REALCO for an aggregate sale
price of $2,542,650 ($2.75 per share) pursuant to the terms and
conditions of the USAA Share Purchase Agreement (the "Additional
Shares"). On December 10, 1996, the New York Stock Exchange
authorized the listing of the Additional Shares of the Trust.
The USAA Share Purchase Agreement affords USAA REALCO,
among other things, the right to have two persons appointed to
fill vacancies on the Board of Trust Managers. Pursuant to such
right afforded in the USAA Share Purchase Agreement, USAA REALCO
requested that Messrs. Kelley and Duncan be appointed Trust
Managers. The USAA Share Purchase Agreement also entitles USAA
REALCO to nominate two individuals for election as Trust Managers
at the next annual meeting of the Trust. Under the USAA Share
Purchase Agreement, the number of Trust Managers on the Board of
Trust Managers will not exceed five unless, prior to December 20,
1999, USAA REALCO exercises the right under the USAA Share
Purchase Agreement to, upon written notice to the Trust, have the
number of Trust Managers increased to seven and to have an
additional two persons appointed to fill such vacancies. In the
event of death, resignation or removal from office of a person
designated or nominated by USAA REALCO to serve as a Trust
Manager, USAA REALCO will be entitled to designate a replacement
Trust Manager to fill the vacancy.
Pursuant to the USAA Share Purchase Agreement,
committees of Trust Managers may not be comprised of more than
three members, at least one of which must be a Trust Manager
designated or nominated by USAA REALCO to serve on the Board of
Trust Managers, as long as any such persons serve on the Board of
Trust Managers.
Registration Rights Agreements between the Trust and USAA
REALCO
The Trust and USAA REALCO also executed Registration
Rights Agreements in connection with the sale of the Additional
Shares and the transfer of the Osborne Shares to USAA REALCO
that, among other things, afford USAA REALCO and permitted
transferees certain rights to require the Trust to register the
Osborne Shares and the Additional Shares, and any shares issued
or issuable with respect to the Osborne Shares or the Additional
Shares, held by USAA REALCO for resale under the Securities Act
of 1933, as amended (the "Registration Rights Agreements"). The
Registration Rights Agreements generally provide USAA REALCO the
right to require the Trust (i) to file a "shelf" registration
statement with respect to the Osborne Shares and Additional
Shares held by USAA REALCO, which must be kept effective for a
period of three years following its initial effective date, (ii)
at any time until December 19, 2001, to file a registration
statement registering the resale of all or a portion of the
Osborne Shares or the Additional Shares then held by USAA REALCO,
up to a maximum of three registration statements, and (iii) at
any time until December 19, 2001, to include (subject to certain
exceptions) in any registration statements filed by the Trust
(other than on Form S-4 or Form S-8) the Osborne Shares or
Additional Shares held by USAA REALCO.
USAA REALCO and Trust's Debt with The Manufacturer's Life
Insurance Company
The Trust has executed a letter agreement dated
December 18, 1996, with USAA REALCO wherein USAA REALCO has
agreed that it or one of its affiliates will commence
negotiations to purchase or repay the Trust's 8.8% Promissory
Notes payable to MLI in the original principal amounts of
$23,261,317.66 and $19,143,646.92 (collectively the "MLI Notes").
USAA REALCO's purchase or repayment of the MLI Notes is
conditioned on, among other things, completion of satisfactory
due diligence, the consummation of a purchase or repayment
agreement on terms satisfactory to USAA REALCO, in its sole
discretion. In the event USAA REALCO purchases or repays the MLI
Notes, or alternatively advances funds to the Trust necessary to
repay the MLI Notes, the MLI Notes (or the obligations
represented thereby) will be modified or replaced to incorporate,
among other things, the following:
a. USAA REALCO will amend the current aggregate
principal balance ($9,419,213) of the MLI Notes so that the
resulting aggregate principal balance of the MLI Notes will be at
least $7,040,721, and in any event $1,591,103 greater than the
amount paid by USAA REALCO to purchase the MLI Notes, plus the
expenses incurred by USAA REALCO in connection with this
transaction.
b. Subject to clause (e) below, the MLI Notes
will continue to accrue interest at a non-default rate of 8.8%
per annum, with accrued interest payable monthly in arrears, and
the maturity of the MLI Notes will be extended to December 31,
2000.
c. The Trust will waive its right to make the
discounted prepayments contemplated by the Option Agreement dated
as of May 22, 1996 relating to the MLI Notes (the "Option
Agreement") and the Trust will have no further right to make any
optional prepayment of the MLI Notes.
d. The MLI Notes will be amended to provide
that, subject to obtaining the shareholder approval described in
clause (e) below, such MLI Notes are convertible (in whole or in
part) at USAA REALCO's option, at any time, into a number of
shares of beneficial interest, $.10 par value per share, of Trust
(the "Converted Shares") determined as follows:
P / C = S
where (i) "P" equals the aggregate principal balance of
such MLI Notes at the date of conversion; (ii) "C" equals the
conversion price determined pursuant to clause (f) below; and
(iii) "S" equals such number of Converted Shares.
e. The Trust will submit the conversion feature
described in clause (d) above to its shareholders for approval as
promptly as possible after USAA REALCO acquires the MLI Notes and
will use its best efforts to secure such approval. If the Trust
has not obtained shareholder approval of such conversion feature
by June 30, 1997, (a) effective July 1, 1997 the interest rate
applicable to the MLI Notes will increase to 18% (but in no event
to exceed the highest lawful rate) and (b) the Trust will be
required to make a mandatory prepayment of the full principal of
the MLI Notes, plus accrued, unpaid interest on October 31, 1997.
f. The conversion price "C" referred to in
clause (d) above will be determined as follows:
(i) if the conversion of such MLI Note
occurs on or before December 31, 1997, the conversion price will
be $2.00;
(ii) if the conversion of such MLI Note
occurs after the period in (i) above but on or before December
31, 2000, the conversion price per share will be $2.25.
Upon conversion of either MLI Note into Converted
Shares, the Trust shall be required to enter into a Registration
Rights Agreement with USAA REALCO covering the resale of such
Converted Shares substantially in the same form as the
Registration Rights Agreements.
Item 7. Financial Statements, Pro Forma Financial
Information and Exhibits
(c) Exhibits
99.1 Court Order dated November 26, 1996.
99.2 Settlement Agreement executed on November 25,
1996.
99.3 Amendments to Fourth Amended and Restated Bylaws
99.4 Share Purchase Agreement dated as of December 13,
1996, by and between American Industrial Properties REIT
and USAA Real Estate Company.
99.5 Promissory Note dated November 25, 1996, by and
between American Industrial Properties, Inc. and USAA Real
Estate Company.
99.6 Letter Agreement dated December 18, 1996, by and
between American Industrial Properties, Inc. and USAA Real
Estate Company.
99.7 Share Purchase Agreement dated as of December 20,
1996, by and between American Industrial Properties
REIT, American Industrial Properties REIT, Inc. and USAA
Real Estate Company.
99.8 Registration Rights Agreement dated as of December
19, 1996 by and between American Industrial Properties REIT
and USAA Real Estate Company.
99.9 Registration Rights Agreement dated as of December
20, 1996,by and between American Industrial Properties REIT
and USAA Real Estate Company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
AMERICAN INDUSTRIAL PROPERTIES REIT
/s/ Charles W. Wolcott
Charles W. Wolcott
President and Chief Executive
Officer
DATE: December 23, 1996
Index to Exhibits
Sequentially
Exhibit No. Description Numbered Page
99.1* Court Order dated November 26, 1996
99.2* Settlement Agreement executed on November 25, 1996
99.3* Amendments to Fourth Amended and Restated Bylaws
99.4* Share Purchase Agreement dated as of December 13, 1996,
by and between American Industrial Properties, REIT
and USAA Real Estate Company
99.5* Promissory Note dated November 25, 1996, by
and between American Industrial Properties, Inc.
and USAA Real Estate Company
99.6* Letter Agreement dated December 18, 1996, by and
between American Industrial Properties, Inc. and
USAA Real Estate Company.
99.7* Share Purchase Agreement dated as of December 20, 1996,
by and between American Industrial Properties REIT,
American Industrial Properties REIT, Inc. and USAA Real
Estate Company.
99.8* Registration Rights Agreement dated as of December 19, 1996,
by and between American Industrial Properties REIT and
USAA Real Estate Company.
99.9* Registration Rights Agreement dated as of December 20, 1996,
by and between American Industrial Properties REIT and
USAA Real Estate Company.
* Filed herewith.
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
AMERICAN INDUSTRIAL PROPERTIES
REIT,
Plaintiff,
v. Civil No. 3:96-CV-0068-H
(consolidated)
PURE WORLD, INC., ET AL.,
Defendants.
ROBERT STROUGO,
Plaintiff, ORDER
v.
WILLIAM H. BRICKER, ET AL.,
Defendants.
ORDER
Upon the consent of all parties and the Joint Motion for
Approval of Settlement dated November 26, 1996 (the "Motion"), it
is hereby
ORDERED as follows:
1. The Actions shall, for purposes of settlement only, be
maintained and proceed as derivative actions on behalf and for
the benefit of American Industrial Properties REIT (the "Trust").
2. A hearing (the "Hearing") will be held before the
undersigned at 2:00 P.M. on December 19, 1996 at 1100 Commerce
Street, Dallas, Texas, for the purpose of determining (a) whether
the terms of the Settlement Agreement between the parties to this
litigation (the "Settlement Agreement") should be approved as
fair, reasonable and adequate, (b) whether final judgment should
be entered dismissing this action with prejudice as to all of the
settled claims, and (c) to consider any applications for an award
of attorneys' fees and reimbursement of expenses to be paid by
the Trust in accordance with the terms and conditions of the
Settlement Agreement.
3. The Hearing may, without further notice, be adjourned
by this Court at the time of the hearing or on any adjourned date
thereof.
4. Notice of the Hearing, including the Notice of Proposed
Settlement of Derivative Actions and Settlement Hearing (the
"Notice") (substantially in the form annexed to the Motion as
Exhibit B) is hereby approved by this Court. A Summary Notice of
Proposed Settlement of Derivative Actions and Settlement Hearing
("Summary Notice") (substantially in the form annexed to the
Motion as Exhibit C) is also hereby approved by the Court. The
Court finds that such notices meet the requirements of Rule 23.1
of the Federal Rules of Civil Procedure and due process, and is
the best possible notice practicable under circumstances and
constitutes due and sufficient notice to all persons entitled
thereto.
5. The Notice shall be mailed to recordholders as of
November 13, 1996, no later than three (3) days after entry of
the Hearing Order and the Summary Notice shall be published in
the national edition of The Wall Street Journal within three (3)
business days after the Notice is mailed. On or before the date
of the Hearing, proof by affidavit of the mailing of the Notice
and publication of the Summary Notice shall be filed with the
Court.
6. At the Hearing, any person or entity who held the
Trust's common stock on the date of Notice may appear in person
or by attorney to show cause, if any, why the Settlement
Agreement should not be approved as fair, reasonable, and
adequate, why judgment should not be entered dismissing this case
with prejudice, or why the Court should not grant the
applications for allowance of attorneys' fees and reimbursement
of expenses filed by Pure World, Inc. and Robert Strougo.
However, unless the Court otherwise directs for good cause shown,
no person other than the named parties shall be heard and no
briefs or papers submitted by or on behalf of such shareholder
shall be received or considered by this Court at or in connection
with the Hearing, unless no later than ten (10) days prior to the
Settlement Hearing the following documents are served and filed
in the manner provided below: (a) a notice of intention to
appear; (b) proof of ownership of the Trust's common stock as of
November 13, 1996; and (c) a detailed statement of such
shareholder's specific objections to any matter before the Court,
including any documents and writings such person wishes the Court
to consider. Such documents shall be served upon the following
counsel and then filed with the United States District Clerk,
1100 Commerce Street, Room 14A20, Dallas, Texas 75242: Craig L.
Weinstock, Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., 2200
Ross Avenue, Suite 900, Dallas, Texas 75201 (counsel for American
Industrial Properties REIT, Charles Wolcott and William Bricker);
Robert Cohan, Cohan, Simpson, Cowlishaw & Wulff, L.L.P., 2700 One
Dallas Centre, 350 N. St. Paul Street, Dallas, Texas 75201
(counsel for Pure World, Inc. and Paul Koether); and Jeffrey M.
Haber, Wechsler Harwood Halebian & Feffer LLP, 805 3rd Avenue,
7th Floor, New York, New York 10022 (counsel for Robert Strougo).
Any person who fails to object in the manner provided herein
shall be deemed to have waived his, her or its objections and
shall forever be barred from making any such objections in the
Actions or in any other action or proceeding.
7. Pending final determination of whether the settlement
shall be approved, no party to this action or shareholder of the
Trust may institute, commence or continue, directly or in any
other capacity any action asserting any of the claims being
settled or any claim which has or could have been asserted in
this action or any other claim arising out of or relating to the
subject matter of this action.
8. Costs incurred in connection with the Notice and the
Summary Notice shall be paid by the Trust.
9. If the terms and provisions of the Settlement Agreement
and Motion are not approved by this Court or if for any other
reason the Settlement does not become final, all the proceedings
had in connection with the Settlement, including the provisions
of this Order, shall be without prejudice to the rights of any of
the parties and inadmissible for any purpose in this or in any
other proceeding or action.
10. Other than as set forth herein, further activity in
this case is stayed pending final approval of the Settlement
Agreement. The Trust is permitted to file a Notice of Appeal of
the Court's November 12, 1996 Order granting Pure World's
Application for Preliminary Injunction (the "Order").
11. Pending final approval of the Settlement Agreement,
that portion of the Court's November 12, 1996 Order concerning
Article IX of the Trust's By-laws is stayed, provided that the
Trust shall not seek to apply Article IX to any shares of the
Trust acquired between September 9, 1996 and November 20, 1996.
SIGNED: November 26, 1996.
/s/
UNITED STATES DISTRICT JUDGE
The undersigned representing all the parties hereto, consent to
the form of the above order and to its immediate entry.
/s/
Craig L. Weinstock
Mark C. Taylor
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
2200 Ross Avenue, Suite 900
Dallas, Texas 75201
COUNSEL FOR AMERICAN INDUSTRIAL
PROPERTIES REIT, CHARLES WOLCOTT,
AND WILLIAM BRICKER
/s/
Robert M. Cohan
Cohan, Simpson, Cowlishaw & Wulff, L.L.P.
2700 One Dallas Centre
350 N. St. Paul Street
Dallas, Texas 75201
COUNSEL FOR PURE WORLD, INC. AND PAUL KOETHER
/s/
Jeffrey M. Haber
Wechsler Harwood Halebian & Feffer LLP
805 3rd Avenue, 7th Floor
New York, New York 10022
COUNSEL FOR ROBERT STROUGO
SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT ("Settlement Agreement") is made
and entered into effective as of November 25, 1996, by and among
AMERICAN INDUSTRIAL PROPERTIES REIT (the "Trust"), CHARLES W.
WOLCOTT ("Wolcott") AND WILLIAM H. BRICKER ("Bricker") (Wolcott
and Bricker are collectively, the "Trust Managers"), on the one
hand and PURE WORLD, INC. ("Pure World") and PAUL O. KOETHER
("Koether") (collectively, the "Pure World Parties"), and ROBERT
STROUGO ("Strougo") on the other hand (sometimes collectively
referred to hereinafter as the "Parties").
RECITALS:
1. Disputes have arisen between the Pure World parties, on the
one hand, and the Trust and Trust Managers, on the other, which
have led to a series of expensive proxy contests and the
institution of litigation against one another (the "Disputes").
2. WHEREAS, the Trust filed suit against Pure World and
Koether, currently pending in the United States District Court
for the Northern District of Texas, Dallas Division (the
"Court"), in a case styled American Industrial Properties REIT v.
Pure World, Inc., et al.; Case No. 3:96-CV-0068-H (the
"Lawsuit"). Additionally, Strougo filed a lawsuit in the Court
styled Robert Strougo v. William Bricker, et al., No. 3:96-CV-
0505-H, which has been consolidated in and with the Lawsuit.
3. WHEREAS, Pure World filed individual and shareholder
derivative claims and Strougo filed shareholder derivative claims
in the Lawsuit against the Trust and the Trust Managers.
4. WHEREAS, the Parties desire to enter into this Settlement
Agreement for the purpose of setting forth all agreements and
understandings reached among them with respect to settlement of
the Lawsuit.
5. WHEREAS, the Parties believe that the remedial provisions of
the settlement are reasonable and appropriate business measures
and in contemplation of the Court's approval of the settlement
have begun to implement many of the remedial measures.
6. WHEREAS, the Parties desire to settle all claims,
crossclaims, counterclaims, and appeals, among them without
admitting liability and hereby specifically denying any liability
whatsoever.
AGREEMENTS:
NOW, THEREFORE, in consideration of the mutual agreements
herein expressed, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
Parties executing this Settlement Agreement hereby agree as
follows:
A. Undertakings of the Trust and the Trust Managers.
1. Amendment of Bylaws. Prior to final approval of
this Settlement Agreement by the Court, the Trust and/or the
Trust Managers will cause the Bylaws of the Trust to be amended
as follows:
(a) To provide that trust manager nominees who
have not been previously elected as trust managers by the
shareholders of the Trust (as well as trust managers who have
been previously elected as trust managers by the shareholders of
the Trust) shall be elected at the annual meeting of shareholders
by the affirmative vote of the holders of a majority of the
outstanding shares of the Trust.
(b) To provide that a vacancy on the Board of
Trust Managers may be filled by a majority of the remaining Trust
Managers, though less than a quorum, or by the holders of
majority of the outstanding shares of the Trust.
(c) To provide that the cash compensation of a
trust manager shall not be increased by more than 20% over the
prior year without the approval of the holders of a majority of
the shares cast at the annual meeting of shareholders of the
Trust.
(d) To provide that, in the event the Trust
receives an offer to purchase all or substantially all of the
assets of the Trust, or if the Trust receives a proposal for a
merger transaction in which the Trust will not be the surviving
entity, the board of trust managers will create a committee
consisting entirely of Independent Trust Managers (as defined in
the Trust's Declaration of Trust) who shall, consistent with
their fiduciary duties, review any such offer and make a
recommendation to the board of trust managers.
(e) To provide that when making a determination
of whether to declare a dividend, the Trust Managers shall make
their decision consistent with their fiduciary duties as Trust
Managers.
(f) To provide that each of the foregoing
provisions may be amended only by the vote of the holders of a
majority of the outstanding shares of the Trust.
2. Repeal of Bylaw Provisions Limiting Share
Ownership.
(a) Within five business days of the execution of
this Settlement Agreement, the Trust and/or the Board of Trust
Managers will repeal Article XIII of the Trust's Bylaws, which
was adopted in September 1996.
(b) The Trust and/or the Board of Trust Managers
shall repeal Article IX of the Trust's Bylaws, relating to a 9.8%
limitation on share ownership, on or before the earliest of the
following dates or events:
(i) an affirmative vote of the holders of a
majority of the outstanding shares of the Trust to repeal Article
IX;
(ii) the occurrence of a vote on a proposal
by the Trust Managers to amend the Declaration of Trust to add a
9.8% limitation on share ownership consistent with industry
standard, which fails to receive the requisite number of votes;
(iii) July 1, 1997, unless on or before
June 30, 1997, the Trust has filed a proxy statement with the
Securities and Exchange Commission which contains a proposal to
be voted on by shareholders to amend the Declaration of Trust to
add a 9.8% limitation on share ownership consistent with industry
standard; or
(iv) December 1, 1997.
(c) The Trust and the Trust Managers shall not
adopt or implement any other bylaw that attempts to limit the
number or percentage of shares which any current or future
shareholder of the Trust may purchase or own or that attempts to
restrict the rights appurtent to those shares without shareholder
approval.
3. Number of Trust Managers. As soon as practicable
after final approval of this Settlement Agreement by the Court,
the Trust shall increase the number of trust managers on the
board of trust managers to five, with the additional two trust
managers being Independent Trust Managers (as defined in the
Trust's Declaration of Trust).
4. Amendment of Declaration of Trust. On or before
June 30, 1997, the Trust will file a proxy statement with the
Securities and Exchange Commission which includes a proposal to
be voted upon by shareholders to amend the Declaration of Trust
to provide that a special meeting of shareholders may be called
by a majority of the Trust Managers, any officer of the Trust or
the holders of at least 5% of all the shares entitled to vote at
such meeting.
B. Undertaking of the Pure World Parties.
1. Stock Purchase Agreement. Prior to final approval
of this Settlement Agreement by the Court, and as a condition
precedent to this settlement, Pure World shall enter into a Stock
Purchase Agreement with USAA Real Estate Company ("USAA")
pursuant to which Pure World will sell to USAA all shares of the
Trust's stock owned by Pure World, and all conditions precedent
to closing such Stock Purchase Agreement (excluding final
approval of this Settlement Agreement) shall have been satisfied.
2. STANDSTILL AGREEMENT. The Pure World parties
agree that for a period of five (5) years from the date hereof,
neither of them nor any affiliate nor any entity owned or
controlled by either of them or under common ownership or control
with either of them will: (a) acquire, offer to acquire, or
agree to acquire, directly or indirectly, by purchase or
otherwise, any securities or direct or indirect rights or options
to acquire (through purchase, exchange, conversion or otherwise)
any securities of Trust, (b) make, or in any way participate,
directly or indirectly, in any "solicitation" of "proxies" (as
such terms are used in the proxy rules of the Securities and
Exchange Commission) to vote (including by the execution of
actions by written consent) or seek to advise, encourage or
influence any person or entity with respect to the voting of any
securities of the Trust, (c) form, join or in any way participate
in any "group" (within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934) with respect to any securities
of the Trust, (d) otherwise act, alone or in concert with others,
to seek to control or influence the management, board of
directors (or trust managers) or policies of the Trust, (e)
initiate, propose or otherwise solicit shareholders for the
approval of one or more shareholder proposals (as described in
the Securities Exchange Act of 1934) seeking to acquire or affect
control of the Trust, or (f) acquire any interest in any claims,
mortgages, notes or any other legal or financial obligations of
the Trust.
C. Payments to Pure World and Payment of Attorneys' Fees
and Expenses to Strougo.
1. On or before November 25, 1996, the Trust shall
join Pure World in presenting an agreed order to the Court
directing the Clerk of the Court to pay to Pure World all monies
deposited into the Registry of the Court by the Trust in
connection with its interpleader claim, which sum represents
dividends payable to Pure World and withheld by the Trust,
together with all interest accrued thereon. In addition, the
Trust shall pay to Pure World on or before November 25, 1996, the
sum of $3,000.00, plus interest at the rate of 10% per annum,
which represents the difference between the full dividend payable
to Pure World and the amount deposited by the Trust in the
Registry of the Court.
2. In addition to the foregoing, the Trust agrees to
pay to Pure World, within three business days after final
approval of this Settlement Agreement by the Court, the sum of
$825,000.00. It is understood that the payment of this sum is in
consideration for the releases being given by Pure World and
Koether in connection with this Settlement Agreement, for the
undertakings of Pure World and Koether set forth in this
Settlement Agreement, and for attorneys' fees and expenses
incurred by Pure World in connection with the Disputes and with
the Lawsuit. Pure World will apply to the Court for
reimbursement of its attorneys' fees and expenses incurred in
connection with the Lawsuit, in an amount not to exceed
$400,000.00. The Trust shall pay to Pure World, within three
business days of final approval of this Settlement Agreement by
the Court, such fees and expenses as may be awarded by the Court,
plus such additional amount as is necessary to make the total
payment to Pure World under this paragraph C.2 equal $825,000.00.
3. In connection with the settlement contemplated by
this Settlement Agreement, Strougo's counsel will apply to the
Court for an award of attorneys' fees, in an amount not to exceed
$120,000.00, and reimbursement of expenses incurred in connection
with the Lawsuit, in an amount not to exceed $10,000.00. The
Trust and the Trust Managers agree that they will not oppose
Strougo's counsel's application for an award of attorneys' fees
and reimbursement of expenses in the maximum amounts set forth
herein. The Trust shall pay Strougo's counsel such fees and
expenses, in an amount not to exceed the amounts specified in
this paragraph, as may be awarded by the Court within five
business days of final approval of this Settlement Agreement by
the Court.
D. Court Approval Required.
This Settlement Agreement is conditioned upon, and made
subject to, final approval thereof by the Court. In the event
the Court does not approve the Settlement Agreement, in whole or
in any part, the Settlement Agreement shall be null and void and
of no further effect. The Trust shall bear all costs and
expenses of providing to the Trust's shareholders such notice of
this Settlement Agreement and of the hearing to be held thereon
as may be required by the Court. In the event that the
settlement is not approved by the Court, Pure World, Strougo and
their counsel shall not be required to reimburse the Trust for
the cost of such notice.
E. Litigation Abatement. The Parties agree to notify the
Court regarding this Settlement Agreement and request that all
proceedings, except proceedings necessary to obtain approval of
this Settlement Agreement, be abated from November 14, 1996,
until the earlier of (a) the date of final approval by the Court
of this Settlement Agreement, or (b) the date on which any Party
to this Settlement Agreement delivers written notice to the other
Parties that the settlement contemplated herein will not be
consummated by the non-occurrence of a condition precedent to
this Settlement Agreement. In the event the settlement is not
consummated or the Settlement Agreement is not approved by the
Court, each Party agrees that any deadlines pending as of
November 14, 1996 (including, but not limited to, the deadline
for the Trust to file a notice of appeal of the Court's November
12, 1996 Order granting Pure World's Application for Preliminary
Injunction (the "Preliminary Injunction Order")) shall be
extended on a day-for-day basis for each day of the abatement
period. The Parties also agree to seek a stay, pending final
approval of this Settlement Agreement, of that part of the
Preliminary Injunction Order which applies to Article IX of the
Trust's Bylaws (provided that the Trust shall not seek to apply
said Article IX to any shares of the Trust acquired between
September 9, 1996 and November 20, 1996). In consideration of
the covenants in paragraph A.2. of this Settlement Agreement, the
Parties agree to request that the Court dissolve the Preliminary
Injunction Order as part of its final approval of this Settlement
Agreement. In the event the Trust determines that its right of
appeal of the Preliminary Injunction Order is not preserved by
this litigation abatement set forth herein, it may file a notice
of appeal of the Preliminary Injunction Order. The Trust shall
dismiss any such appeal immediately upon the Court's final
approval of this Settlement Agreement.
F. It is expressly understood that this Stipulation and
any proceeding in connection therewith are not, and shall not be
construed or invoked by any person to be, an admission by any of
the Parties of any liability or wrongdoing with respect to any of
the facts or claims alleged in or arising out of or in any way
relating to the subject matter of the Lawsuit, nor shall this
Settlement Agreement or any of its terms or the negotiations or
proceedings connected with it be offered or received in evidence
as an admission of wrongdoing on the part of the Parties or any
liability therefore.
G. Agreed Dismissals.
Upon final approval of this Settlement Agreement by the
Court, the Parties shall file Agreed Motions to Dismiss With
Prejudice in the Lawsuit. Each Party shall bear its own costs
and attorneys' fees, except as otherwise specified in this
Settlement Agreement.
H. Press Release.
Each of the Trust and Pure World agrees that it will
provide to the other a copy of any proposed press release or
public filing, which describes the Settlement Agreement, not less
than two hours prior to its issuance or filing, and that it will
consider any comments the other may offer about the form or
substance of such release or filing.
I. MUTUAL RELEASES.
1. The Trust, and Charles Wolcott, individually, and
William Bricker, individually, for the purpose of binding
themselves and their heirs, legal representatives, successors and
assigns, and entities with which they are affiliated, including,
but not limited to, all persons or entities claiming by, through
or under any of them, hereby RELEASE, WAIVE, ACQUIT, AND FOREVER
DISCHARGE to the maximum extent permitted under applicable law,
Pure World, Koether and Strougo, and their respective prior,
current and future officers, employees, directors, shareholders,
receivers and conservators, and their respective heirs, legal
representatives, successors and assigns of and from any and all
actions, causes of action, liabilities, claims, counterclaims,
effective defenses, offsets, demands, losses, damages (the
"Wolcott, Bricker and Trust Claims") of any kind or nature
whatsoever, in law or in equity, known or unknown, contingent or
fixed, arising under contract, tort or otherwise, and whether
based on facts known or unknown, and existing on the date hereof,
or which may arise in the future based upon facts and
circumstances which exist or existed on or prior to the date
hereof (excluding, however, any Wolcott, Bricker and Trust Claims
for breach of any further agreement, representation, warranty or
covenant contained in, or for any misrepresentation under, this
Settlement Agreement or any of the documents executed in
connection with or pursuant hereto), including, without
limitation, any and all actions, causes of action, liabilities,
claims, counterclaims, demands, losses and damages asserted or
that could have been asserted in the Lawsuit, or sounding in,
arising from or any way relating to breach of contract, fraud,
deceit, tortious interference, breach of obligations of good
faith and fair dealing, misrepresentation, or deceptive trade
practices, or federal or state securities violations existing
under or arising out of, directly or indirectly, or incurred in
respect of, expressly including, but not limited to, claims for
breach of fiduciary duty, tortious interference with contracts
and business opportunities, fraud in a real estate transaction
under Section 27.01 of the Texas Business and Commerce Code or
deceptive trade practices pursuant to Section 17.41 et seq. of
the Texas Business and Commerce Code. This provision shall not
be construed as an admission of any liability by Pure World,
Koether, Strougo or any other entity or person. WITH RESPECT TO
THE WOLCOTT, BRICKER, AND TRUST CLAIMS, WOLCOTT, BRICKER, AND THE
TRUST, FOR THE PURPOSE OF BINDING THEMSELVES AND THEIR HEIRS,
LEGAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS, AND AFFILIATES,
AND FOR ALL PERSONS OR ENTITIES CLAIMING BY, THROUGH OR UNDER ANY
OF THEM, HEREBY EXPRESSLY WAIVE, RELEASE AND DISCHARGE ANY AND
ALL CLAIMS, RIGHTS AND BENEFITS UNDER THE TEXAS DECEPTIVE TRADE
PRACTICES-CONSUMER PROTECTION ACT, ART. 17.41, OF TEX. BUS. AND
COM. CODE, AS WELL AS UNDER ANY STATUTORY, COMMON LAW OR OTHER
PROVISIONS FOR PUNITIVE, TREBLE OR ANY OTHER TYPES OF DAMAGES IN
EXCESS OF ANY ACTUAL DAMAGES INCURRED, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW. COUNSEL FOR THE TRUST JOINS IN THE
EXECUTION HEREOF FOR THE PURPOSE OF MEETING THE STATUTORY
REQUIREMENTS OF ART. 17.42 OF THE TEXAS DECEPTIVE TRADE PRACTICES-
CONSUMER PROTECTION ACT.
2. PURE WORLD, KOETHER and STROUGO, individually, for
the purpose of binding themselves and their heirs, legal
representatives, successors and assigns, and entities with which
they are affiliated, including, but not limited to, all persons
or entities claiming by, through or under any of them, hereby
RELEASE, WAIVE, ACQUIT, AND FOREVER DISCHARGE to the maximum
extent permitted under applicable law, the Trust and the Trust
Managers, and their respective prior, current and future
officers, employees, directors, trust managers (including, but
not limited to, Robert E. Giles), shareholders, receivers and
conservators, insurers, and their respective heirs, legal
representatives, successors and assigns of and from any and all
actions, causes of action, liabilities, claims, counterclaims,
effective defenses, offsets, demands, losses, damages (the
"Individual Claims") of any kind or nature whatsoever, in law or
in equity, known or unknown, contingent or fixed, arising under
contract, tort or otherwise, and whether based on facts known or
unknown, and existing on the date hereof (excluding, however, any
Individual Claims for breach of any agreement, representation,
warranty or covenant contained in, or for any misrepresentation
under, this Settlement Agreement or any of the documents executed
in connection with or pursuant hereto), including, without
limitation, any and all actions, causes of action, liabilities,
claims, counterclaims, demands, losses and damages asserted or
that could have been asserted in the Lawsuit, or sounding in,
arising from or any way relating to breach of contract, fraud,
deceit, tortious interference, breach of obligations of good
faith and fair dealing, misrepresentation, or deceptive trade
practices, or federal or state securities violations existing
under or arising out of, directly or indirectly, or incurred in
respect of, expressly including, but not limited to, claims of
breach of fiduciary duty, tortious interference with contracts
and business opportunities, fraud in a real estate transaction
pursuant to Section 27.01 of the Texas Business and Commerce Code
or deceptive trade practices pursuant to Section 17.41 et seq. of
the Texas Business and Commerce Code. This provision shall not
be construed as an admission of any liability by the Trust, the
Trust Managers or any other entity or person. WITH RESPECT TO
PURE WORLD'S, KOETHER'S AND STROUGO'S CLAIMS, PURE WORLD, KOETHER
AND STROUGO, FOR THE PURPOSE OF BINDING THEMSELVES AND THEIR
HEIRS, LEGAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS, AND
AFFILIATES, AND FOR ALL PERSONS OR ENTITIES CLAIMING BY, THROUGH
OR UNDER ANY OF THEM, HEREBY EXPRESSLY WAIVE, RELEASE AND
DISCHARGE ANY AND ALL CLAIMS, RIGHTS AND BENEFITS UNDER THE TEXAS
DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT, ART. 17.41, OF
TEX. BUS. AND COM. CODE, AS WELL AS UNDER ANY STATUTORY, COMMON
LAW OR OTHER PROVISIONS FOR PUNITIVE, TREBLE OR ANY OTHER TYPES
OF DAMAGES IN EXCESS OF ANY ACTUAL DAMAGES INCURRED, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW. COUNSEL FOR PURE
WORLD AND STROUGO JOIN IN THE EXECUTION HEREOF FOR THE PURPOSE OF
MEETING THE STATUTORY REQUIREMENTS OF ART. 17.42 OF THE TEXAS
DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT.
3. Pure World and Strougo derivatively on behalf of
the Trust for the purpose of binding themselves and their heirs,
legal representatives, successors and assigns, and entities with
which they are affiliated, including, but not limited to, persons
or entities claiming by, through, or under any of them, hereby
RELEASE, WAIVE, ACQUIT, AND FOREVER DISCHARGE to the maximum
extent permitted under applicable law, the Trust and the Trust
Managers, and their respective prior, current, and future
officers, employees, directors, trust managers (including, but
not limited to, Robert E. Giles), shareholders, advisors,
receivers and conservators, insurers, and their respective heirs,
legal representatives, successors and assigns of and from any and
all actions, causes of action, liabilities, claims, third-party
claims, counterclaims, effective defenses, offsets, demands,
losses, damages, of any kind or nature whatsoever, known or
unknown, contingent or fixed, (including, but not limited to, any
claims arising under federal or state law relating to the alleged
breach of fiduciary duty, negligence, waste, violations of the
federal securities laws or otherwise) and whether based on facts
known or unknown, which were or could have been brought, and
existing on the date hereof, arising from or relating to the
subject matter of the Lawsuit.
J. NO DURESS. The parties hereto have entered into this
Settlement Agreement voluntarily and with consent of counsel for
valuable consideration, and not by reason of any fraud, duress,
undue influence or mistake. Each party represents and warrants
that (a) they are competent, (b) and they are represented by
legal counsel in connection with the execution of this Settlement
Agreement, (c) they are not in a significantly disparate
bargaining position, and (d) they are knowledgeable and fully
able to evaluate the merits and risks of this transaction.
K. GOVERNING LAW, ETC. This Settlement Agreement shall be
governed by and construed in accordance with the laws of the
State of Texas and the United States of America. The parties
hereto hereby irrevocably waive, to the fullest extent permitted
by law, any objection which any of them may now or hereafter have
to the laying of venue of any suit, action or proceeding arising
out of or relating to this Settlement Agreement or the
transactions contemplated hereby in the United States District
Court for the Northern District of Texas, Dallas Division, and
hereby further irrevocably waive any claim that any such suit,
action or proceeding brought in any such court has been brought
in an inconvenient forum. The Parties hereto hereby irrevocably
agree that any proceeding against any of the Parties, arising
out of or in connection with this Settlement Agreement or the
transactions contemplated hereby shall be brought in the United
States District Court for the Northern District of Texas, Dallas
Division.
L. MISCELLANEOUS. As used in this Settlement Agreement:
(a) any singular term shall include the plural, and vice versa,
even though the term in question is defined collectively or
singularly; (b) all references to "including" or similar
references shall be deemed to be followed by the phrase "without
limitation;" (c) the headings contained in this Settlement
Agreement are for convenience of reference only, and shall be
afforded no significance in the construction or interpretation
hereof. This Settlement Agreement has been drafted by counsel
for all Parties.
M. ENTIRE AGREEMENT. This Settlement Agreement embodies
the entire agreement among the parties hereto and supersedes all
prior proposals, negotiations, agreements and understandings
relating to the subject matter hereof. There are no oral
agreements, understandings or representations upon which any
party hereto is relying in executing this Settlement Agreement.
N. SEVERABILITY. Subsequent to final approval of the
Settlement Agreement by this Court and consummation of the
settlement contemplated herein, if any provision of this
Settlement Agreement is held to be illegal, invalid or
unenforceable under any current or future law, and if the rights
or obligations of the parties under this Settlement Agreement
would not be materially and adversely affected thereby, such
provision shall be fully separable, and this Settlement Agreement
shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part thereof, the
remaining provisions of this Settlement Agreement shall remain in
full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance therefrom.
In lieu of such illegal, invalid or unenforceable provision,
there shall be added automatically as a part of this Settlement
Agreement, a legal, valid and enforceable provision as similar in
terms to such illegal, invalid or unenforceable provision as may
be possible, and the parties hereto request the Court to whom
disputes relating to this Settlement Agreement are submitted to
reform the otherwise illegal, invalid or unenforceable provision
in accordance with this paragraph (N).
O. DUE AUTHORIZATION, ETC. Each party to this Settlement
Agreement hereby represents and warrants to each other party
hereto that this Settlement Agreement has been duly authorized,
executed and delivered by such party, and constitutes the legal,
valid and binding obligation of such party enforceable against
such party in accordance with its terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium,
liquidation and such other similar laws now or hereafter in
effect and by general principles of equity.
P. PARTIES BOUND; OBLIGATIONS. This Settlement Agreement
shall bind and inure to the benefit of the Parties hereto and
their respective heirs, beneficiaries, administrators, executors,
personal representatives, trustees, receivers, conservators,
successors and assigns. Each reference in this Settlement
Agreement to one or more parties shall be deemed to include such
parties and their respective heirs, beneficiaries,
administrators, executors, personal representatives, trustees,
receivers, conservators, successors and assigns. Although each
party hereto consents to the execution and performance of this
Settlement Agreement by the other parties hereto, no party hereto
shall, by its execution hereof, be deemed to bind itself or
himself to perform the obligations of any other party under this
Settlement Agreement (unless otherwise indicated by the context),
nor be deemed to recommend to any other party that this
Settlement Agreement should be entered into and performed by such
other party.
Q. NO ASSIGNMENT OF CLAIMS. All Parties hereto each
acknowledge, warrant and represent that they have not assigned,
conveyed, or otherwise transferred any claim or cause of action,
asserted or that could have been asserted, in the Lawsuit. The
Trust, Wolcott and Bricker hereby agree to indemnify and hold
harmless Pure World and Koether, singly and collectively from any
claims or causes of action released pursuant to this Settlement
Agreement asserted by any third-party on behalf of or through the
Trust, Wolcott and Bricker. Pure World and Koether hereby agree
to indemnify and hold harmless the Trust and Trust Managers, from
any claims or causes of action released pursuant to this
Settlement Agreement asserted by any third-party on behalf of or
through Pure World or Koether.
R. NOTICES. All notices under this Settlement Agreement
shall be in writing and mailed by registered or certified mail,
return receipt requested, addressed as follows:
If to Pure World or Koether:
Pure World, Inc.
Attn: Paul Koether
211 Pennbrook Road
P.O. Box 97
Far Hills, New Jersey 07931
with copy to:
Robert M. Cohan
Cohan, Simpson, Cowlishaw & Wulff, L.L.P.
2700 One Dallas Centre
350 N. St. Paul Street
Dallas, Texas 75201
If to Strougo:
Jeffrey M. Haber, Esq.
Wechsler Harwood Halebian & Feffer LLP
805 3rd Avenue, 7th Floor
New York, NY 10022
If to Trust or Trust Managers:
American Industrial Properties REIT
Attn: Charles W. Wolcott
6220 N. Beltline, Suite 205
Irving, Texas 75063
with copy to:
Bryan Goolsby, Esq.
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P.
2200 Ross Avenue, Suite 900
Dallas, Texas 75201
S. EFFECTIVENESS AND TERMINATION. This Settlement
Agreement shall be of no force and effect unless it is executed
on or before November 27, 1996 by the following parties: AMERICAN
INDUSTRIAL PROPERTIES REIT, CHARLES W. WOLCOTT, WILLIAM H.
BRICKER, PURE WORLD, INC., PAUL O. KOETHER, AND ROBERT STROUGO.
This Settlement Agreement shall terminate if the sale
contemplated in Paragraph B.1. hereof and the payments
contemplated in paragraph C hereof have not been made by December
31, 1996, unless the Parties hereto agree in writing to extend
the termination date.
T. COUNTERPARTS. This Settlement Agreement may be
executed in several identical counterparts, and by the parties
hereto on separate counterparts and each counterpart when so
executed and delivered, shall constitute an original instrument,
and all such separate counterparts shall constitute but one and
the same instrument.
U. REPRESENTATION BY LEGAL COUNSEL. THE PURE WORLD
PARTIES, AND STROUGO ACKNOWLEDGE AND AGREE THAT THEY HAVE BEEN
REPRESENTED BY LEGAL COUNSEL DURING THE NEGOTIATION AND
PREPARATION OF THIS SETTLEMENT AGREEMENT AND WERE AFFORDED THE
OPPORTUNITY TO OBTAIN LEGAL COUNSEL TO REVIEW THIS SETTLEMENT
AGREEMENT. THE ATTORNEYS REPRESENTING THE PURE WORLD PARTIES
AND STROUGO WILL SIGN BELOW FOR THE PURPOSE OF ACKNOWLEDGING THAT
THE PURE WORLD PARTIES AND STROUGO WERE REPRESENTED BY LEGAL
COUNSEL. THE PURE WORLD PARTIES AND STROUGO ACKNOWLEDGE THAT THE
TRUST AND TRUST MANAGERS HAVE RELIED ON THE STATEMENTS CONTAINED
IN THIS PARAGRAPH 21 (U.) AND THAT THE TRUST AND THE TRUST
MANAGERS WOULD NOT EXECUTE THIS SETTLEMENT AGREEMENT UNLESS THE
PURE WORLD PARTIES AND STROUGO WERE REPRESENTED BY LEGAL COUNSEL
IN CONNECTION HEREWITH.
/s/
Robert M. Cohan, Esq.
Cohan, Simpson, Cowlishaw & Wulff, L.L.P.
2700 One Dallas Centre
350 N. St. Paul Street
Dallas, Texas 75201
REPRESENTING PURE WORLD, INC. AND PAUL O. KOETHER
/s/
Jeffrey M. Haber, Esq.
Wechsler Harwood Halebian & Feffer LLP
805 3rd Avenue, 7th Floor
New York, NY 10022
REPRESENTING ROBERT STROUGO
THE TRUST AND THE TRUST MANAGERS ACKNOWLEDGE AND AGREE THAT THEY
HAVE BEEN REPRESENTED BY LEGAL COUNSEL DURING THE NEGOTIATION AND
PREPARATION OF THIS SETTLEMENT AGREEMENT AND WERE AFFORDED THE
OPPORTUNITY TO OBTAIN LEGAL COUNSEL TO REVIEW THIS SETTLEMENT
AGREEMENT. THE ATTORNEY REPRESENTING THE TRUST AND THE TRUST
MANAGERS WILL SIGN BELOW FOR THE PURPOSE OF ACKNOWLEDGING THAT
THE TRUST AND THE TRUST MANAGERS WERE REPRESENTED BY LEGAL
COUNSEL. THE TRUST AND THE TRUST MANAGERS ACKNOWLEDGE THAT PURE
WORLD, KOETHER AND STROUGO HAVE RELIED ON THE STATEMENTS
CONTAINED IN THIS PARAGRAPH 21 (U.) AND THAT PURE WORLD, KOETHER
AND STROUGO WOULD NOT EXECUTE THIS SETTLEMENT AGREEMENT UNLESS
THE TRUST AND THE TRUST MANAGERS WERE REPRESENTED BY LEGAL
COUNSEL IN CONNECTION HEREWITH.
/s/
Craig L. Weinstock, Esq.
Mark C. Taylor, Esq.
LIDDELL, SAPP, ZIVLEY, HILL and LaBOON, L.L.P.
2200 Ross Avenue, Suite 900
Dallas, Texas 75201
REPRESENTING AMERICAN INDUSTRIAL PROPERTIES REIT,
CHARLES W. WOLCOTT AND WILLIAM H. BRICKER
IN WITNESS WHEREOF, the parties hereto have executed this
Settlement Agreement effective as of the 25th day of November,
1996, which date shall be the date of this Settlement Agreement
for all purposes.
AMERICAN INDUSTRIAL PROPERTIES REIT
By: /s/
Name: Charles W. Wolcott
Title: President
/s/
CHARLES W. WOLCOTT, in his
individual capacity
/s/
WILLIAM H. BRICKER, in his
individual capacity
/s/
PAUL O. KOETHER, in his individual
capacity
PURE WORLD, INC.
By: /s/
Name: Paul O. Koether
Title: Chairman
/s/
ROBERT STROUGO
AMENDMENTS TO THE
FOURTH AMENDED AND RESTATED BYLAWS OF
AMERICAN INDUSTRIAL PROPERTIES REIT
The following amendments to the Fourth Amended and Restated
Bylaws (the "Fourth Bylaws") of American Industrial Properties
REIT were unanimously adopted by the Trust Managers effective as
of December 19, 1996:
Amendment No. 1:
Article XIII of the Fourth Bylaws is deleted in its
entirety.
Amendment No. 2:
The first sentence of Section 3.3 of the Fourth Bylaws is
deleted and replace by the following sentence:
The Trust Manager nominees who have not been
previously elected as Trust Managers by the shareholders of the
Trust shall be elected at the annual meeting of the shareholders
(except as provided in Section 3.6) by the affirmative vote of
the holders of a majority of the outstanding shares of the Trust.
Amendment No. 3:
The third sentence of Section 3.6 of the Fourth Bylaws is
deleted and replace by the following sentence:
Vacancies may be filled either by a majority of
the remaining Trust Managers, though less than a quorum, or by
vote of the holders of at least a majority of the outstanding
shares at an annual or special meeting of the shareholders.
Amendment No. 4:
The first sentence of Section 3.8 of the Fourth Bylaws is
deleted and replaced by the following sentence:
Trust Managers shall receive compensation for
their services to the Trust as may be determined from time to
time by the Trust Managers; provided, however, that the cash
compensation of the Trust Managers shall not be increased by more
than 20% over the prior year without the approval of the holders
of a majority of the shares cast at the annual meeting of
shareholders of the Trust.
Amendment No. 5:
The following provision is added to Article X of the Fourth
Bylaws:
10.11 Independent Committee. If the Trust
receives an offer to purchase all or substantially all of the
assets of the Trust, or if the Trust receives a proposal for a
merger transaction in which the Trust will not be the surviving
entity, the Trust Managers shall create a committee consisting
entirely of Independent Trust Managers (as defined in the
Declaration of Trust) who shall, consistent with their fiduciary
duties, review any such offer and make a recommendation to all of
the Trust Managers.
Amendment No. 6:
The following sentence is added as the last sentence of
Section 7.6 of the Fourth Bylaws:
When making a determination of whether to declare
a dividend, the Trust Managers shall make the determination
consistent with their fiduciary duties as Trust Managers.
Amendment No. 7:
The second sentence of Article XI of the Fourth Bylaws is
deleted and replaced by the following sentence:
Such action shall be taken (i) with respect to
Section 2.5, Section 3.4, Article IX or clauses (i) or (iii) of
Article XI, by a majority of the Trust Managers or by the
affirmative vote of the holders of two-thirds (2/3) of the
Trust's outstanding shares, (ii) with respect to Sections 3.3,
3.6, 3.8, 7.6, 10.11 or clause (ii) of Article XI, by the
affirmative vote of the holders of a majority of the Trust's
outstanding shares, or (iii) with respect to all other bylaws, by
a majority of the Trust Managers or the affirmative vote of the
holders of a majority of the Trust's outstanding shares.
SHARE PURCHASE AGREEMENT
dated as of December 13, 1996
Between
AMERICAN INDUSTRIAL PROPERTIES REIT
and
USAA REAL ESTATE COMPANY
TABLE OF CONTENTS
SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION -1-
1.1 Definitions -1-
1.2 Rules of Construction -8-
SECTION 2. PURCHASE AND SALE -8-
2.1 Purchase and Sale of the Shares. -8-
2.2 Purchase Price; Payment -8-
2.3 The Closing -8-
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER -9-
3.1 Organization and Related Matters -9-
3.2 Capital Stock; Title to Shares. -9-
3.3 Financial Statements -10-
3.4 SEC Reports -11-
3.5 Authorization; No Conflicts -12-
3.6 Legal Proceedings -12-
3.7 Compliance with Law and Permits -13-
3.8 Dividends and Other Distributions -13-
3.9 Certain Interests -13-
3.10 No Brokers or Finders -14-
3.11 Employee Benefit Plans -14-
3.12 Labor Matters -15-
3.13 Properties -15-
3.14 Tax Matters -17-
3.15 Material Contracts -19-
3.16 Insurance -20-
3.17 Environmental Matters -20-
3.18 Trust Records; Accounting Records -21-
3.19 New York Stock Exchange Listing -21-
3.20 Disclosure of Facts -21-
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER -21-
4.1 Organization and Related Matters -21-
4.2 Authorization -21-
4.3 No Conflicts -22-
4.4 No Brokers or Finders -22-
4.5 Legal Proceedings -22-
4.6 Investment Representation -22-
4.7 Legends; Stop-Transfer Orders -22-
4.8 Status for REIT Ownership and Income Tests -23-
SECTION 5. COVENANTS WITH RESPECT TO CONDUCT OF SELLER PRIOR TO
CLOSING -23-
5.1 Access -23-
5.2 Material Adverse Changes; SEC Filings; Reports;
Financial Statements -23-
5.3 Conduct of Business -24-
5.4 Prohibition of Solicitation -26-
5.5 Notification of Certain Matters -27-
5.6 Permits and Approvals -27-
SECTION 6. ADDITIONAL CONTINUING COVENANTS AND AGREEMENTS -28-
6.1 Use of Proceeds -28-
6.2 Appointment of Trust Managers -28-
6.3 Environmental Matters -29-
6.4 Status for REIT Ownership and Income Tests -29-
6.5 Prohibited Transactions. -29-
6.6 Seller/Buyer Registration Rights Agreement -29-
6.7 REIT Qualification -29-
6.8 Services by Buyer -29-
SECTION 7. GENERAL CONDITIONS OF PURCHASE -30-
7.1 No Orders -30-
7.2 Approvals -30-
7.3 Absence of Litigation -30-
7.4 New York Stock Exchange -30-
SECTION 8. CONDITIONS TO OBLIGATIONS OF BUYER -30-
8.1 Settlement Agreement -30-
8.2 Accuracy of Seller's Representations and Warranties-30-
8.3 Performance by Seller -30-
8.4 No Material Adverse Change -31-
8.5 Certification by Seller -31-
8.6 Opinion of Seller's Counsel -31-
8.7 No Other Business Combination Transaction -31-
SECTION 9. CONDITIONS TO OBLIGATIONS OF SELLER -31-
9.1 Settlement Agreement -31-
9.2 Accuracy of Buyer's Representations and Warranties -32-
9.3 Buyer's Performance -32-
9.4 Certification by Buyer -32-
9.5 Opinion of Buyer's Counsel -32-
SECTION 10. TERMINATION OF OBLIGATIONS; SURVIVAL -32-
10.1 Termination of Agreement -32-
10.2 Effect of Termination -33-
10.3 Survival of Representations and Warranties -33-
SECTION 11. INDEMNIFICATION -33-
11.1 Obligations of Seller -33-
11.2 Obligations of Buyer -34-
11.3 Procedure -34-
11.4 Survival -35-
11.5 Notice by Seller -35-
SECTION 12. GENERAL -35-
12.1 Amendments; Waivers -35-
12.2 Schedules; Exhibits; Integration -35-
12.3 Best Efforts; Further Assurances -36-
12.4 Governing Law -36-
12.5 No Assignment -36-
12.6 Headings -36-
12.7 Counterparts -36-
12.8 Publicity and Reports -36-
12.9 Confidentiality -36-
12.10Parties in Interest -37-
12.11Notices -37-
12.12Expenses -38-
12.13Remedies; Waiver -38-
12.14Representation By Counsel; Interpretation -38-
12.15Severability -38-
EXHIBITS
EXHIBIT A Settlement Agreement
EXHIBIT B Registration Rights Agreement
SCHEDULES
SCHEDULE 3.1 Jurisdictions; Officers and Trust Managers
SCHEDULE 3.2 Capital Stock; Title to Shares
SCHEDULE 3.3 Additional Liabilities or Contingencies
SCHEDULE 3.5 Permits and Approvals
SCHEDULE 3.6 Litigation
SCHEDULE 3.7 Compliance with Law and Permits
SCHEDULE 3.8 Dividends and Other Distributions
SCHEDULE 3.9 Certain Interests
SCHEDULE 3.11 Seller Benefit Plans
SCHEDULE 3.13 Properties and Encumbrances
SCHEDULE 3.14 Taxes
SCHEDULE 3.15 Material Contracts
SCHEDULE 3.16 Insurance
SCHEDULE 3.17 Environmental Compliance
SCHEDULE 3.18 Trust Records
SCHEDULE 5.3 Conduct of Business
SCHEDULE 8.6 List of Opinions of Seller's Counsel
SCHEDULE 9.5 List of Opinions of Buyer's Counsel
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of December 13, 1996, by and between AMERICAN
INDUSTRIAL PROPERTIES REIT, a Texas real estate investment trust
("Seller"), and USAA REAL ESTATE COMPANY, a Delaware corporation
("Buyer").
R E C I T A L S
A. Seller qualifies and operates as a real estate
investment trust for federal income tax purposes.
B. Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, a certain number of Seller's Common Shares
(as defined herein) upon the terms and subject to the conditions
set forth in this Agreement.
C. The proceeds from the sale of Seller's Common Shares
are to be used for the purposes set forth in this Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and agreements set forth in this Agreement,
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree
as follows:
SECTION 18. DEFINITIONS AND RULES OF CONSTRUCTION
18.1 Definitions. The capitalized terms used in this
Agreement, the Exhibits and the Schedules attached hereto shall
have the meanings set forth below:
"Action" means any action, complaint, investigation,
Suit or other proceeding, whether civil or criminal, in law or in
equity, or before any mediator, arbitrator or Governmental
Entity.
"Affiliate" means a Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled
by, or is under common control with, a specified Person.
"Agreement" means this Share Purchase Agreement, by and
between Seller and Buyer, as amended from time to time pursuant
to the terms of this Agreement, together with all Exhibits and
all Schedules attached hereto.
"Alternative Proposal" has the meaning set forth in
Section 5.4(a) of this Agreement.
"Approval" means any approval, authorization, consent,
qualification or registration, or any waiver of the foregoing, or
any notice, statement or other communication required to be filed
with or delivered to any Governmental Entity or any other Person.
"Associate" of a Person means
(i) a corporation or organization (other than Seller or
a party to this Agreement) of which such Person is an officer or
partner or is, directly or indirectly, the beneficial owner of
10% or more of any class of equity securities;
(ii) any trust or other estate in which such Person has
a substantial beneficial interest or as to which such Person
serves as trustee or in a similar capacity; and
(iii) any relative or spouse of such Person who has the
same residence as such Person.
"Audited Financial Statements" has the meaning set
forth in Section 3.3(a) of this Agreement.
"Auditors" means Ernst & Young, LLP, independent public
accountants to Seller.
"Buyer" means USAA Real Estate Company, a Delaware
corporation, or permitted assigns.
"Buyer Indemnified Parties" has the meaning set forth
in Section 11.1 of this Agreement.
"Capital Stock" means any capital stock, beneficial
interest or other equity interest, or any securities convertible
into or exchangeable or exercisable for capital stock, beneficial
interests or other equity interests, or any other rights,
warrants or options to acquire any of the foregoing securities.
"Charter Documents" means Seller's Second Amended and
Restated Declaration of Trust and Fourth Amended and Restated
Bylaws as in effect as of the date of this Agreement.
"Closing" has the meaning set forth in Section 2.3(a)
of this Agreement.
"Closing Agreement" shall mean a written and legally
binding agreement with a taxing authority relating to Taxes.
"Closing Date" means the date specified in Section
2.3(a) of this Agreement.
"Code" means the Internal Revenue Code of 1986, as
amended, and, as applicable, the regulations promulgated
thereunder.
"Common Shares" means common shares of beneficial
interest, par value $.10 per share, of Seller.
"Confidentiality Agreement" has the meaning set forth
in Section 5.4(b) of this Agreement.
"Contract" means any agreement, arrangement, bond,
commitment, franchise, indemnity, indenture, instrument, lease,
license or understanding, whether or not in writing.
"Encumbrance" means any claim, charge, easement,
encumbrance, lease, covenant, security interest, lien, option,
pledge, rights of others, preferential right, right of first
refusal or restriction (whether on voting, sale, transfer,
disposition or otherwise), whether imposed by agreement,
understanding, law, equity or otherwise, except that
"Encumbrance" does not include any such item that (i) is
reflected in the Audited Financial Statements or (ii) constitutes
a statutory lien arising in the ordinary course of business.
"Environmental Claims" means any of the following to
the extent they relate to, or arise out of, directly or
indirectly, Environmental Noncompliance with respect to the
Properties or actual or alleged Environmental Conditions or any
Notification which may lead to: (i) claims, demands, suits,
causes of action for personal injury, death or property damage;
(ii) claims for actual or threatened damages to natural
resources; (iii) claims for the recovery of response costs, or
administrative or judicial orders directing the performance of
investigations, response or remedial actions under any
Environmental Law; (iv) a requirement to implement "corrective
action" pursuant to any restitution, contribution or equitable
indemnity to third parties or any Governmental Entity; (v) fines,
penalties, liens against the Properties; (vi) claims for
injunctive relief or other orders or notices of violation from
any Governmental Entity; or (vii) with regard to any present or
former employees, tenants or guests, exposure to or injury from
Environmental Conditions.
"Environmental Conditions" means conditions of the
environment, including the ocean, natural resources (including
flora and fauna), soil, surface water, ground water, any actual
or potential drinking or water supply, subsurface strata, or air,
including ambient air, relating to or arising out of the use,
handling, storage, treatment, recycling, generation,
transportation, release, spilling, leaking, pumping, pouring,
emptying, discharging, injecting, escaping, leaching, disposal,
dumping or threatened release of Hazardous Materials from, in,
on, or onto the Properties.
"Environmental Noncompliance" means any of the
following to the extent they are applicable to the Properties or
alleged to be applicable to the Properties or to Seller,
Subsidiaries or a Seller Partnership: (i) the Release of any
Hazardous Material into the environment, any storm drain, sewer,
septic system or publicly-owned treatment works, in violation of
any effluent or emission limitations, standards or other criteria
or guidelines established by any Environmental Law; (ii) any
noncompliance of physical structure, equipment, process or
premises with the requirements of building or fire codes, zoning
or land use regulations or ordinances or conditional use permits;
(iii) any noncompliance with federal, state or local requirements
governing occupational safety and health; (iv) any operations,
procedures and designs at or on the Properties which do not
conform to the statutory or regulatory requirements of any Law
(including land use regulations and ordinances) intended to
protect public health, welfare and the environment; (v) the
failure to have obtained permits, licenses, variances or other
governmental authorizations necessary for the legal use and/or
operation of any equipment, process or any activity at the
Properties; or (vi) the operation and/or use of any process or
equipment in violation of any permit condition, schedule of
compliance, administrative or court order.
"Environmental Permits" has the meaning set forth in
Section 3.17(a) of this Agreement.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
"EVEREN" means EVEREN Securities, Inc.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"GAAP" means generally accepted accounting principles
as in effect from time to time.
"Governmental Entity" means any agency, bureau,
commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether
federal, state or local, domestic or foreign.
"Hazardous Materials" means any substance, matter,
material, waste, solid, liquid, gas, or pollutant, the
generation, storage, disposal, handling, recycling, Release (or
threatened Release) or treatment of which is regulated,
prohibited, or limited under: (1) the Resource Conservation and
Recovery Act, as amended by the Hazardous and Solid Waste
Amendments of 1984, as now or hereafter amended ("RCRA") (42
U.S.C. Sections 6901 et seq.); (ii) the Comprehensive
Environmental Response, Compensation and Liability Act, as
amended by the Superfund Amendments and Reauthorization Act of
1986, as now or hereafter amended ("CERCLA") (42 U.S.C. Sections
9601 et seq.); (iii) the Clean Water Act, as now or hereafter
amended ("CWA") (33 U.S.C. Sections 1251 et seq.); (iv) the Toxic
Substances Control Act, as now or hereafter amended ("TSCA") (15
U.S.C. Sections 2601 et seq.); (v) the Clean Air Act, as now or
hereafter amended ("CAA") (42 U.S.C. Sections 7401 et seq.)
(RCRA, CERCLA, CWA, TSCA and CAA are collectively referred to
herein as the "Federal Environmental Laws"); (vi) any local,
state or foreign law, statute, regulation, or ordinance analogous
to any of the Federal Environmental Laws; or (vii) any other
federal, state, local, or foreign law (including any common law),
statute, regulation, or ordinance regulating, prohibiting, or
otherwise restricting the placement, Release, threatened Release,
generation, treatment, or disposal upon or into any environmental
media of any substance, pollutant, or waste which is now or
hereafter classified or considered to be hazardous or toxic to
human health or the environment. All of the laws, statutes,
regulations and ordinances referred to in subsections (vi) and
(vii) above, together with the Federal Environmental Laws, are
collectively referred to herein as "Environmental Laws." The term
"Hazardous Materials" shall also include: (a) gasoline, diesel
fuel, fuel oil, motor oil, waste oil, and any other petroleum
hydrocarbons, including any additives or other by-products
associated therewith; (b) "friable" asbestos (as the term
"friable" is defined under 40 C.F.R. Section 61.141) and friable
asbestos-containing materials in any form; (c) polychlorinated
biphenyls; or (d) any substance the presence of which on the
Properties, (x) requires reporting or remediation under any
Environmental Law, (y) causes or threatens to cause a nuisance on
the Properties or poses or threatens to pose a hazard to the
health or safety of persons on the Properties, or (z) which, if
it emanated or migrated from the Properties, could constitute a
trespass, nuisance or health or safety hazard to persons on
adjacent property.
"Indemnifiable Claim" means any Loss for or against
which any Person is entitled to indemnification under this
Agreement; "Indemnified Party" means the party entitled to
indemnity hereunder and their successors, assigns, and heirs; and
"Indemnifying Party" means the Person obligated to provide
indemnification hereunder and its successors and assigns.
"Initial REIT Year" has the meaning set forth in
Section 3.14(c) of this Agreement.
"Law" means any constitutional provision, statute or
other law, rule, regulation or interpretation of any thereof and
any Order of any Governmental Entity (including Environmental
Laws, including, without limitation, the Americans with
Disabilities Act).
"Loss" means any claim, amount paid in settlement,
cost, damage (including, without limitation, consequential
damage), disbursement, expense (including legal fees and
expenses), liability, loss, deficiency, diminution in value or
obligation.
"Material Contract" means any Contract to which Seller,
any Subsidiary or any Seller Partnership is a party or by which
any such Person or any of their respective Properties are bound
that currently is in effect and (a) after December 31, 1995
obligates Seller, any Subsidiary or any Seller Partnership to pay
an amount equal to $100,000 or more, (b) is one of the group of
Tenant Leases that is anticipated by Seller to produce 66 2/3% of
Seller's gross income during the fiscal year ending December 31,
1997, such group of Tenant Leases calculated beginning with the
Tenant Lease that is anticipated to produce the most gross income
during such period and thereafter in descending order of
magnitude of gross income anticipated to be earned during such
period under each other Tenant Lease until such percentage of
gross income is reached, (c) is a Tenant Lease involving the
lease of space in excess of 10,000 square feet for any Property,
(d) other than any Tenant Lease, has an unexpired term as of
December 31, 1995 in excess of five (5) years, (e) other than any
Tenant Lease, contains a covenant not to compete or otherwise
significantly restricts business activities of Seller, any
Subsidiary or any Seller Partnership, (f) provides for the
extension of credit by Seller, any Subsidiary or any Seller
Partnership or a line of credit to Seller, any Subsidiary or any
Seller Partnership in excess of $50,000, (g) provides for a
guaranty or indemnity by Seller, any Subsidiary or any Seller
Partnership, (h) grants a power of attorney, agency or similar
authority to another Person, (i) contains an option to purchase
or a right of first refusal relating to any of the Properties,
(j) relates to the sale or issuance of any equity securities of
Seller or securities exercisable for or convertible into any
equity securities of Seller, or (k) any other Contract that is
not within the general descriptions of clauses (a) through (j)
(i.e., is not a Tenant Lease or within any of the other general
categories listed above) but is material to the business,
financial condition, assets, results of operations or prospects
of Seller, Subsidiaries or Seller Partnerships.
"Notification" means any summons, citation, directive,
order, claim, litigation, pleading, investigation, proceeding,
judgment, letter or any other written or oral communication from
any Governmental Entity, any entity or any individual, concerning
any intentional or unintentional act or omission which has
resulted in or which may result in any Environmental
Noncompliance or Environmental Claim.
"Order" means any decree, injunction, judgment, order,
ruling, assessment or writ.
"Permit" means any license, permit, franchise,
certificate of authority or order, or any waiver of the
foregoing, required to be issued by any Governmental Entity.
"Person" means an association, a corporation, an
individual, a partnership, a joint venture, a limited liability
company, a trust or any other entity or organization, including a
Governmental Entity.
"Properties" means the real property owned or leased by
Seller, Subsidiaries and Seller Partnerships listed on Schedule
3.13 hereto.
"Purchase Price" has the meaning set forth in Section
2.2 of this Agreement.
"Pure World Litigation" means that case pending in the
United States District Court for the Northern District of Texas
Dallas Division, Civil No. 3:96-CV-0068-H, involving Seller, Pure
World, Inc., Robert Strougo, et. al.
"Registration Rights Agreement" means the registration
rights agreement between Buyer and Seller to be executed
contemporaneously with the Closing.
"REIT" has the meaning set forth in Section 3.14(b) of
this Agreement.
"Release" means releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, ejecting, escaping,
leaching, disposing, seeping, infiltrating, draining or dumping
of any Hazardous Material. This term shall be interpreted to
include both the present and past tense, as appropriate.
"Schedule" means any schedule attached to this
Agreement.
"SEC" means the Securities and Exchange Commission or
any successor entity.
"SEC Filings" has the meaning set forth in Section 3.4
of this Agreement.
"Securities Act" means the Securities Act of 1933, as
amended.
"Seller" means American Industrial Properties REIT, a
Texas real estate investment trust.
"Seller Benefit Plans" has the meaning set forth in
Section 3.11 of this Agreement.
"Seller Indemnified Parties" has the meaning set forth
in Section 11.2 of this
Agreement.
"Seller Partnerships" has the meaning set forth in
Section 3.1 of this
Agreement.
"Seller Permits" has the meaning set forth in Section
3.7(b) of this Agreement.
"Settlement Agreement" shall mean the settlement
agreement by and among Seller, Charles W. Wolcott and William H.
Bricker on the one hand and Pure World, Inc., Paul O. Koether and
Robert Strougo on the other hand attached hereto as Exhibit A.
"Shares" has the meaning set forth in Section 2.1 of
this Agreement.
"Subsidiaries" has the meaning set forth in Section 3.1
of this Agreement.
"Taxes" has the meaning set forth in Section 3.14(a) of
this Agreement.
"Tax Return" has the meaning set forth in Section
3.14(b) of this Agreement.
"Tenant Leases" has the meaning set forth in Section
3.13(b) of this Agreement.
"Trust Managers" means the Trust Managers of Seller.
"Unaudited Financial Statements" has the meaning set
forth in Section 3.3(b) of this Agreement.
"USAA Group" means United Services Automobile
Association, a reciprocal interinsurance exchange under the Texas
Insurance Code ("USAA"), and, as designated by USAA from time to
time, any entity in which USAA directly or indirectly owns 100%
of the issued and outstanding equity securities.
18.2 Rules of Construction. This Agreement shall be
construed in accordance with the following rules of construction:
(a) the terms defined in this Agreement include the plural
as well as the singular;
(b) all accounting terms not otherwise defined herein have
the meanings given such terms under GAAP;
(c) all references in the Agreement to designated
"Sections" and other subdivisions are to the designated Sections
and other subdivisions of the body of this Agreement;
(d) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms;
(e) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and
not to any particular Section or other subdivision;
(f) the words "includes" and "including" are not limiting;
and
(g) knowledge of any Subsidiary or any Seller Partnership
shall be deemed to be knowledge of Seller.
SECTION 19. PURCHASE AND SALE
19.1 Purchase and Sale of the Shares. Subject to the terms
and conditions set forth herein, on the Closing Date, Seller
shall issue to Buyer, and Buyer shall purchase from Seller, an
aggregate of 924,600 Common Shares (the "Shares").
19.2 Purchase Price; Payment. The cash purchase price for
each Common Share shall be $2.75 per Common Share, and the
aggregate cash purchase price for the Shares (the "Purchase
Price") shall be Two Million Five Hundred Forty-Two Thousand Six
Hundred Fifty Dollars ($2,542,650), payable on the Closing Date
by wire transfer of immediately available funds to an account
designated by Seller.
19.3 The Closing.
(a) The closing of the purchase and sale of the Shares
(the "Closing") will take place at 10:00 a.m. at the offices of
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., counsel to Seller,
on the same day or within one (1) business day of final approval
of the settlement of the Pure World Litigation by the court
overseeing such settlement (the "Closing Date").
(b) At the Closing, Seller shall deliver to Buyer the
certificate or certificates evidencing the Shares. In addition,
all other actions shall be taken and all other documents shall be
delivered which are necessary to consummate the purchase and sale
of the Shares, other than such actions and documents as are to be
taken or delivered at another date, as specifically provided in
this Agreement.
(c) At the Closing, Buyer shall pay and deliver to Seller
the Purchase Price in the manner set forth in Section 2.2 above.
SECTION 20. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to, and agrees with, Buyer as
follows:
20.1 Organization and Related Matters. Seller is duly
organized, validly existing and in good standing under the laws
of the State of Texas. Seller has all necessary power and
authority to execute, deliver and perform this Agreement.
Schedule 3.1 lists all Subsidiaries (the "Subsidiaries") and all
Seller Partnerships (the "Seller Partnerships") of Seller and
correctly sets forth Seller's ownership interest therein, the
jurisdiction in which each Subsidiary and each Seller Partnership
is organized and each jurisdiction in which Seller, each
Subsidiary and each Seller Partnership is and is required to be
qualified or licensed to do business as a foreign Person. Each
Subsidiary and each Seller Partnership is duly organized, validly
existing and, with respect to each Subsidiary, in good standing
under the laws of the jurisdiction of its incorporation or
organization. Seller, Subsidiaries and Seller Partnerships have
all necessary power (whether corporate, partnership or other
power, as applicable) and authority to own their respective
properties and assets and to carry on their respective businesses
as now conducted. Seller, Subsidiaries and Seller Partnerships
are duly qualified or licensed to do business as foreign Persons
in good standing in all jurisdictions in which the character or
the location of the assets owned or leased by any of them or the
nature of the business conducted by any of them requires
licensing or qualification, except where the failure to be so
qualified or licensed is not and will not be material to their
respective businesses, financial condition, assets, results of
operations or prospects. Schedule 3.1 correctly lists the current
Trust Managers, directors, general partners and executive
officers of Seller, Subsidiaries and Seller Partnerships. True,
correct and complete copies of the Charter Documents and the
charter or organizational documents of Subsidiaries and Seller
Partnerships (including the declaration of trust, articles or
certificate of incorporation, bylaws and partnership agreements,
as applicable) as in effect on the date hereof have been
delivered to Buyer. Seller is registered and is a reporting
company under the Exchange Act. Neither any Subsidiary nor any
Seller Partnership is registered or is a reporting company under
the Exchange Act. Except as listed on Schedule 3.1, Seller does
not directly or indirectly own or control any equity interest in
any Person.
20.2 Capital Stock; Title to Shares. The authorized
Capital Stock of Seller consists of 10,000,000 Common Shares of
which 9,075,400 Common Shares are issued and outstanding. Seller
owns all of the outstanding Capital Stock of Subsidiaries free
and clear of any Encumbrances, equities and claims except as
specified in Schedule 3.2. Seller owns the equity interest in
each Seller Partnership free and clear of any Encumbrances,
equities and claims except as specified in Schedule 3.2. No
Common Shares or Capital Stock of any Subsidiary are held in
treasury. Except as set forth in Schedule 3.2 or as contemplated
in this Agreement, there are no outstanding Contracts or other
rights to subscribe for or purchase, or Contracts or other
obligations to issue or grant any rights to acquire, any Common
Shares, any Capital Stock of any Subsidiary or any Seller
Partnership or to restructure or recapitalize Seller, any
Subsidiary or any Seller Partnership. Except as set forth in
Schedule 3.2, there are no outstanding Contracts of Seller, any
Subsidiary or any Seller Partnership to repurchase, redeem or
otherwise acquire any of their respective Common Shares or
Capital Stock, as applicable. No bonds, debentures, notes or
other indebtedness having general voting rights (or convertible
into securities having general voting rights) of Seller, any
Subsidiary or any Seller Partnership are issued or outstanding.
There are no voting trusts or other agreements or understandings
to which Seller, any Subsidiary or any Seller Partnership is a
party or is bound, or to the knowledge of Seller, to which any
other Person is a party or is bound, with respect to the voting
of the Common Shares or the Capital Stock of any Subsidiary or
any Seller Partnership. All issued and outstanding Common Shares
and Capital Stock of all Subsidiaries and Seller Partnerships
were duly authorized and validly issued at the time of issuance
and are fully paid and nonassessable. There are no preemptive
rights in respect of any Common Shares or Capital Stock of any
Subsidiary or any Seller Partnership. Upon the issuance of the
Shares to Buyer at the Closing, the Shares will have been validly
issued and be validly outstanding, fully paid and nonassessable,
and the issuance of such Shares is not and will not be subject to
preemptive rights of any other shareholder of Seller. Buyer
shall receive good and marketable title to the Shares, free and
clear of all Encumbrances, except for restrictions on the
transferability of the Shares set forth in the Charter Documents
or generally imposed on securities under federal and state
securities laws. Such Shares will rank equally with all other
Common Shares of Seller with respect to priority in payment of
dividends and the distribution of assets upon any liquidation of
Seller, and there are no shares of any class of Capital Stock of
Seller having any priority in respect thereof.
20.3 Financial Statements.
(a) Audited Financial Statements. Seller has delivered to
Buyer the consolidated balance sheets of Seller (which reflect
the financial position of all Subsidiaries and Seller
Partnerships), as of December 31, 1993, 1994 and 1995, and the
respective related consolidated statements of operations, cash
flows and stockholders' equity for the periods then ended
(collectively, the "Audited Financial Statements"). The Audited
Financial Statements have been examined by the Auditors whose
report thereon is attached to such financial statements. All
Audited Financial Statements have been prepared in conformity
with GAAP applied on a consistent basis (except for changes, if
any, disclosed therein). The Audited Financial Statements present
fairly, in all material respects, the consolidated financial
condition and results of operations of Seller, Subsidiaries and
Seller Partnerships as of their respective dates and periods.
Since December 31, 1995, there has been no change in the
significant accounting policies or procedures of Seller, any
Subsidiary or any Seller Partnership. Seller has not received any
annual management letters from the Auditors since March 29, 1996.
(b) Unaudited Financial Statements. Seller has delivered
to Buyer the consolidated balance sheets of Seller (which reflect
the financial position of all Subsidiaries and Seller
Partnerships), as of March 31, June 30 and September 30, 1996,
and the respective related consolidated statements of operations,
cash flows and stockholders' equity for the periods then ended
(collectively, the "Unaudited Financial Statements"). All
Unaudited Financial Statements have been prepared in conformity
with GAAP applied on a consistent basis (except for changes, if
any, disclosed therein). The Unaudited Financial Statements
present fairly, in all material respects, the consolidated
financial condition and results of operations of Seller,
Subsidiaries and Seller Partnerships as of their respective dates
and periods.
(c) No Material Adverse Changes. Since September 30, 1996,
except as set forth in Schedule 3.3, specifically contemplated by
this Agreement, specifically disclosed in any SEC Filings filed
since September 30, 1996 and prior to the date of this Agreement
(copies of which have been provided to Buyer), and except the
settlement of the Pure World Litigation, Seller, Subsidiaries and
Seller Partnerships have conducted their respective businesses
only in the ordinary course and in a manner consistent with past
practice and, whether or not in the ordinary course of business,
there has not been, occurred or arisen:
(i) any change in or event affecting the business of
Seller, Subsidiaries and Seller Partnerships that has had a
material adverse effect on such business or any materially
adverse change or trend in the business, financial condition,
assets, results of operations or prospects of Seller,
Subsidiaries or Seller Partnerships, or
(ii) any condition or action which would be
proscribed by (or require consent under) Section 5.3 had it
existed, occurred or arisen after the date of this Agreement, or
(iii) any casualty, loss, damage or
destruction of any real property of Seller, any Subsidiary or any
Seller Partnership that has involved or may involve a Loss
(whether or not covered by insurance) to Seller, any Subsidiary
or any Seller Partnership of more than $100,000 individually, or
$300,000 in the aggregate.
(d) No Other Liabilities or Contingencies. Neither
Seller nor any Subsidiary nor any Seller Partnership has any
material liability of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due,
probable of assertion or not, except liabilities that (i) were
incurred after September 30, 1996 in the ordinary course of
business in a manner consistent with past practice and are not
material in amount or which involve the Pure World Litigation, or
(ii) are set forth in Schedule 3.3 hereto.
20.4 SEC Reports. Seller has filed with the SEC all forms,
reports, statements, including registration statements, and other
material documents, together with any amendments required to be
made with respect thereto, that were required to be filed with
the SEC since December 31, 1993. Such forms, reports, statements,
including registration statements, and other material documents
required to be filed with the SEC by Seller since December 31,
1993 are collectively referred to in this Agreement as the "SEC
Filings." Seller has made available to Buyer all SEC Filings. As
of their respective dates, (x) each of the SEC Filings, including
the financial statements contained therein, was true and complete
in all material respects, (y) each of the SEC Filings, including
the financial statements contained therein, complied in all
material respects with the Securities Act and Exchange Act, as
applicable, and the rules and regulations promulgated thereunder,
and (z) none contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
20.5 Authorization; No Conflicts. Seller has the requisite
power and authority to enter into this Agreement and the
Registration Rights Agreement and to carry out its obligations
hereunder and thereunder. The execution, delivery and
performance of this Agreement by Seller has been duly and validly
authorized by the Trust Managers and by all other necessary
action on the part of Seller, and no other proceedings on the
part of Seller (including Trust Manager and shareholder approval)
are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly
executed and delivered by Seller and constitutes the legally
valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws and equitable
principles relating to or limiting creditors' rights generally.
Except as set forth in Schedule 3.5, the execution, delivery and
performance of this Agreement by Seller and the consummation by
Seller of the transactions contemplated hereby will not (i)
conflict with or result in the breach of any provisions of, or
trigger any preferential rights under, the Charter Documents or
the charter or organizational documents of Subsidiaries or Seller
Partnerships, (ii) result in a breach or violation of, a default
under, or the triggering of any payment or other material
obligations pursuant to, or accelerate vesting under, any Seller
Benefit Plans or any grant or award thereunder or any employment
or consulting agreement or arrangement of Seller, any Subsidiary
or any Seller Partnership, (iii) violate, conflict with, result
in a breach of any provision of, constitute a default (or an
event which, with notice or lapse of time or both, would
constitute a default) under, result in the termination or in a
right of termination or cancellation of, accelerate the
performance required by, result in the creation of any
Encumbrance upon any Properties under, result in the triggering
of any rights under, or result in being declared void, voidable
or without further binding effect, any of the terms or provisions
of any Material Contract of Seller, any Subsidiary or any Seller
Partnership or (iv) violate any Law. Schedule 3.5 lists all
Permits and Approvals required to be obtained by Seller,
Subsidiaries and Seller Partnerships to consummate the
transactions contemplated hereby. Except for matters identified
in Schedule 3.5 as requiring that certain actions be taken by or
with respect to a third party or Governmental Entity, the
execution and delivery of this Agreement by Seller and the
consummation of the transactions contemplated hereby will not
require the consent, authorization or approval of filing or
registration with, or the issuance of any Permit by, any other
third party or Governmental Entity under the terms of any
applicable Laws or Material Contracts of Seller, Subsidiaries or
Seller Partnerships.
20.6 Legal Proceedings. Except as set forth in Schedule
3.6 and except with respect to the Pure World Litigation, there
is no Order or Action pending, or to the knowledge of Seller
threatened, against or affecting Seller, any Subsidiary, any
Seller Partnership, any Trust Manager in his capacity as a trust
manager of Seller or any of the Properties which (i) questions
the validity of this Agreement, the Registration Rights
Agreement, the Settlement Agreement or any action taken or to be
taken pursuant hereto or thereto, or (ii) individually or when
aggregated with one or more other Orders or Actions has, or if
determined adversely will have, a material adverse effect on the
business, financial condition, assets, results of operations or
prospects of Seller, any Subsidiary or any Seller Partnership or
on Seller's ability to perform this Agreement. To Seller's
knowledge, Schedule 3.6 lists each Order and each Action that (i)
involves a claim or potential claim of aggregate liability in
excess of $50,000 against Seller, any Subsidiary or any Seller
Partnership that is not covered by insurance, (ii) involves a
claim or potential claim of aggregate liability brought by
Seller, any Subsidiary or any Seller Partnership against a tenant
under any Tenant Lease which Tenant Lease obligates such tenant
to pay rent to Seller, any Subsidiary or any Seller Partnership
during the year ending December 31, 1996 in an amount equal to or
in excess of $150,000, or (iii) that enjoins or seeks to enjoin
any activity by Seller, any Subsidiary or any Seller Partnership.
There is no matter as to which Seller, any Subsidiary or any
Seller Partnership has received any notice, claim or assertion in
connection with which any such Person has or may reasonably be
expected to have any right to be indemnified by Seller, any
Subsidiary or any Seller Partnership.
20.7 Compliance with Law and Permits.
(a) Seller, Subsidiaries and Seller Partnerships are
organized and have conducted their respective businesses in
accordance with applicable Laws, neither Seller nor any
Subsidiaries or Seller Partnerships has received any notice of
violation of any Laws which remains uncorrected, and the
respective forms, procedures and practices of Seller,
Subsidiaries and Seller Partnerships are in compliance with all
such Laws, to the extent applicable, the violation of which would
have a material adverse effect on the respective businesses,
financial condition, assets, results of operations or prospects
of Seller, Subsidiaries and Seller Partnerships.
(b) Except as set forth in Schedule 3.7, Seller,
Subsidiaries and Seller Partnerships hold all permits, licenses,
variances, exemptions, authorizations, orders and approvals of
all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "Seller Permits") and Seller,
Subsidiaries and Seller Partnerships are in compliance with the
terms of the Seller Permits relating to each such Person, except
where the failure to hold such Seller Permits or be in compliance
therewith would not, individually or in the aggregate, have a
material adverse effect on the business, financial condition,
assets, results of operations or prospects of Seller,
Subsidiaries or Seller Partnerships. Seller has made available to
Buyer correct and complete copies of all Seller Permits. Except
as set forth in Schedule 3.7, to the knowledge of the Seller, no
investigation or review by any Governmental Entity with respect
to the Seller Permits is pending or threatened.
20.8 Dividends and Other Distributions. Except as set
forth in Schedule 3.8, there has been no dividend or other
distribution of assets or securities by Seller or Seller
Partnerships (other than Seller Partnerships in which Seller owns
100% beneficial interest) whether consisting of money, property
or any other thing of value, declared, issued or paid to or for
the benefit of Seller subsequent to the date of the Audited
Financial Statements.
20.9 Certain Interests. Except as set forth in Schedule
3.1 and Schedule 3.9, no Affiliate of Seller, any Subsidiary or
any Seller Partnership, nor any of their respective officers,
Trust Managers, directors or partners, nor any Associate of any
such individual, has any material interest in any property used
in or pertaining to the respective businesses of Seller, any
Subsidiary or any Seller Partnership. Except as set forth in
Schedule 3.1 and Schedule 3.9, no such Person is indebted or
otherwise obligated to Seller, any Subsidiary or any Seller
Partnership. Except as set forth in Schedule 3.9, Seller,
Subsidiaries and Seller Partnerships are not indebted or
otherwise obligated to any such Person, except for amounts due
under normal arrangements applicable to all employees generally
as to salary or reimbursement of ordinary business expenses not
unusual in amount or significance. Except as set forth in
Schedule 3.1 and Schedule 3.9, there are no material transactions
between Seller, any Subsidiary or any Seller Partnership and any
Affiliate of Seller, any Subsidiary or any Seller Partnership or
any Associate of any such Affiliate that have continuing
obligations of any party thereunder. Except as set forth in
Schedule 3.9, the consummation of the transactions contemplated
by this Agreement will not (either alone, or upon the occurrence
of any act or event, or with the lapse of time, or both) result
in any compensation or severance or other payment or benefit
arising or becoming due from Seller, any Subsidiary or any Seller
Partnership or any of its assigns to any Person.
20.10 No Brokers or Finders. No agent, broker, finder, or
investment or commercial banker, or other Person or firm engaged
by or acting on behalf of Seller or any of its Affiliates in
connection with the negotiation, execution or performance of this
Agreement or the transactions contemplated by this Agreement, is
or will be entitled to any brokerage or finder's or similar fee
or other commission as a result of this Agreement or such
transactions except for a fee payable to EVEREN.
20.11 Employee Benefit Plans. Schedule 3.11 lists
all employee benefit plans and collective bargaining, labor and
employment agreements or other similar benefit arrangements to
which either Seller, any Subsidiary, or any Seller Partnership is
a party or by which either Seller, any Subsidiary, or any Seller
Partnership is bound (collectively, the "Seller Benefit Plans"),
including (i) any profit-sharing, deferred compensation, bonus,
stock option, stock purchase, pension, retainer, consulting,
retirement, severance, welfare or incentive plan, agreement or
arrangement, (ii) any plan, agreement or arrangement providing
for "fringe benefits" or perquisites to employees, officers,
directors, trust managers or agents, including benefits relating
to automobiles, clubs, vacation, child care, parenting,
sabbatical, sick leave, medical, dental, hospitalization, life
insurance and other types of insurance, (iii) any employment
agreement not terminable on 30 days (or less) written notice or
(iv) any other "employee benefit plan" within the meaning of
Section 3(3) of ERISA. True and complete copies of the Seller
Benefit Plans, current descriptive booklets and summary plan
descriptions of the Seller Benefit Plans, any relevant trust
agreements or insurance policies or contracts and, if applicable,
the most recent annual return on Form 5500 (or equivalent form)
have been made available to Buyer. To the extent applicable, the
Seller Benefit Plans comply, in all material respects, with the
requirements of ERISA and the Code. Except as set forth in
Schedule 3.11, no Seller Benefit Plan is or is intended to be a
stock bonus, pension or profit-sharing plan within the meaning of
Section 401(a) of the Code. Neither any Seller Benefit Plan nor
Seller, any Subsidiary, or any Seller Partnership has incurred
any liability or penalty under Section 4975 of the Code or
Section 502(i) of ERISA. Each Seller Benefit Plan has been
maintained and administered in all material respects in
compliance with its terms and with ERISA and the Code to the
extent applicable thereto. Except as set forth in Schedule 3.11,
there are no pending, or to the knowledge of Seller threatened,
claims (other than pursuant to the terms of any such plan)
against or otherwise involving any of the Seller Benefit Plans
and no Action has been brought against or with respect to any
Seller Benefit Plan, and neither Seller nor any Subsidiary nor
any Seller Partnership has incurred any liability to any party
with respect to any Seller Benefit Plan. All contributions
required to be made to the Seller Benefit Plans have been made or
provided for. Except as set forth in Schedule 3.11, neither
Seller nor any Subsidiary nor any Seller Partnership maintains or
contributes to any plan or arrangement which provides or has any
liability to provide life insurance or medical or other employee
welfare benefits to any employee or former employee upon his
retirement or termination of employment and neither Seller nor
any Subsidiary nor any Seller Partnership has represented,
promised or contracted (whether in oral or written form) to any
employee or former employee that such benefits would be provided.
Except as set forth in Schedule 3.11, the execution of, and
performance of the transactions contemplated by, this Agreement
will not (either alone or upon the occurrence of any additional
or subsequent event) constitute an event under any Seller Benefit
Plan or other policy, arrangement or any trust or loan that will
or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits
with respect to any employee. No Seller Benefit Plan is subject
to Title IV of ERISA and neither Seller nor any Subsidiary nor
any Seller Partnership has, within six years prior to the date of
this Agreement, contributed to or had any obligation to
contribute to any employee benefit plan subject to Title IV of
ERISA. For purposes of this Section 3.11, (i) the term "Seller"
includes any entity required to be aggregated with the Seller
pursuant to Code Section 414(b), (c), (m) or (o) and (ii)
provisions of ERISA or the Code include regulations prescribed
under such provisions.
20.12 Labor Matters. Neither Seller nor any
Subsidiary nor any Seller Partnership is a party to or bound by
any collective bargaining or other labor union contracts. There
is no pending or, to the knowledge of Seller, threatened labor
dispute, strike or work stoppage against Seller, any Subsidiary,
or any Seller Partnership. Neither Seller nor any Subsidiary nor
any Seller Partnership, nor their respective representatives or
employees, has committed any unfair labor practices in connection
with the operation of the respective businesses of Seller, each
Subsidiary, and each Seller Partnership, and there is no pending
or, to the knowledge of Seller, threatened charge or complaint
against Seller, any Subsidiary, or any Seller Partnership by the
National Labor Relations Board or any comparable state agency.
Seller, Subsidiaries, and Seller Partnerships are in compliance
with all applicable Laws respecting employment, consulting,
employment practices, wages, hours, and terms and conditions of
employment.
20.13 Properties.
(a) Schedule 3.13 contains a complete and correct list of
all real property owned or leased by Seller, each Subsidiary and
each Seller Partnership (collectively, the "Properties"). Except
as set forth in Schedule 3.13, Seller, Subsidiary or Seller
Partnership, as applicable, owns good and indefeasible title to
each Property, including the land and all improvements, all
personalty and the Tenant Leases (as hereinafter defined). Except
as set forth in Schedule 3.13, the Properties are free and clear
of all Encumbrances of any nature, except for (i) liens for real
property taxes or similar assessments not yet due and payable,
(ii) easements for utilities servicing the Properties and (iii)
such Encumbrances as do not materially detract from or interfere
with the present use of the Properties subject thereto or
affected thereby, or otherwise materially impair the use or value
of such Properties.
(b) Seller has delivered to Buyer a true, correct and
complete copy of a rent roll with respect to each Property
setting forth, among other matters, the term (commencement or
renewal date and expiration date) of each lease with respect to
the Properties (collectively, the "Tenant Leases"), the square
feet for each of the Tenant Leases, the monthly base rental rates
for each of the Tenant Leases and the security deposits for each
of the Tenant Leases. Other than the Tenant Leases, no party has
been granted any license, lease or other material right relating
to the use or possession of the Properties which is material to
the use or value of the Properties. Except as set forth in
Schedule 3.13, all of the Tenant Leases are valid and subsisting
and in full force and effect with respect to Seller, Subsidiaries
and Seller Partnerships and, to Seller's knowledge, with respect
to any other party thereto, and no tenant of the Properties is
more than 30 days delinquent on its rental as of October 31, 1996
except as set forth in Schedule 3.13. To Seller's knowledge, no
tenant of the Properties has initiated or threatened bankruptcy
since January 1, 1996. No tenant of the Properties is an
Affiliate or Associate of Seller, any Subsidiary or any Seller
Partnership. Except as set forth in Schedule 3.13, there are no
contracts or other material obligations outstanding for the sale,
exchange or transfer of the Properties or any portion thereof.
There are no attachments, executions, assignments for the benefit
of creditors, receiverships, conservatorship or voluntary or
involuntary proceedings in bankruptcy or pursuant to any other
debtor relief laws filed by, or pending against, Seller,
Subsidiaries, Seller Partnerships or the Properties. Except as
set forth in Schedule 3.13, since January 1, 1996, no tenants
have terminated their leases prior to expiration and, to Seller's
knowledge, have no intent to do so.
(c) Except as set forth in Schedule 3.13 there is no
pending condemnation or similar proceeding affecting the land,
the improvements or the personalty situated at the Properties or
any portion thereof, and neither Seller nor any Subsidiary nor
any Seller Partnership has received any written notice and has no
knowledge that any such proceeding is contemplated.
(d) The continued ownership, operation, use and occupancy
of the land or the improvements thereon do not violate any
zoning, building, administrative or other law, ordinance, order
or regulation or any restrictive covenant applicable to the
Properties, the violation of which would have a material adverse
effect on the business, financial condition, assets, results of
operations or prospects of Seller, Subsidiaries or Seller
Partnerships, as applicable, and no written notice of any such
violation has been received by Seller, any Subsidiary or any
Seller Partnership from any Governmental Entity.
(e) Seller, Subsidiaries or Seller Partnerships, as
applicable, currently has in place title, liability, casualty and
other insurance coverage with respect to the Properties in such
amounts as are reasonable and customary for properties similar to
the Properties. Each of such policies is in full force and
effect, and all premiums due and payable thereunder have been,
and on the Closing Date will be, fully paid when due. No notice
of cancellation has been received, or to the knowledge of Seller
threatened, with respect thereto.
(f) Except as set forth in Schedule 3.13, there is no
Action pending, or to the knowledge of Seller contemplated, by
any Governmental Entity or third party to levy any special
assessments against the Properties that, if successful, would
have a material adverse effect on the business, financial
condition, assets, results of operations or prospects of Seller.
(g) To Seller's knowledge, each unsatisfied brokerage
obligation that is in excess of $25,000 with respect to the
Properties is set forth on Schedule 3.13.
(h) To Seller's knowledge and except as set forth on
Schedule 3.13, no capital expenditures are contemplated by Seller
to be incurred by Seller, any Subsidiary or any Seller
Partnership within twelve months after the date of this Agreement
in excess of $50,000 per Property with respect to any Property.
(i) Except as set forth in Schedule 3.13, all management
contracts with respect to the Properties are terminable by Seller
on 30 days notice.
(j) To Seller's knowledge, except for customary easements
for access to building systems or utilities and except as set
forth in Schedule 3.13, each Property is an independent unit
which does not now rely on any facilities (other than facilities
of municipalities or public utilities) located on any property
that is not part of the Property for the furnishing to the
Property of any essential building systems or utilities
(including drainage facilities, catch basins and retention ponds)
that if the owner of the Property could not avail the use of
which, would materially detract from the value of the Property or
materially interfere with the use of the Property.
3.14 Tax Matters.
(a) For purposes of this Agreement, "Taxes" means any
federal (including, without limitation, tax on its undistributed
taxable income, alternative minimum tax, tax on certain sale
proceeds or other nonqualifying income from foreclosure property
or on income from prohibited transactions, and any taxes imposed
upon Seller, Subsidiaries or Seller Partnerships under Section
857 or Section 4981 of the Code), state, county, local or foreign
taxes, charges, fees, levies, or other assessments, including,
without limitation, all net income, gross income, sales and use,
ad valorem, transfer, gains, profits, excise, franchise, real and
personal property, gross receipt, capital stock, business and
occupation, disability, employment, payroll, license, estimated,
or withholding taxes or charges imposed by any Governmental
Entity, and includes any interest and penalties (civil or
criminal) on or additions to any such taxes.
(b) For purposes of this Agreement, "Tax Return" means a
report, return or other information required to be filed with or
supplied to a Governmental Entity with respect to Taxes
including, without limitation, any notices or information reports
or returns required to be filed by Seller, Subsidiaries or Seller
Partnerships with respect to their respective operations, income,
assets and shareholders or partners in order to maintain Seller's
status as a real estate investment trust ("REIT") under the Code.
(c) Seller elected to be taxed as a REIT under Sections
856 through 860 of the Code effective for its taxable year ended
December 31, 1985 (the "Initial REIT Year"). Seller, since the
Initial REIT Year through the end of the immediately preceding
taxable year, has always qualified as a REIT under the Code. At
all times from and after the Initial REIT Year to the date
hereof, Seller has complied with, and through the Closing Date
will comply with, all applicable Code and regulatory requirements
necessary to maintain its qualification as a REIT under the Code
and has otherwise operated, and through the Closing Date will
have otherwise operated, in the manner necessary to maintain its
qualification as a REIT under the Code. No dividend will be
required to be distributed before December 31, 1996 in order for
Seller to maintain its qualification as a REIT under the Code.
(d) Except as disclosed in Schedule 3.14, Seller,
Subsidiaries and Seller Partnerships have (i) filed all Tax
Returns required to be filed by applicable Law since December 31,
1990, and all such Tax Returns were in all material respects
(and, as to Tax Returns not filed as of the date hereof but filed
on or before the Closing Date, will be in all material respects)
true, complete and correct and filed on a timely basis and (ii)
within the time and in the manner prescribed by law, paid (and
until the Closing Date will pay within the time and in the manner
prescribed by law) all material Taxes that were or are due and
payable.
(e) Except as set forth in Schedule 3.14, Seller,
Subsidiaries and Seller Partnerships have established (and until
the Closing Date will maintain) on their respective books and
records reserves adequate to pay all Taxes of Seller,
Subsidiaries and Seller Partnerships not yet due and payable in
accordance with GAAP which are reflected in the Audited Financial
Statements and Unaudited Financial Statements to the extent
required by GAAP.
(f) Except as disclosed in Schedule 3.14, as of the date
hereof, there are no, and, as of the Closing Date, there will be
no, material Tax liens upon the assets of Seller, Subsidiaries
and Seller Partnerships, except liens for Taxes not yet due.
(g) Except as disclosed in Schedule 3.14, Seller,
Subsidiaries, and Seller Partnerships have complied (and until
the Closing Date will comply) in all material respects with the
provisions of the Code relating to the payment and withholding of
Taxes, including the withholding and reporting requirements under
Code Sections 1441 through 1464, 3401 through 3406, and 6041
through 6049, as well as similar provisions under any other laws,
and have, within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper
governmental authorities all material amounts required by
applicable Law.
(h) Except as disclosed in Schedule 3.14, Seller,
Subsidiaries and Seller Partnerships have not executed any
outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any
Taxes or Tax Returns.
(i) No notice of any material deficiency for any Taxes has
been received by Seller, any Subsidiary or any Seller Partnership
that has not been resolved and paid in full or otherwise settled,
no audits or other administrative proceedings or court
proceedings are presently pending or, to Seller's knowledge,
threatened with regard to any Taxes or Tax Returns of Seller,
Subsidiaries or Seller Partnerships, and no notice of any
material claim has been received by Seller, any Subsidiary or any
Seller Partnership from any authority in a jurisdiction where
Seller, Subsidiaries or Seller Partnerships do not file Tax
Returns that Seller, any Subsidiary or any Seller Partnership is
or may be subject to Tax in that jurisdiction.
(j) Seller, Subsidiaries and Seller Partnerships have not
received a Tax Ruling or entered into a Closing Agreement with
the Internal Revenue Service that would have any continuing
effect after the Closing Date.
(k) Seller has made available (or, with respect to all Tax
Returns filed after the date hereof, will make available) to
Buyer complete and accurate copies of all Tax Returns, and
amendments thereto, filed by Seller, any Subsidiary or any Seller
Partnership for all taxable periods or years ending on or prior
to the Closing Date.
(l) Neither Seller nor any Subsidiary nor any Seller
Partnership is required to include in income any adjustment
pursuant to Code Section 481(a) by reason of a voluntary change
in federal income tax accounting method (other than a change of
federal income tax accounting method required as a result of a
change in law) initiated by Seller, and the Internal Revenue
Service has not proposed any such adjustment or change in
accounting method.
(m) Seller has made available to Buyer all relevant
information with respect to the federal income tax net operating
loss carryovers of Seller as of December 31, 1995, based on the
federal income Tax Returns filed by Seller as of such date.
(n) For all taxable years from and including its Initial
REIT Year through the Closing Date, (i) Seller has maintained
permanent records containing the information required to be
maintained by Code Section 857(a)(2) and Treasury Regulation
Sections 1.857-(8)(a), 1.857-8(c) and 1.857-8(e) and (ii) Seller
has demanded the written statements from its shareholders
required by Treasury Regulation Section 1.857-8(d) in accordance
with Treasury Regulation Section 1.857-8(e).
3.15 Material Contracts. Schedule 3.15 sets forth an
accurate list of all Material Contracts of Seller, Subsidiaries
and Seller Partnerships. Seller has made available to Buyer
complete and correct copies of all Material Contracts. All
Material Contracts are in full force and effect. Except as set
forth in Schedule 3.15, Seller, Subsidiaries and Seller
Partnerships are not in violation of or default in any material
respect (nor is there any waiver in effect of any event that
would constitute a default but for such waiver) under, and no
event has occurred that (with notice or the lapse of time or
both) would constitute a violation of or default under, any
Material Contract. Except as set forth in Schedule 3.15, to the
knowledge of Seller, no other party to any Material Contract is
in breach of the terms, provisions and conditions of such
Material Contract and no other party to any Material Contract has
notified Seller, any Subsidiary or any Seller Partnership that it
intends to terminate or modify a Material Contract.
3.16 Insurance. Schedule 3.16 sets forth a complete and
correct list of all insurance policies, except for title
insurance policies, currently in force insuring against risks of
Seller, Subsidiaries and Seller Partnerships. Seller,
Subsidiaries and Seller Partnerships are in compliance with the
terms of such policies applicable to them and there are no claims
by Seller, any Subsidiary or any Seller Partnership under any
such policy as to which any insurance company is denying
liability or defending under a reservation of rights clause.
3.17 Environmental Matters.
(a) Except as set forth in the documentation provided to
Seller pursuant to Section 3.17(b) and in Schedule 3.17, there is
no material Environmental Noncompliance with respect to any
Property and there are no material Environmental Claims with
respect to any Property or the Seller, any Subsidiary or any
Seller Partnership or, to the knowledge of Seller, any tenants
under any of the Tenant Leases. All material permits, consents,
licenses, certificates, approvals, registrations, and
authorizations in connection with environmental matters
(collectively, "Environmental Permits") which are required by any
Law have been obtained and are valid. The Properties (and all
uses thereof and operations conducted thereon) comply in all
material respects with all Environmental Permits. All operations
on or at the Properties conducted by Seller are and have been
conducted in all material respects in compliance with applicable
Environmental Laws. Except as set forth in the documentation
provided to Seller pursuant to Section 3.17(b) and in Schedule
3.17, Seller has not received any Notification from any
Governmental Entity seeking any information or alleging any
violation of any Law regarding Environmental Conditions. Except
as set forth in the documentation provided to Seller pursuant to
Section 3.17(b) and in Schedule 3.17, Seller has not caused or
given its verbal or written authorization to cause, and has no
knowledge of, any Release of any Hazardous Materials on-site or
off-site of the Properties in violation of any Environmental Law.
(b) Seller has made available to Buyer true, correct, and
complete copies of all written reports of any environmental
assessment, compliance or regulatory audit, inspection, or
investigation of the Properties in its possession, and Seller has
not received any other written report containing any evidence of
Environmental Noncompliance.
(c) Except as set forth in the documentation provided to
Seller pursuant to Section 3.17(b) and in Schedule 3.17, there is
not now, nor has there been in the past, any "friable" asbestos
(as the term "friable" is defined under 40 C.F.R. Section 61.141)
or friable asbestos containing materials located on, incorporated
in, or otherwise contained in the Properties or any portion
thereof, and there are not now, and have not in the past been,
any underground storage tanks located on the Properties or any
portion thereof.
(d) Except as set forth in the documentation provided to
Seller pursuant to Section 3.17(b), and in Schedule 3.17, none of
the tenants under any Tenant Lease handle or store any Hazardous
Material as a principal or primary business.
3.18 Trust Records; Accounting Records. The minute books of
Seller accurately reflect in all material respects all actions
taken to the date of this Agreement by the holders of Common
Shares, the Trust Managers and committees of the Trust Managers,
except for those matters set forth in Schedule 3.18 for which
minutes of such actions have not yet been prepared or approved.
The share certificate books and records of Seller accurately
reflect the ownership of the Common Shares. Seller maintains
accounting records which fairly reflect, in all material
respects, Seller's transactions.
3.19 New York Stock Exchange Listing. The outstanding
Common Shares are listed on the New York Stock Exchange. The
sale and delivery of the Shares to Buyer pursuant to this
Agreement along with the subsequent sale and delivery of any
other Common Shares to Buyer will not violate any listing
requirements of the New York Stock Exchange for the listing of
Common Shares, including the Shares.
3.20 Disclosure of Facts. There are no facts peculiar to
Seller, Subsidiaries or the Seller Partnerships that Seller has
not disclosed to Buyer that materially adversely affect, or
insofar as Seller can reasonably foresee, will materially
adversely affect, the business, financial condition, assets,
results of operations or prospects of Seller, Subsidiaries or
Seller Partnerships.
SECTION 21. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to, and agrees with, Seller as
follows:
21.1 Organization and Related Matters. Buyer is a
corporation duly organized and validly existing under the laws of
the State of Delaware. Buyer has all necessary corporate power
and corporate authority to carry on its business as now being
conducted. Buyer has all necessary corporate power and corporate
authority to execute, deliver and perform this Agreement and the
transactions contemplated hereby. USAA beneficially owns, and at
Closing will beneficially own, directly or indirectly, all of the
capital stock of Buyer.
21.2 Authorization. The execution, delivery and
performance of this Agreement by Buyer has been duly and validly
authorized by Buyer and by all other necessary corporate action
on the part of Buyer and no other corporate proceedings on the
part of Buyer are necessary to authorize this Agreement or
consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Buyer and constitutes the
legally valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws and equitable
principles relating to or limiting creditors' rights generally.
The execution and delivery of this Agreement by Buyer and the
consummation of the transactions contemplated hereby will not
require filing or registration with, or the issuance of any
Permit by, any other third party or Governmental Entity under the
terms of any applicable Law or material Contracts of Buyer, other
than any filing required under the Exchange Act.
21.3 No Conflicts. The execution, delivery and
performance of this Agreement by Buyer will not violate the
provisions of, or constitute a breach or default (whether upon
lapse of time and/or the occurrence of any act or event or
otherwise) under, (a) Buyer's certificate of incorporation and
bylaws, pursuant to which Buyer was organized and by which Buyer
is governed, (b) any Law to which Buyer is subject or (c) any
Contract to which Buyer is a party that is material to the
financial condition, results of operations or conduct of the
business of Buyer.
21.4 No Brokers or Finders. No agent, broker, finder or
investment or commercial banker, or other Person or firms engaged
by or acting on behalf of Buyer or their respective Affiliates in
connection with the negotiation, execution or performance of this
Agreement or the transactions contemplated by this Agreement, is
or will be entitled to any broker's or finder's or similar fees
or other commissions as a result of this Agreement or such
transactions.
21.5 Legal Proceedings. There is no Order or Action
pending against or, to the knowledge of Buyer, affecting Buyer
that individually or when aggregated with one or more other
Actions has, or if determined adversely would have, a material
adverse effect on the business, properties, or financial
condition of Buyer or on Buyer's ability to perform this
Agreement.
21.6 Investment Representation. Buyer is acquiring the
Shares from Seller for Buyer's own account, for investment
purposes only and not with a view to or for sale in connection
with the distribution thereof. Buyer agrees to execute any
further certificate or other document representing Buyer's
investment intent or as to any other matter reasonably requested
by Seller to assure compliance with applicable securities laws.
21.7 Legends; Stop-Transfer Orders.
(a) All certificates for the Shares may bear legends in
substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY
STATE AND, ACCORDINGLY, MAY BE OFFERED, SOLD, TRANSFERRED OR
PLEDGED ONLY IN A TRANSACTION WHICH IS REGISTERED UNDER SUCH ACT
AND SUCH LAWS OR IS EXEMPT FROM SUCH REGISTRATION REQUIREMENT."
(b) The certificates for Shares may also bear any legend
required by any applicable state blue sky law.
(c) The certificates for the Shares will also bear a
legend relating to restrictions on transfer imposed pursuant to
the percentage ownership limitation contained in the Charter
Documents.
(d) Seller may impose appropriate stop-transfer
instructions relating to the restrictions set forth herein.
21.8 Status for REIT Ownership and Income Tests. At the
Closing, applying the stock ownership rules of Code Section
856(h), Buyer will be treated as a corporation, and the Shares
that it owns will be treated as owned proportionately by Buyer's
policyholders (its "shareholders" for this purpose).
SECTION 22. COVENANTS WITH RESPECT TO CONDUCT OF SELLER PRIOR TO
CLOSING
From the date of this Agreement up to and including the
Closing Date, Seller covenants and agrees to take such actions,
or refrain from taking such actions, as are set forth in this
Section 5.
22.1 Access. Seller shall, and shall cause the
Subsidiaries and Seller Partnerships to, authorize and permit
Buyer and its representatives (which term shall be deemed to
include its independent accountants and counsel) to have
reasonable access during normal business hours, upon reasonable
notice and in such manner as will not unreasonably interfere with
the conduct of business, to all of the Properties, books,
records, operating instructions and procedures, Tax Returns and
all other information with respect to the businesses of Seller,
Subsidiaries and Seller Partnerships as Buyer may from time to
time reasonably request, and to make copies of such books,
records and other documents and to discuss the business of
Seller, Subsidiaries and Seller Partnerships with Buyer and its
partners and their respective officers, employees, accountants
and counsel, as Buyer considers necessary or appropriate for the
purposes of familiarizing itself with the business of Seller,
obtaining any necessary Approvals of, or Permits for, the
transactions contemplated by this Agreement and conducting an
evaluation of the organization and business of Seller. From the
date of this Agreement up to and including the Closing Date,
Seller will permit, and cause Subsidiaries and Seller
Partnerships to permit, Buyer and its partners, and their
respective officers, directors, agents, attorneys, accountants,
and representatives, to audit such books and records, to meet
with tenants of the Properties, and to conduct such
investigations, tests, or inspections of the Properties as Seller
shall approve in Seller's sole discretion, including intrusive
sampling studies to ascertain whether or not there are any
Hazardous Materials on, in, or under the Properties.
22.2 Material Adverse Changes; SEC Filings; Reports;
Financial Statements.
(a) Seller shall promptly notify Buyer of any event of
which Seller obtains knowledge which has had or might reasonably
be expected to have a material adverse effect on Seller's
business or which if known as of the date hereof would have been
required to be disclosed to Buyer.
(b) Seller will, and will cause the Subsidiaries and
Seller Partnerships to, furnish to Buyer as soon as available
copies of all SEC Filings, reports, renewals, filings,
certificates, statements and other documents filed with any
Governmental Entity.
22.3 Conduct of Business. Except as set forth in Schedule
5.3 and as provided in Section 5.4, from the date of this
Agreement until December 24, 1996, Seller agrees with and for the
benefit of Buyer that Seller shall not, and Seller shall cause
Subsidiaries and Seller Partnerships not to, without the prior
written consent of Buyer, which consent may not unreasonably be
withheld:
(a) conduct the business of Seller, Subsidiaries and
Seller Partnerships in any manner except in the ordinary course
consistent with past practices; or
(b) purchase any real property; or
(c) declare, issue, make or pay any dividend or other
distribution of assets, whether consisting of money, other
tangible or intangible personal property, real property or other
thing of value, to its shareholders, or split, combine, dividend,
distribute or reclassify any Common Shares or any shares of its
Capital Stock, as applicable, except for dividends the record
date of which is after the Closing Date; or
(d) issue, sell, redeem or acquire for value, or agree to
do so, any debt obligations, Common Shares or Capital Stock; or
(e) incur or agree to incur any obligation or liability
(absolute or contingent) that individually calls for payment by
Seller, any Subsidiary or any Seller Partnership of more than
$50,000 individually or in the aggregate except for (i)
liabilities (other than indebtedness for borrowed money) incurred
in the ordinary course of business consistent with past practices
(including, but not limited to, tenant improvements and capital
improvements to Properties) and (ii) liabilities arising out of,
incurred in connection with, or related to the consummation of
the transactions contemplated by this Agreement; or
(f) merge, sell substantially all of its assets or enter
into any other contract involving any other form of business
combination or liquidate, wind-up or dissolve (or suffer any
liquidation or dissolution) or adopt any plan of liquidation or
dissolution; or
(g) change the number of Trust Managers or the Board of
Directors of any of the Subsidiaries, or admit any additional
partners to the Seller Partnerships; or
(h) amend the Charter Documents or the charter or
organizational documents of the Subsidiaries or Seller
Partnerships; or
(i) sell, lease, transfer or otherwise dispose of, or
mortgage, pledge or otherwise encumber, other than the lease of
any Property or space therein in the ordinary course of business
consistent with past practices, any of the Properties; or
(j) cancel, satisfy or prepay any debt, obligation,
liability or encumbrance, or waive any claim or right of value of
Seller, Subsidiaries or Seller Partnerships; or
(k) (i) increase in any manner the compensation or fringe
benefits (including, but not limited to, severance benefits)
payable or to become payable by Seller, Subsidiaries, or Seller
Partnerships to any officer, Trust Manager, director, partner,
consultant or independent contractor as salary or wages or under
any bonus, insurance, welfare, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including,
without limitation, the granting of any stock option or stock
appreciation right or performance or restricted stock award),
stock purchase or other employee benefit plan, (ii) increase in
any manner the compensation or fringe benefits (including, but
not limited to, severance benefits) payable or to become payable
by Seller, Subsidiaries or Seller Partnerships to any employee
who is not an officer, Trust Manager, director or partner of
Seller, Subsidiaries or Seller Partnerships as salary or wages or
under any bonus, insurance, welfare, severance, deferred
compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of any stock option
or stock appreciation right or performance or restricted stock
award) stock purchase or other employee benefit plan, except for
such increase in salary, bonuses or severance benefits to such
employees in the ordinary course of business consistent with past
practices and provided that all such increases in salary, bonuses
or severance benefits do not have a material adverse effect on
the business, assets, financial condition or prospects of Seller,
Subsidiaries or Seller Partnerships, or (iii) enter into, adopt,
amend in any material respect (except as required by law) or
terminate any Seller Benefit Plan or any agreement, arrangement,
plan or policy between Seller, Subsidiaries or Seller
Partnerships, as applicable, and one or more of its Trust
Managers, directors, partners, officers, employees or independent
contractors; or
(l) make any tax election other than in connection with
maintaining Seller's qualification as a REIT or take any action
that would cause Seller not to qualify as a REIT, or fail to take
any reasonable action to preserve Seller's qualification as a
REIT; or
(m) make any change in any significant accounting
principles or practices used by Seller, Subsidiaries or Seller
Partnerships, except as required by the SEC; or
(n) amend, modify or change the terms of any Material
Contract other than in the ordinary course of business consistent
with past practice and provided that such amendment, modification
or change does not have a material adverse effect on the
business, assets, financial condition or prospects of Seller,
Subsidiaries or Seller Partnerships; or
(o) acquire any Person (or interest therein) or any
material amount of assets, or make any loans, advances or capital
contributions to, or investments in, any Person; or
(p) incur any indebtedness for borrowed money or assume,
endorse (other than endorsements of negotiable instruments in the
ordinary course of business), guarantee or otherwise become
liable or responsible (whether directly, contingently or
otherwise) for the liabilities or obligations of any Person; or
(q) take any action that would, or fail to take any action
which failure would, result in any of Seller's representations
and warranties set forth in this Agreement not being true; or
(r) agree to or make any commitment to take any action
prohibited by this Section 5.3.
22.4 Prohibition of Solicitation.
(a) General Prohibition. Seller shall not, and it shall
direct and use its best efforts to cause its officers, Trust
Managers, employees, agents and representatives (including,
without limitation, any investment banker, attorney or accountant
retained by it) to not, directly or indirectly, initiate, solicit
or encourage (including by way of furnishing information or
assistance), or take any other action to facilitate, the making
or implementation of any proposal or offer (including, without
limitation, any proposal or offer to its shareholders) with
respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant
portion of the assets or Common Shares of Seller (any such
proposal or offer being hereinafter referred to as an
"Alternative Proposal") or engage in any negotiations concerning,
or provide any confidential information or data to, or have any
discussions with, any Person relating to an Alternative Proposal,
or otherwise facilitate any effort or attempt to make or
implement an Alternative Proposal. Except as disclosed to Buyer
in writing prior to the date of this Agreement, Seller represents
and warrants to Buyer that there are no existing activities,
discussions or negotiations with any Person with respect to an
Alternative Proposal. Seller hereby agrees to notify Buyer
immediately if any inquiries or proposals are received by, any
information is requested from, or any negotiations or discussions
are sought to be initiated or continued with Seller with respect
to an Alternative Proposal.
(b) Unsolicited Offers. Nothing contained in Section
5.4(a) shall prohibit the Trust Managers from: (i) furnishing
information to or entering into discussions or negotiations with
any Person that makes an unsolicited bona fide Alternative
Proposal if, and only to the extent that, (1) prior to furnishing
such information to, or entering into discussions or negotiations
with, such Person, Seller provides written notice to Buyer to the
effect that it is furnishing information to, or entering into
discussions or negotiations with, such Person, (2) prior to
furnishing such information to, or entering into discussions or
negotiations with, such Person, Seller receives from such Person
an executed confidentiality agreement in customary form on terms
not less favorable in any material respect to Seller than the
terms of the letter agreement, dated July 12, 1996 by and between
Buyer and Seller (the "Confidentiality Agreement"), (3) Seller
keeps Buyer informed of the status of any such discussions or
negotiations and (4) Seller shall not disclose the terms of this
Agreement and other information with respect to transactions
among Seller and Buyer except as permitted under Section 12.9
hereto; and (ii) to the extent applicable, complying with Rule
14e-2 promulgated under the Exchange Act with regard to an
Alternative Proposal. Nothing in this Section 5.4 shall permit
Seller to terminate this Agreement or affect any other obligation
of Seller under this Agreement.
(c) Buyer's Continuing Rights. Seller shall be permitted
to enter into a binding agreement relating to an Alternative
Proposal only if the Trust Managers determine, after considering
the advice of its legal counsel, that the failure to consummate
such a transaction might reasonably be expected to subject the
Trust Managers to liability for breach of their fiduciary duties
to Seller's shareholders. The terms of any Alternative Proposal
to which Seller is a party in which Seller is the surviving
entity shall provide that Buyer shall have the right, at its
election, to purchase the Shares upon payment of the Purchase
Price prior to consummation of any such transaction. In the event
that Seller shall not be the surviving entity of such
transaction, upon consummation of such transaction Seller shall
cause such third party to assume the obligations of Seller under
this Agreement and Buyer shall have the right, at its election,
to acquire, upon payment of the Purchase Price, such securities
or other property as it would have been entitled to receive upon
exchange of the Shares if Buyer had purchased the Shares
immediately prior to the consummation of such transaction.
(d) Reimbursement of Expenses. If for any reason,
regardless of fault, the Shares are not sold by Seller to Buyer,
Seller shall reimburse Buyer for all out-of-pocket expenses
incurred by Buyer in connection with the transactions
contemplated by this Agreement upon the submission by Buyer to
Seller of documentation evidencing the incurrence of such
expenses.
22.5 Notification of Certain Matters. Seller shall give
prompt notice to Buyer, and Buyer shall give prompt notice to
Seller, of (a) the occurrence, or failure to occur, of any event
that causes any representation or warranty contained in this
Agreement to be untrue or inaccurate at any time from the date of
this Agreement to the Closing Date and (b) any failure of Buyer
or Seller, as the case may be, to comply with or satisfy, in any
material respect, any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement.
22.6 Permits and Approvals.
(a) Seller and Buyer each agree to cooperate and use their
best efforts to obtain (and will immediately prepare all
registrations, filings and applications, requests and notices
preliminary to all) Approvals and Permits that may be necessary
or which may be reasonably requested by Seller or Buyer to
consummate the transactions contemplated by this Agreement.
(b) To the extent that the Approval of a third party with
respect to any Material Contract is required in connection with
the transactions contemplated by this Agreement, Seller shall use
its best efforts to obtain such Approval prior to the Closing
Date.
SECTION 23. ADDITIONAL CONTINUING COVENANTS AND AGREEMENTS
23.1 Use of Proceeds. The proceeds from the sale of the
Shares to Buyer, net of any costs (including any accounting,
legal and fairness opinion costs and expenses) associated with
the transactions contemplated by this Agreement, shall be applied
by Seller to expenses provided for in the Settlement Agreement
and general reserves.
23.2 Appointment of Trust Managers.
(a) Effective as of the Closing Date, Seller shall
increase the number of its Trust Managers from three (3) to five
(5), and Seller shall appoint two (2) individuals designated by
Buyer to fill the vacancies caused by the increase in the number
of Trust Managers under this Section 6.2(a). In addition, at the
first annual meeting and all subsequent annual meetings of
shareholders after the number of Trust Managers has been
increased to five (5) under this Section 6.2(a), Seller shall
nominate, and use its best efforts to have such persons elected
(which efforts shall include, without limitation, including
Buyer's nominees in management's slate for nomination and
election and solicitation of proxies on their behalf), two (2)
designees of Buyer (which may be different persons than the
persons initially appointed as Trust Managers pursuant to the
first sentence of this Section 6.2(a) if such initial designees
shall have died, resigned, been removed or declined to be
nominated) as Trust Managers. During such time as Seller shall
have individuals designated by Buyer serving as Trust Managers
pursuant to this Section 6.2(a), and except as otherwise provided
in Section 6.2(b) hereof, the number of Trust Managers shall
consist of not more than five (5) persons, including the
designees of Buyer. Such designees of Buyer shall hold office
until resignation, removal, death or expiration of the term for
which he or she was appointed and any successive term for which
such representative is duly elected as a Trust Manager by the
shareholders of Seller. In the event of the death, resignation
or removal from office of a designee of Buyer serving as a Trust
Manager pursuant to the first sentence of this Section 6.2(a),
the Buyer shall be entitled to appoint a replacement designee as
Trust Manager prior to the date Trust Managers are to be elected
at the first annual meeting after the number of Trust Managers
has been increased to five (5) pursuant to this Section 6.2(a).
(b) Additional Appointments. In addition to Buyer's
rights under Section 6.2(a), at any time during the three (3)
year period commencing on the Closing Date, Buyer may, by notice
in writing to Seller, require Seller to increase the number of
Trust Managers from five (5) to seven (7) and to appoint two (2)
individuals designated by Buyer in such written notice to fill
such resulting vacancies. In addition, including Buyer's rights
under Section 6.2(a), at the first annual meeting and all
subsequent annual meetings of shareholders after notice by Buyer
pursuant to the first sentence of this Section 6.2(b), Seller
shall nominate four (4) designees of Buyer (which may be
different persons than those persons initially appointed as Trust
Managers pursuant to such first sentence if such initial
designees shall have died, resigned, been removed or declined to
be nominated) as Trust Managers. During such time as Seller
shall have designees of Buyer serving as Trust Managers pursuant
to this Section 6.2(b), the Trust Managers shall consist of not
more than seven (7) persons, including designees of Buyer. Such
designees of Buyer shall hold office until resignation, removal,
death or expiration of the term for which he or she was appointed
and any successive term for which such representative is duly
elected as a Trust Manager by the shareholders of Seller. In the
event of the death, resignation or removal from office of a
designee of Buyer serving as a Trust Manager pursuant to the
first sentence of this Section 6.2(b), the Buyer shall be
entitled to appoint a replacement designee as Trust Manager.
(c) Qualifications. Each of the representatives
designated by Buyer in accordance with this Section 6.2 shall be
a Person selected by Buyer in its sole discretion; provided,
however, that any such person may not have been involved in any
of the events described in Item 401(d)(1)-(4) of Regulation S-K
promulgated under the Exchange Act.
(d) Committees. At any time that Buyer shall have
exercised its rights under this Section 6.2 to appoint a designee
as Trust Manager, Seller shall appoint at least one of Buyer's
designees on each committee of the Trust Managers, and each such
committee shall contain no more than three (3) members until
expiration of the latest term of office of any designee of Buyer
pursuant to Section 6.2(a) or 6.2(b).
23.3 Environmental Matters. Seller will advise Buyer
promptly (a) upon obtaining knowledge that a Release has occurred
at or upon the Properties and/or (b) upon receipt of a
Notification pertaining to the Properties.
23.4 Status for REIT Ownership and Income Tests. Following
the Closing, and at all subsequent times during which Buyer owns
any of the Shares, applying the stock ownership rules of Code
Section 856(h), Buyer will be treated as a corporation, and the
Shares that it owns will be treated as owned proportionately by
Buyer's policyholders (its "shareholders" for this purpose).
23.5 Prohibited Transactions. Seller shall not effect any
business transactions, or agree to effect any business
transactions, with Affiliates, Trust Managers or employees of
Seller except in the ordinary course of business and unless the
consideration paid by Seller in any such business transaction is
fair value at market rates.
23.6 Seller/Buyer Registration Rights Agreement.
Contemporaneously with the Closing, Buyer and Seller shall enter
into a Registration Rights Agreement substantially in the form of
Exhibit B.
23.7 REIT Qualification. Seller shall take all actions
necessary to maintain Seller's qualification as a REIT and,
without the written consent of Buyer, shall take no action that
would cause Seller not to qualify as a REIT or fail to take any
action that would preserve Seller's qualification as a REIT.
23.8 Services by Buyer. To the extent permitted by law and
the Charter Documents, Buyer shall have the right to provide
management and leasing services to Seller at fair market rates.
SECTION 24. GENERAL CONDITIONS OF PURCHASE
The obligations of the parties to effect the Closing shall
be subject to the following conditions unless waived in writing
by all parties:
24.1 No Orders. No Law or Order shall have been enacted,
entered, issued, promulgated or enforced by any Governmental
Entity which prohibits or restricts the transactions contemplated
by this Agreement. No Governmental Entity shall have notified any
party to this Agreement that consummation of the transactions
contemplated by this Agreement would constitute a violation of
any Law of any jurisdiction or that it intends to commence
proceedings to restrain or prohibit such transactions or force
divestiture or rescission, unless such Governmental Entity shall
have withdrawn such notice and abandoned any such proceedings
prior to the time which otherwise would have been the Closing
Date.
24.2 Approvals. To the extent required by applicable Law,
all Permits and Approvals required to be obtained in connection
with the Closing from any Governmental Entity or any consent from
a third party material to Seller or its business shall have been
received or obtained on or prior to the Closing Date.
24.3 Absence of Litigation. No Action before any
Governmental Entity pertaining to the transactions contemplated
by this Agreement shall have been instituted on or before the
Closing Date whether or not Buyer or its Affiliates is a party.
24.4 New York Stock Exchange. The Shares shall have been
approved for listing, upon official notice of issuance, on the
New York Stock Exchange. Seller shall have received a letter or
other assurance from the New York Stock Exchange confirming that
approval by Seller's shareholders of the issuance of the Shares
is not required under the rules of the New York Stock Exchange.
Seller will use its best efforts to maintain the listing of its
Common Shares on the New York Stock Exchange.
SECTION 25. CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer to effect the Closing shall be
subject to the following conditions except to the extent waived
in writing by Buyer:
25.1 Settlement Agreement. The final settlement of the
Pure World Litigation by the court overseeing such settlement
shall have occurred on or before the Closing Date.
25.2 Accuracy of Seller's Representations and
Warranties. All representations and warranties of Seller set
forth in this Agreement shall be true and correct at the Closing
Date as if made on and as of the Closing Date.
25.3 Performance by Seller. Seller shall have in all
material respects performed, satisfied and complied with all
covenants, agreements and conditions required by this Agreement
to be performed, satisfied or complied with by Seller on or
before the Closing Date, including the covenants set forth in
Section 5.
25.4 No Material Adverse Change. During the period from
the date of the Audited Financial Statements to the Closing Date,
(i) there shall not have been any material adverse change in the
business, assets, prospects, financial condition or the results
of operations of Seller, and Seller shall not have sustained any
material Loss or damage to its assets (including those of
Subsidiaries and Seller Partnerships), except for Losses covered
by insurance, that adversely affects its ability to conduct a
material part of its business and (ii) there shall not have
occurred any material adverse change in the financial markets in
the United States, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development
involving a prospective change in national or international
political, financial or economic conditions, in each case the
effect of which is such as to, in the judgment of Buyer,
significantly impair the marketability or value of the Shares,
(iii) the trading in any securities of the Company shall not have
been suspended or limited by the Commission or the New York Stock
Exchange, trading generally on the American Stock Exchange or the
New York Stock Exchange or in the Nasdaq National Market shall
not have been suspended or limited, minimum or maximum prices for
trading shall not have been fixed, and maximum ranges for prices
shall not have been required, by any of said exchanges or by such
system or by order of the Commission, the National Association of
Securities Dealers, Inc. or any other Governmental Entity, and
(iv) a banking moratorium shall not have been declared by
Federal, Texas or New York authorities.
25.5 Certification by Seller. Buyer shall have received a
certificate, dated as of the Closing Date, signed by the
President of Seller, certifying, in such detail as Buyer and its
counsel reasonably may request, that the conditions specified in
Section 8.1, Section 8.2, Section 8.3, and Section 8.4 have been
fulfilled.
25.6 Opinion of Seller's Counsel. Buyer shall have
received from counsel for Seller an opinion, dated as of the
Closing Date, in form and substance reasonably satisfactory to
Buyer as to the matters set forth in Schedule 8.6.
25.7 No Other Business Combination Transaction. Seller
shall not have entered into an agreement relating to an
Alternative Proposal and its Trust Managers shall not have
recommended an Alternative Proposal.
SECTION 26. CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to effect the Closing shall be
subject to the following conditions, except to the extent waived
in writing by Seller:
26.1 Settlement Agreement. The final settlement of the
Pure World Litigation by the court overseeing such settlement
shall have occurred on or before the Closing Date.
26.2 Accuracy of Buyer's Representations and Warranties.
All representations and warranties of Buyer set forth in this
Agreement shall be true and correct at the Closing Date as if
made on and as of the Closing Date.
26.3 Buyer's Performance. Buyer shall have in all
material respects performed, satisfied and complied with all
covenants, agreements and conditions required by this Agreement
to be performed, satisfied or complied with by Buyer on or before
the Closing Date.
26.4 Certification by Buyer. Seller shall have received a
certificate, dated as of the Closing Date, signed by the
President or a Vice President of Buyer, certifying, in such
detail as Seller and its counsel reasonably may request, that the
conditions specified in Section 9.2 and Section 9.3 have been
fulfilled.
26.5 Opinion of Buyer's Counsel. Seller shall have
received from counsel to Buyer an opinion, dated as of the
Closing Date, in form and substance reasonably satisfactory to
Seller as to the matters set forth in Schedule 9.5.
SECTION 27. TERMINATION OF OBLIGATIONS; SURVIVAL
27.1 Termination of Agreement. This Agreement and the
transactions contemplated by this Agreement may be terminated at
any time before the Closing Date, as follows and in no other
manner:
(a) Mutual Consent. By mutual consent in writing of
Buyer and Seller.
(b) Conditions to Buyer's Performance Not Met. By Buyer
with written notice to Seller if the Closing Date has not
occurred on or before December 31, 1996. Notwithstanding the
foregoing, Buyer may not exercise any right to terminate this
Agreement pursuant to this paragraph if Buyer has breached in any
material respect its covenants or agreements set forth in this
Agreement in any manner that shall have proximately contributed
to the failure of the Closing Date to occur on or before December
31, 1996.
(c) Conditions to Seller's Performance Not Met. By
Seller with written notice to Buyer if the Closing Date has not
occurred on or before December 31, 1996. Notwithstanding the
foregoing, Seller may not exercise any right to terminate this
Agreement pursuant to this paragraph if Seller has breached in
any material respect its covenants or agreements set forth in
this Agreement in any manner that shall have proximately
contributed to the failure of the Closing Date to occur on or
before December 31, 1996.
(d) Misrepresentation or Material Breach. By Buyer or
Seller with written notice to the other party if there has been a
misrepresentation or material breach on the part of Seller or
Buyer, respectively, in their respective representations,
warranties and covenants set forth herein, which, with respect to
a breach of a covenant, if curable, has not been cured within ten
business days after receipt of notice from Buyer or Seller of the
terminating party's intention to terminate.
(e) Environmental Noncompliance. By Buyer in the event
of the discovery of any Release or other matter prior to the
Closing Date which, if known to Seller as of the date of this
Agreement, would have constituted a breach of the representations
and warranties contained in Section 3.17.
27.2 Effect of Termination. In the event that this
Agreement shall be terminated pursuant to Section 10.1, all
further obligations of the parties under this Agreement shall
terminate; provided that the obligations of the parties contained
in this Section 10.2, Section 11, and Section 12, (other than
Sections 12.3 and 12.8) shall survive any such termination. A
termination under Section 10.1 shall not relieve any party of any
liability for a breach of, or for any misrepresentation under,
this Agreement, or be deemed to constitute a waiver of any
available remedy (including specific performance if available)
for any such breach or misrepresentation.
27.3 Survival of Representations and Warranties. The
representations and warranties contained in or made pursuant to
this Agreement shall expire on the third anniversary of the
Closing except that (a) the representations and warranties
contained in Section 3.2 shall continue forever (subject to all
defenses of Seller available under applicable Law, including the
expiration of the applicable statute of limitations period), (b)
the representations and warranties contained in Section 3.14
shall continue through the applicable statute of limitations, (c)
representations and warranties which are intentionally
misrepresented shall continue through the later of the first
anniversary of the Closing Date and one year following the date
of actual discovery of such intentional misrepresentation, and
(d) if a claim or notice is given under Section 11 with respect
to the breach of any representation or warranty prior to the
applicable expiration date, such representation or warranty shall
continue indefinitely until such claim is finally resolved. All
covenants and agreements of the parties hereto shall be
continuing and shall survive the Closing Date pursuant to the
terms thereof.
SECTION 28. INDEMNIFICATION
28.1 Obligations of Seller. Seller agrees to indemnify,
defend and hold harmless Buyer and its officers, employees,
agents, directors and Affiliates (collectively, the "Buyer
Indemnified Parties") from and against any and all Losses of the
Buyer Indemnified Parties (as incurred) as a result of, or based
upon, relating to or arising out of, directly or indirectly, the
transactions contemplated hereby or by the Registration Rights
Agreement, including, without limitation, as a consequence of (a)
any inaccuracy in, or breach or nonperformance of, any of the
representations, warranties, covenants or agreements made by
Seller in, or pursuant to, this Agreement, or (b) any pending or
threatened Action brought by Seller's shareholders or creditors
or any other Person other than the Buyer Indemnified Parties or
their creditors relating to, or arising out of or in connection
with, directly or indirectly, the transactions contemplated under
this Agreement; provided, however, that Seller shall not be
obligated to indemnify, defend or hold harmless any of the Buyer
Indemnified Parties for any claims based solely on actions taken
by any of the Buyer Indemnified Parties other than the
performance of the covenants and agreements to be undertaken by
Buyer pursuant to the terms and conditions of this Agreement and
any other action authorized in writing by Seller. As a condition
to the rights of any of the Buyer Indemnified Parties under this
Section 11, Seller may require that any such Person provide a
written undertaking that such Person will repay to Seller any
amount expended by Seller to indemnify, defend or hold harmless
such Person in the event and to the extent a court determines
that Seller's indemnification or defense of such Person is
prohibited by applicable Law.
28.3 Obligations of Buyer. Buyer agrees to indemnify,
defend and hold harmless Seller and its Trust Managers, officers,
employees, agents, directors and Affiliates (collectively, the
"Seller Indemnified Parties") from and against any Losses of the
Seller Indemnified Parties as a result of, or based upon or
arising out of, directly or indirectly, (a) any material
inaccuracy in, or material breach or material nonperformance of,
any of the representations, warranties, covenants or agreements
made by Buyer in, or pursuant to, this Agreement, or (b) any
pending or threatened Action brought by Buyer's policyholders or
creditors relating to, or arising out of or in connection with,
directly or indirectly, the transactions contemplated under this
Agreement; provided, however, that Buyer shall not be obligated
to indemnify, defend or hold harmless any of the Seller
Indemnified Parties for any claims based solely on actions taken
by any of the Seller Indemnified Parties other than the
performance of the covenants and agreements to be undertaken by
Seller pursuant to the terms and conditions of this Agreement and
any other action authorized in writing by Buyer. As a condition
to the rights of any of the Seller Indemnified Parties under this
Section 11, Buyer may require that any such Person provide a
written undertaking that such Person will repay to Buyer any
amount expended by Buyer to indemnify, defend or hold harmless
such Person in the event and to the extent a court determines
that Buyer's indemnification or defense of such Person is
prohibited by applicable Law.
28.3 Procedure.
(a) Notice. Any party seeking indemnification with
respect to any Loss shall give notice to the party required to
provide indemnity hereunder (the "Indemnifying Party") on or
before the date specified in Section 11.4.
(b) Defense of Claim. If any claim, demand or liability
is asserted by any third party against any Indemnified Party, the
Indemnifying Party shall have the right, unless otherwise
precluded by applicable law, to conduct and control the defense,
compromise or settlement of any Action or threatened Action
brought against the Indemnified Party in respect of matters
embraced by the indemnity set forth in this Section 11. The
Indemnified Party shall have the right to employ counsel separate
from counsel employed by the Indemnifying Party in connection
with any such Action or threatened Action and to participate in
the defense thereof, but the fees and expenses of such counsel
employed by the Indemnified Party shall be at the sole expense of
the Indemnified Party unless (i) the Indemnifying Party shall
have elected not, or, after reasonable written notice of any such
Action or threatened Action, shall have failed, to assume or
participate in the defense thereof, (ii) the employment thereof
has been specifically authorized by the Indemnifying Party in
writing, or (iii) the parties to any such Action or threatened
Action (including any impleaded parties) include both the
Indemnifying Party and the Indemnified Party and the Indemnified
Party shall have been advised in writing by counsel for the
Indemnified Party that there may be one or more defenses
available to the Indemnified Party that are not available to the
Indemnifying Party or legal conflicts of interest pursuant to
applicable rules of professional conduct between the Indemnifying
Party and the Indemnified Party (in any which case, the
Indemnifying Party shall not have the right to assume the defense
of such Action on behalf of the Indemnified Party), in either of
which events referred to in clauses (i), (ii) and (iii) the fees
and expenses of such counsel employed by the Indemnified Party
shall be at the expense of the Indemnifying Party. The
Indemnifying Party shall not, without the written consent of the
Indemnified Party, settle or compromise any such Action or
threatened Action or consent to the entry of any judgment which
does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnified Party a release
from all liability in respect of such Action or threatened
Action. Unless the Indemnifying Party shall have elected not, or
shall have after reasonable written notice of any such Action or
threatened Action failed, to assume or participate in the defense
thereof, the Indemnified Party may not settle or compromise any
Action or threatened Action without the written consent of the
Indemnifying Party. If, after reasonable written notice of any
such Action or threatened Action, the Indemnifying Party neglects
to defend the Indemnified Party, a recovery against the latter
suffered by it in good faith, is conclusive in its favor against
the Indemnifying Party; provided, however, that no such
conclusive presumption shall be made if the Indemnifying Party
has not received reasonable written notice of the Action against
the Indemnified Party.
28.4 Survival. The indemnity set forth in this Section 11
shall survive the Closing or termination of this Agreement and
shall remain in effect for a period of (a) with respect to a
breach of a representation or warranty, for the period through
which such representation or warranty shall continue pursuant to
Section 10.3 (including such period of time through which such
representation or warranty shall be extended until resolution of
a claim with respect thereto) and (b) with respect to a breach of
a covenant or agreement or an Action referred to in clause (b) of
Sections 11.1 or 11.2, forever.
28.5 Notice by Seller. Seller and Buyer agree to notify
in writing the other party of any liabilities, claims or
misrepresentations, breaches or other matters covered by this
Section 11 upon discovery or receipt of notice thereof (other
than from such other party), whether before or after Closing.
SECTION 29. GENERAL
29.1 Amendments; Waivers. This Agreement and any Schedule
or Exhibit attached hereto or referenced herein may be amended
only by agreement in writing of all parties. No waiver of any
provision nor consent to any exception to the terms of this
Agreement shall be effective unless in writing and signed by the
party to be bound and then only to the specific purpose, extent
and instance so provided.
29.2 Schedules; Exhibits; Integration. Each Exhibit and
Schedule delivered pursuant to the terms of this Agreement shall
be in writing and shall constitute a part of the Agreement. This
Agreement, together with such Exhibits and Schedules, constitutes
the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements and
understandings of the parties in connection therewith.
29.3 Best Efforts; Further Assurances. Each party will
use its best efforts to cause all conditions to its obligations
to be timely satisfied and to perform and fulfill all obligations
on its part to be performed and fulfilled under this Agreement.
The parties shall cooperate with each other in such actions and
in securing requisite Approvals. Each party shall execute and
deliver such further certificates, agreements and other documents
and take such other actions as the other party may reasonably
request to consummate or implement the transactions contemplated
hereby or to evidence such events or matters, including the
seeking of any necessary shareholder approvals.
29.4 Governing Law. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS
OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW
OR CONFLICT OF LAW PROVISION (WHETHER OF THE STATE OF TEXAS OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS.
29.5 No Assignment. Except as otherwise specifically
provided herein, neither this Agreement nor any rights or
obligations under it are assignable by any party, except that
Buyer may assign its rights hereunder (including but not limited
to its rights under Section 11) to any member of the USAA Group.
Buyer shall remain liable to Seller for the payment of the
Purchase Price and other obligations of Buyer hereunder
notwithstanding a permitted assignment.
29.6 Headings. The descriptive headings of the Sections
and subsections of this Agreement are for convenience only and do
not constitute a part of this Agreement.
29.7 Counterparts. This Agreement and any other
agreement or document delivered pursuant hereto may be executed
in one or more counterparts and by different parties in separate
counterparts. All of such counterparts shall constitute one and
the same agreement or other document and shall become effective
when one or more counterparts of this Agreement have been signed
by each party and delivered to the other party.
29.8 Publicity and Reports. Seller and Buyer shall
coordinate all publicity relating to the transactions
contemplated by this Agreement and no party shall issue any press
release, publicity statement or other public notice relating to
this Agreement, or the transactions contemplated by this
Agreement, without obtaining the prior consent of the other
party, except to the extent that independent legal counsel to
Seller or Buyer, as the case may be, shall advise Seller or Buyer
in writing that a particular action is required by applicable Law
(in which event the party taking such action shall cooperate with
the other party in connection with any disclosure or publicity
resulting from such action).
29.9 Confidentiality. All information disclosed by any
party (or its representatives) to the other party whether before
or after the date hereof, in connection with the transactions
contemplated by, or the discussions and negotiations preceding,
this Agreement to any other party (or its representatives) shall
be kept confidential by such other party and its representatives
and shall not be used by any such Persons other than as
contemplated by this Agreement, except (a) to the extent that
such information (i) was known by the recipient when received,
(ii) is or hereafter becomes lawfully obtainable from other
public sources or (iii) is necessary or appropriate to be
disclosed to a Governmental Entity having jurisdiction over the
parties, (b) may otherwise be required by Law to be disclosed or
(c) to the extent such duty as to confidentiality is waived in
writing by the other party. If this Agreement is terminated in
accordance with its terms, each party shall use all reasonable
efforts to return upon written request from the other party all
documents (and reproductions thereof) received by it or its
representatives from such other party (and, in the case of
reproductions, all such reproductions made by the receiving
party) that include information not within the exceptions
contained in the first sentence of this Section 12.9, unless the
recipients provide assurances reasonably satisfactory to the
requesting party that such documents have been destroyed.
29.10 Parties in Interest. This Agreement shall be binding
upon and inure to the benefit of each party, and nothing in this
Agreement, express or implied, is intended to confer upon any
other Person any rights or remedies of any nature whatsoever
under or by reason of this Agreement. Nothing in this Agreement
is intended to relieve or discharge the obligation of any third
Person to or to confer any right of subrogation or action over or
against any party to this Agreement.
22.11 Notices. Any notice or other communication hereunder
must be given in writing and (a) either delivered in person, (b)
transmitted by telex, telefax or telecopy mechanism, (c) mailed
by first class mail, return receipt requested, or (d) delivered
by overnight mail or courier service, as follows:
If to Buyer, addressed to:
USAA Real Estate Company
8000 Robert F. McDermott Freeway
IH-10 West, Suite 600
San Antonio, Texas 78230-3884
Attention: David M. Holmes
Randal R. Seewald, Esq.
Telephone: (210) 498-0626
Telecopy: (210) 498-6214
If to Seller, addressed to:
American Industrial Properties REIT
6220 North Beltline Road, Suite 205
Irving, Texas 75063-2656
Attention: Mr. Charles W. Wolcott
President and Chief Executive Officer
Telephone: (972) 550-6053
Telecopy: (972) 550-6037
or to such other address or to such other person as any party
shall have last designated by such notice to the other parties.
Each such notice or other communication shall be effective (i) if
given by telecommunication, when transmitted to the applicable
number so specified in this Section 12.11 and an appropriate
answer back is received, (ii) if given by mail, three days after
such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any
other means, when actually delivered at such address.
29.12 Expenses. Seller and Buyer shall pay their own
respective expenses incident to the negotiation, preparation and
performance of this Agreement and the transactions contemplated
hereby, including but not limited to the fees, expenses and
disbursements of their respective financial advisers, accountants
and counsel.
29.13 Remedies; Waiver. All rights and remedies existing
under this Agreement and any related agreements or documents are
cumulative to and not exclusive of any rights or remedies
otherwise available under applicable Law. No failure on the part
of any party to exercise or delay in exercising any right
hereunder shall be deemed a waiver thereof, nor shall any single
or partial exercise preclude any further or other exercise of
such or any other right. Buyer and Seller shall be entitled to
seek any equitable remedy to the extent such remedy is available
under applicable Law.
29.14 Representation By Counsel; Interpretation. Seller
and Buyer each acknowledge that each party to this Agreement has
been represented by counsel in connection with this Agreement
and the transactions contemplated by this Agreement. Accordingly,
any rule of Law or any legal decision that would require
interpretation of any claimed ambiguities in this Agreement
against the party that drafted it has no application and is
expressly waived. The provisions of this Agreement shall be
interpreted in a reasonable manner to effect the intent of Buyer
and Seller, and no rule of strict construction shall be applied
against any party to this Agreement.
29.15 Severability. If any provision of this Agreement is
determined to be invalid, illegal or unenforceable by any
Governmental Entity, the remaining provisions of this Agreement
to the extent permitted by Law shall remain in full force and
effect to the extent permitted by Law, and the parties hereby to
the same extent waive any provision of Law that renders any
provision hereof prohibited or unenforceable in any respect.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed by its duly authorized officers as
of the day and year first above written.
"BUYER"
USAA REAL ESTATE COMPANY
By: /s/
T. Patrick Duncan
Senior Vice President - Operations
"SELLER"
AMERICAN INDUSTRIAL PROPERTIES REIT
By: /s/
Charles W. Wolcott
President and Chief Executive Officer
PROMISSORY NOTE
$2,769,775.00 Dallas, Dallas County, TexasNovember 25, 1996
FOR VALUE RECEIVED, American Industrial Properties
REIT, Inc., a Maryland corporation ("Maker") promises to pay to
the order of USAA Real Estate Company ("Lender"), a Delaware
corporation, whose address is 8000 Robert F. McDermott Freeway,
IH-10 West, Suite 600, San Antonio, Texas 78230-3884, at said
address or such other address as may be designated in writing by
the holder hereof from time to time, the principal sum of TWO
MILLION SEVEN HUNDRED SIXTY-NINE THOUSAND SEVEN HUNDRED SEVENTY
FIVE AND NO/100 Dollars ($2,769,775.00), together with interest
on said principal, (i) from the date hereof through and including
the date sixty days from the date hereof, at a fixed rate equal
to nine percent (9%) per annum, and (i) thereafter, at a fixed
rate equal to seventeen percent (17%) per annum; provided,
however, that in no event shall such rate exceed the maximum
legal rate of interest (the "Maximum Rate") permitted by the
applicable laws of the State of Texas or the United States of
America, whichever shall permit the higher lawful rate, and as to
which Maker could not successfully assert a claim or defense of
usury, and to the extent that the Maximum Rate is determined by
reference to the laws of the State of Texas, the Maximum Rate
shall be determined by reference to the indicated rate ceiling
(as defined and described in Texas Revised Civil Statutes,
Article 5069-1.04, as amended) at the applicable time in effect.
ALL OUTSTANDING PRINCIPAL OF THIS NOTE AND ALL ACCRUED
AND UNPAID INTEREST HEREUNDER SHALL BE DUE AND PAYABLE ON DEMAND,
OR IF NO DEMAND IS MADE, THE DATE 120 DAYS FROM THE DATE HEREOF.
In the absence of a demand, accrued and unpaid interest shall be
payable on the twentieth (20th) day of each month. In the event
the lawsuit styled American Industrial Properties REIT v. Pure
World, Inc., et al, is settled in accordance with the Settlement
Agreement dated November 25, 1996 attached hereto as Exhibit A,
this Note may be prepaid, in whole or in part, at any time
without penalty, in cash or by the transfer of the 998,100 Shares
of Beneficial Interest, par value $0.10 per share, of American
Industrial Properties REIT, which were purchased as of the date
hereof by Maker from Richard M. Osborne and his affiliates.
Interest charges will be calculated on amounts advanced
hereunder on the actual number of days said amounts are
outstanding on the basis of a 365 or 366 day year as the case may
be. It is the intention of Maker and Lender to conform strictly
to the usury laws in force in the State of Texas and the United
States of America. It is therefore agreed that (i) in the event
that the maturity hereof is accelerated by reason of a demand by
Lender, or if the same is prepaid prior to maturity, all unearned
interest shall be canceled automatically, or if theretofore paid,
shall be credited on the unpaid principal amount of this Note, or
if the principal amount of this Note has been paid, refunded to
Maker, (ii) the aggregate of all interest and other charges
constituting interest under applicable law and contracted for,
chargeable or receivable under this Note or otherwise in
connection with this loan transaction shall never exceed the
maximum amount of interest, or produce a rate in excess of the
maximum rate of interest that Lender may charge Maker under
applicable law and in regard to which Maker may not successfully
assert the claim or defense of usury, and (iii) if any excess
interest is provided for, it shall be deemed a mistake and the
same shall either be refunded to Maker or credited on the unpaid
principal amount hereof, and this Note shall be automatically
deemed reformed so as to permit only the collection of the
maximum non-usurious rate and amount of interest allowed by
applicable law. All sums paid or agreed to be paid to the holder
or holders hereof for the use, forbearance or detention of the
indebtedness evidenced hereby shall, to the full extent permitted
by applicable law, be amortized, prorated, allocated and spread
through the full term of this Note.
In the event Maker fails to pay this Note when due,
whether by demand or passage of time, and it is placed in the
hands of an attorney for collection, or is collected through
probate, bankruptcy or other proceedings, Maker promises to pay
all amounts incurred by Lender for court costs and attorneys'
fees in connection therewith.
Maker waives grace, notice, demand, presentment for
payment, notice of non-payment, protest, notice of protest,
notice of intention to accelerate, notice of acceleration of the
indebtedness due hereunder and all other notice, filing of suit
and diligence in collecting this Note, and the enforcing of any
of the security rights of Lender, and consent and agree that the
time of payment hereof may be extended without notice at any time
and from time to time, and for periods of time, whether or not
for a term or terms in excess of the original term hereof,
without notice or consideration to, or consent from, any of them.
Time is of the essence hereof.
This Note shall be governed by and construed in
accordance with the laws of the State of Texas (without giving
effect to the conflict of laws principles thereof).
EXECUTED to be effective the day and year first written
above.
AMERICAN INDUSTRIAL PROPERTIES REIT, INC.
By: /s/
Name: Charles W. Wolcott
Title: President
American Industrial Properties REIT, a Texas real
estate investment trust (the "Guarantor"), which is the sole
shareholder of Maker, hereby unconditionally guarantees to
Lender, irrespective of the validity and enforceability of the
Note or a Share Purchase Agreement to be entered into among
Guarantor and Lender (the "Agreement"), or the obligations of
Maker hereunder or thereunder, that the principal and interest on
the Note shall be promptly paid in full when due, whether at
maturity, by acceleration, redemption, demand or otherwise, and
interest on the overdue principal and interest on the Note, if
any, if lawful, and all other obligations of Maker to Lender
hereunder and under the Agreement shall be promptly paid in full
or performed, all in accordance with the terms hereof or thereof.
Failing payment when due of any amount so guaranteed or any
performance so guaranteed for whatever reason, Guarantor shall be
obligated to pay the same immediately and the obligations of
Maker to repay principal and interest on the Note shall, at the
option of Lender, be satisfied either in cash or in Shares of
Beneficial Interest, par value $.10 per share, of Guarantor at a
price of $1.50 per share.
AMERICAN INDUSTRIAL PROPERTIES REIT
By: /s/
Name: Charles W. Wolcott
Title: President and Chief Executive Officer
USAA REAL ESTATE COMPANY
8000 McDermott Freeway
Suite 600
San Antonio, Texas 78230-3884
December 18, 1996
American Industrial Properties REIT
6220 North Beltline, Suite 205
Irving, Texas 75063
Re: 8.8% Promissory Note dated February 27, 1992 in the
original principal amount of $23,261,317.66 ("Note A") executed
by Trammell Crow Real Estate Investors ("Trammell Crow") and
payable to The Manufacturers Life Insurance Company ("MLI") and
the 8.8% Promissory Note, dated February 27, 1992, in the
original principal amount of $19,143,646.92 ("Note B") executed
by Trammell Crow and payable to The Manufacturers Life Insurance
Company (U.S.A.) ("MLI-USA") (collectively the "Notes")
Gentlemen:
American Industrial Properties REIT ("AIP"), the
predecessor obligor on the Notes, has requested that USAA Real
Estate Company or one of its affiliates (collectively, "USAA")
commence negotiations with MLI and MLI-USA for the purchase or
repayment of the Notes. USAA is willing to commence these
negotiations, subject to AIP's acceptance of the following terms
and conditions:
1. Purchase of the Notes. USAA, with the assistance
of AIP, will commence negotiations with MLI to purchase the Notes
at a price acceptable to USAA, in its sole discretion.
Consummation of any such purchase by USAA shall be in USAA's sole
discretion, but shall in any event require (a) completion of
satisfactory due diligence, in USAA's sole discretion, with
respect to the Notes, including, without limitation, review of
the Notes, the Settlement Agreement by and between AIP, Patapsco
#1 Limited Partnership, Patapsco #2 Limited Partnership, MLI and
MLI-USA dated as of May 22, 1996, the Note Purchase Agreement,
dated February 27, 1992, by and between Trammell Crow Real Estate
Investors and MLI, the Option Agreement, dated May 22, 1996,
between MLI, MLI-USA and AIP and other agreements concerning the
obligations under the Notes (collectively the "Note Documents"),
(b) negotiation and consummation of the purchase or repayment of
the Notes (the "Purchase Documents"), on terms satisfactory to
USAA, in its sole discretion, and (c) execution and delivery of
agreements, in form and substance satisfactory to USAA, in its
sole discretion, by USAA and AIP, necessary to implement the
modifications to (or replacement of) the Notes and the other Note
Documents described in paragraph 2 below. AIP will use its best
efforts to assist USAA to complete this transaction and will also
execute any consents or other documents necessary for USAA to
acquire the Notes. In the event USAA does not purchase the Notes
from MLI, USAA shall have the option, in its sole discretion, to
advance to AIP the funds necessary to repay the Notes, in which
case AIP agrees to repay USAA such funds on terms consistent with
those set forth below.
2. Note Modifications. For the consideration of the
mutual obligations set forth below, the Notes (or the obligations
represented thereby) and the other Note Documents (or the
obligations represented thereby) will be modified (or replaced),
effective upon consummation of the Purchase Documents, to
incorporate the following terms:
a. USAA will amend the current aggregate principal
balance ($9,419,213) of the Notes so that the resulting aggregate
principal balance of the Notes will be at least $7,040,721, and
in any event $1,591,103 greater than the amount paid by USAA to
purchase the Notes (provided such purchase price for this purpose
shall be limited to $5,449,618 plus accrued interest), plus the
expenses incurred by USAA in connection with this transaction.
Such amendment shall not apply to any accrued and unpaid interest
on the Notes. AIP acknowledges that the foregoing may result in
income to AIP.
b. Subject to clause (e) below, the Notes will
continue to accrue interest at a non-default rate of 8.8% per
annum, with accrued interest payable monthly in arrears, and the
maturity of the Note will be extended to December 31, 2000.
c. AIP will waive its right to make the discounted
prepayments contemplated by the Option Agreement dated as of May
22, 1996 relating to the Notes (the "Option Agreement") and AIP
will have no further right to make any optional prepayment of the
Notes.
d. The Notes will be amended to provide that, subject
to obtaining the shareholder approval described in clause (e)
below, such Notes are convertible (in whole or in part) at USAA's
option, at any time, into a number of shares of beneficial
interest, $.10 par value per share, of AIP (the "Shares")
determined as follows:
P / C = S
where (i) "P" equals the aggregate principal balance of such
Notes at the date of conversion; (ii) "C" equals the conversion
price determined pursuant to clause (f) below; and (iii) "S"
equals such number of Shares.
e. AIP will submit the conversion feature described
in clause (d) above to its shareholders for approval as promptly
as possible after USAA acquires the Notes and will use its best
efforts to secure such approval. If AIP has not obtained
shareholder approval of such conversion feature by June 30, 1997,
(a) effective July 1, 1997 the interest rate applicable to the
Notes will increase to 18% (but in no event to exceed the highest
lawful rate) and (b) AIP will be required to make a mandatory
prepayment of the full principal of the Notes, plus accrued,
unpaid interest on October 31, 1997.
f. The conversion price "C" referred to in clause (d)
above will be determined as follows:
(i) if the conversion of such Note occurs on or
before December 31, 1997, the conversion price will be $2.00;
(ii) if the conversion of such Note occurs after
the period in (i) above but on or before December 31, 2000, the
conversion price per share will be $2.25.
The conversion prices described above will be subject to
further adjustment pursuant to anti-dilution provisions
acceptable to USAA.
g. Upon conversion of either Note into Shares, AIP
shall be required to enter into a Registration Rights Agreement
with USAA covering the resale of such Shares substantially in the
same form as provided in the Registration Rights Agreement dated
December 13, 1996, between AIP and USAA.
3. No Defaults. AIP represents and warrants that it
is in compliance with the terms of the Settlement Agreement dated
as of May 22, 1996 relating to the Notes (the "Settlement
Agreement") and the other documents pertaining thereto and that
there are currently no defaults existing with respect to the
Settlement Agreement or any other material contract of AIP.
4. Term. The term of this Agreement shall be four
years from the date hereof, unless replaced by the terms of new
notes and related documents reflecting the terms set forth
herein.
This letter does not constitute a commitment by USAA to
lend or to otherwise advance funds to AIP. However, AIP
understands that USAA will commence negotiations with MLI and
expend funds in connection therewith in reliance upon AIP's
agreements contained herein. Please acknowledge your agreement
to the foregoing by signing a counterpart hereof in the space
provided below and returning the same to USAA no later than 5:00
p.m. (San Antonio, Texas time) on December 17, 1996.
Very truly yours,
USAA REAL ESTATE COMPANY
By: /s/
Name: T. Patrick Duncan
Title: Senior Vice President - Operations
Accepted and agreed to this 19th day of December, 1996.
AMERICAN INDUSTRIAL PROPERTIES REIT
By: /s/
Name: Charles W. Wolcott
Title: President
SHARE PURCHASE AGREEMENT
dated as of December 20, 1996
Among
AMERICAN INDUSTRIAL PROPERTIES REIT, INC.,
AMERICAN INDUSTRIAL PROPERTIES REIT
and
USAA REAL ESTATE COMPANY
TABLE OF CONTENTS
SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION -1-
1.1 Definitions -1-
1.2 Rules of Construction -8-
SECTION 2. PURCHASE AND SALE -8-
2.1 Purchase and Sale of the Shares. -8-
2.2 Purchase Price; Payment -9-
2.3 The Closing -9-
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER AND TRUST-9-
3.1 Organization and Related Matters -9-
3.2 Capital Stock; Title to Shares. -10-
3.3 Financial Statements -11-
3.4 SEC Reports -12-
3.5 Authorization; No Conflicts -12-
3.6 Legal Proceedings -13-
3.7 Compliance with Law and Permits -14-
3.8 Dividends and Other Distributions -14-
3.9 Certain Interests -14-
3.10 No Brokers or Finders -15-
3.11 Employee Benefit Plans -15-
3.12 Labor Matters -16-
3.13 Properties -16-
3.14 Tax Matters -18-
3.15 Material Contracts -20-
3.16 Insurance -20-
3.17 Environmental Matters -21-
3.18 Trust Records; Accounting Records -21-
3.19 New York Stock Exchange Listing -22-
3.20 Disclosure of Facts -22-
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER -22-
4.1 Organization and Related Matters -22-
4.2 Authorization -22-
4.3 No Conflicts -22-
4.4 No Brokers or Finders -23-
4.5 Legal Proceedings -23-
4.6 Investment Representation -23-
4.7 Legends; Stop-Transfer Orders -23-
4.8 Status for REIT Ownership and Income Tests -23-
SECTION 5. COVENANTS WITH RESPECT TO CONDUCT OF SELLER
PRIOR TO CLOSING -23-
5.1 Access -23-
5.2 Material Adverse Changes; SEC Filings; Reports;
Financial Statements -24-
5.3 Conduct of Business -24-
5.4 Prohibition of Solicitation -26-
5.5 Notification of Certain Matters -28-
5.6 Permits and Approvals -28-
SECTION 6. ADDITIONAL CONTINUING COVENANTS AND AGREEMENTS -28-
6.1 Use of Proceeds -28-
6.2 Environmental Matters -28-
6.3 Status for REIT Ownership and Income Tests -28-
6.4 Prohibited Transactions. -28-
6.5 Registration Rights Agreement -29-
6.6 REIT Qualification -29-
6.7 Services by Buyer -29-
SECTION 7. GENERAL CONDITIONS OF PURCHASE -29-
7.1 No Orders -29-
7.2 Approvals -29-
7.3 Absence of Litigation -29-
7.4 New York Stock Exchange -29-
SECTION 8. CONDITIONS TO OBLIGATIONS OF BUYER -30-
8.1 Settlement Agreement -30-
8.2 Accuracy of Representations and Warranties -30-
8.3 Performance by Seller and the Trust -30-
8.4 No Material Adverse Change -30-
8.5 Certification by Seller and the Trust -30-
8.6 Opinion of Seller and the Trust's Counsel -31-
8.7 No Other Business Combination Transaction -31-
SECTION 9. CONDITIONS TO OBLIGATIONS OF SELLER AND THE TRUST-31-
9.1 Settlement Agreement -31-
9.2 Accuracy of Buyer's Representations and Warranties -31-
9.3 Buyer's Performance -31-
9.4 Certification by Buyer -31-
9.5 Opinion of Buyer's Counsel -31-
SECTION 10. TERMINATION OF OBLIGATIONS; SURVIVAL -31-
10.1 Termination of Agreement -31-
10.2 Effect of Termination -32-
10.3 Survival of Representations and Warranties -32-
SECTION 11. INDEMNIFICATION -33-
11.1 Obligations of Seller and the Trust -33-
11.2 Obligations of Buyer -33-
11.3 Procedure -34-
11.4 Survival -34-
11.5 Notice by Seller and the Trust -35-
SECTION 12. GENERAL -35-
12.1 Amendments; Waivers -35-
12.2 Schedules; Exhibits; Integration -35-
12.3 Best Efforts; Further Assurances -35-
12.4 Governing Law -35-
12.5 No Assignment -35-
12.6 Headings -36-
12.7 Counterparts -36-
12.8 Publicity and Reports -36-
12.9 Confidentiality -36-
12.10Parties in Interest -36-
12.11Notices -37-
12.12Expenses -37-
12.13Remedies; Waiver -37-
12.14Representation By Counsel; Interpretation -38-
12.15Severability -38-
EXHIBITS
EXHIBIT A Settlement Agreement
EXHIBIT B Registration Rights Agreement
SCHEDULES
SCHEDULE 3.1 Jurisdictions; Officers and Trust Managers
SCHEDULE 3.2 Capital Stock; Title to Shares
SCHEDULE 3.3 Additional Liabilities or Contingencies
SCHEDULE 3.5 Permits and Approvals
SCHEDULE 3.6 Litigation
SCHEDULE 3.7 Compliance with Law and Permits
SCHEDULE 3.8 Dividends and Other Distributions
SCHEDULE 3.9 Certain Interests
SCHEDULE 3.11 Trust Benefit Plans
SCHEDULE 3.13 Properties and Encumbrances
SCHEDULE 3.14 Taxes
SCHEDULE 3.15 Material Contracts
SCHEDULE 3.16 Insurance
SCHEDULE 3.17 Environmental Compliance
SCHEDULE 3.18 Trust Records
SCHEDULE 5.3 Conduct of Business
SCHEDULE 8.6 List of Opinions of Seller and the Trust's Counsel
SCHEDULE 9.5 List of Opinions of Buyer's Counsel
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (this "Agreement") is made and
entered into as of December 20, 1996, by and among AMERICAN
INDUSTRIAL PROPERTIES REIT, INC., a Maryland corporation
("Seller"), AMERICAN INDUSTRIAL PROPERTIES REIT, a Texas real
estate investment trust ("Trust"), and USAA REAL ESTATE COMPANY,
a Delaware corporation ("Buyer").
R E C I T A L S
A. Seller is a wholly-owned subsidiary of the Trust.
B. The Trust qualifies and operates as a real estate
investment trust for federal income tax purposes.
C. Seller desires to sell to Buyer, and Buyer desires to
purchase from Seller, a certain number of Common Shares (as
defined herein) owned by Seller upon the terms and subject to the
conditions set forth in this Agreement.
D. The proceeds from the sale of the Common Shares owned
by Seller are to be used for the purposes set forth in this
Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the premises and
the mutual covenants and agreements set forth in this Agreement,
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree
as follows:
0. DEFINITIONS AND RULES OF CONSTRUCTION
1.
0 Definitions. The capitalized terms used in this
Agreement, the Exhibits and the Schedules attached hereto shall
have the meanings set forth below:
"Action" means any action, complaint,
investigation, Suit or other proceeding, whether civil or
criminal, in law or in equity, or before any mediator, arbitrator
or Governmental Entity.
"Affiliate" means a Person that directly, or
indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, a specified
Person.
"Agreement" means this Share Purchase Agreement,
by and among Seller, the Trust and Buyer, as amended from time to
time pursuant to the terms of this Agreement, together with all
Exhibits and all Schedules attached hereto.
"Alternative Proposal" has the meaning set forth
in Section 5.4(a) of this Agreement.
"Approval" means any approval, authorization,
consent, qualification or registration, or any waiver of the
foregoing, or any notice, statement or other communication
required to be filed with or delivered to any Governmental Entity
or any other Person.
"Associate" of a Person means
(i) a corporation or organization (other than
Seller or a party to this Agreement) of which such Person is an
officer or partner or is, directly or indirectly, the beneficial
owner of 10% or more of any class of equity securities;
(ii) any trust or other estate in which such
Person has a substantial beneficial interest or as to which such
Person serves as trustee or in a similar capacity; and
(iii) any relative or spouse of such Person who
has the same residence as such Person.
"Audited Financial Statements" has the meaning set
forth in Section 3.3(a) of this Agreement.
"Auditors" means Ernst & Young, LLP, independent
public accountants to the Trust.
"Buyer" means USAA Real Estate Company, a Delaware
corporation, or permitted assigns.
"Buyer Indemnified Parties" has the meaning set
forth in Section 11.1 of this Agreement.
"Capital Stock" means any capital stock,
beneficial interest or other equity interest, or any securities
convertible into or exchangeable or exercisable for capital
stock, beneficial interests or other equity interests, or any
other rights, warrants or options to acquire any of the foregoing
securities.
"Charter Documents" means the Trust's Second
Amended and Restated Declaration of Trust and Fourth Amended and
Restated Bylaws as in effect as of the date of this Agreement.
"Closing" has the meaning set forth in Section
2.3(a) of this Agreement.
"Closing Agreement" shall mean a written and
legally binding agreement with a taxing authority relating to
Taxes.
"Closing Date" means the date specified in Section
2.3(a) of this Agreement.
"Code" means the Internal Revenue Code of 1986, as
amended, and, as applicable, the regulations promulgated
thereunder.
"Common Shares" means common shares of beneficial
interest, par value $.10 per share, of the Trust.
"Confidentiality Agreement" has the meaning set
forth in Section 5.4(b) of this Agreement.
"Contract" means any agreement, arrangement, bond,
commitment, franchise, indemnity, indenture, instrument, lease,
license or understanding, whether or not in writing.
"December 13 Agreement" has the meaning set forth
in Section 3.5 of this Agreement.
"Demand Note" has the meaning set forth in Section
2.2 of this Agreement.
"Encumbrance" means any claim, charge, easement,
encumbrance, lease, covenant, security interest, lien, option,
pledge, rights of others, preferential right, right of first
refusal or restriction (whether on voting, sale, transfer,
disposition or otherwise), whether imposed by agreement,
understanding, law, equity or otherwise, except that
"Encumbrance" does not include any such item that (i) is
reflected in the Audited Financial Statements or (ii) constitutes
a statutory lien arising in the ordinary course of business.
"Environmental Claims" means any of the following
to the extent they relate to, or arise out of, directly or
indirectly, Environmental Noncompliance with respect to the
Properties or actual or alleged Environmental Conditions or any
Notification which may lead to: (i) claims, demands, suits,
causes of action for personal injury, death or property damage;
(ii) claims for actual or threatened damages to natural
resources; (iii) claims for the recovery of response costs, or
administrative or judicial orders directing the performance of
investigations, response or remedial actions under any
Environmental Law; (iv) a requirement to implement "corrective
action" pursuant to any restitution, contribution or equitable
indemnity to third parties or any Governmental Entity; (v) fines,
penalties, liens against the Properties; (vi) claims for
injunctive relief or other orders or notices of violation from
any Governmental Entity; or (vii) with regard to any present or
former employees, tenants or guests, exposure to or injury from
Environmental Conditions.
"Environmental Conditions" means conditions of the
environment, including the ocean, natural resources (including
flora and fauna), soil, surface water, ground water, any actual
or potential drinking or water supply, subsurface strata, or air,
including ambient air, relating to or arising out of the use,
handling, storage, treatment, recycling, generation,
transportation, release, spilling, leaking, pumping, pouring,
emptying, discharging, injecting, escaping, leaching, disposal,
dumping or threatened release of Hazardous Materials from, in,
on, or onto the Properties.
"Environmental Noncompliance" means any of the
following to the extent they are applicable to the Properties or
alleged to be applicable to the Properties or to the Trust,
Subsidiaries or a Trust Partnership: (i) the Release of any
Hazardous Material into the environment, any storm drain, sewer,
septic system or publicly-owned treatment works, in violation of
any effluent or emission limitations, standards or other criteria
or guidelines established by any Environmental Law; (ii) any
noncompliance of physical structure, equipment, process or
premises with the requirements of building or fire codes, zoning
or land use regulations or ordinances or conditional use permits;
(iii) any noncompliance with federal, state or local requirements
governing occupational safety and health; (iv) any operations,
procedures and designs at or on the Properties which do not
conform to the statutory or regulatory requirements of any Law
(including land use regulations and ordinances) intended to
protect public health, welfare and the environment; (v) the
failure to have obtained permits, licenses, variances or other
governmental authorizations necessary for the legal use and/or
operation of any equipment, process or any activity at the
Properties; or (vi) the operation and/or use of any process or
equipment in violation of any permit condition, schedule of
compliance, administrative or court order.
"Environmental Permits" has the meaning set forth
in Section 3.17(a) of this Agreement.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
"EVEREN" means EVEREN Securities, Inc.
"Exchange Act" means the Securities Exchange Act
of 1934, as amended.
"GAAP" means generally accepted accounting
principles as in effect from time to time.
"Governmental Entity" means any agency, bureau,
commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether
federal, state or local, domestic or foreign.
"Hazardous Materials" means any substance, matter,
material, waste, solid, liquid, gas, or pollutant, the
generation, storage, disposal, handling, recycling, Release (or
threatened Release) or treatment of which is regulated,
prohibited, or limited under: (1) the Resource Conservation and
Recovery Act, as amended by the Hazardous and Solid Waste
Amendments of 1984, as now or hereafter amended ("RCRA") (42
U.S.C. Sections 6901 et seq.); (ii) the Comprehensive
Environmental Response, Compensation and Liability Act, as
amended by the Superfund Amendments and Reauthorization Act of
1986, as now or hereafter amended ("CERCLA") (42 U.S.C. Sections
9601 et seq.); (iii) the Clean Water Act, as now or hereafter
amended ("CWA") (33 U.S.C. Sections 1251 et seq.); (iv) the Toxic
Substances Control Act, as now or hereafter amended ("TSCA") (15
U.S.C. Sections 2601 et seq.); (v) the Clean Air Act, as now or
hereafter amended ("CAA") (42 U.S.C. Sections 7401 et seq.)
(RCRA, CERCLA, CWA, TSCA and CAA are collectively referred to
herein as the "Federal Environmental Laws"); (vi) any local,
state or foreign law, statute, regulation, or ordinance analogous
to any of the Federal Environmental Laws; or (vii) any other
federal, state, local, or foreign law (including any common law),
statute, regulation, or ordinance regulating, prohibiting, or
otherwise restricting the placement, Release, threatened Release,
generation, treatment, or disposal upon or into any environmental
media of any substance, pollutant, or waste which is now or
hereafter classified or considered to be hazardous or toxic to
human health or the environment. All of the laws, statutes,
regulations and ordinances referred to in subsections (vi) and
(vii) above, together with the Federal Environmental Laws, are
collectively referred to herein as "Environmental Laws." The term
"Hazardous Materials" shall also include: (a) gasoline, diesel
fuel, fuel oil, motor oil, waste oil, and any other petroleum
hydrocarbons, including any additives or other by-products
associated therewith; (b) "friable" asbestos (as the term
"friable" is defined under 40 C.F.R. Section 61.141) and friable
asbestos-containing materials in any form; (c) polychlorinated
biphenyls; or (d) any substance the presence of which on the
Properties, (x) requires reporting or remediation under any
Environmental Law, (y) causes or threatens to cause a nuisance on
the Properties or poses or threatens to pose a hazard to the
health or safety of persons on the Properties, or (z) which, if
it emanated or migrated from the Properties, could constitute a
trespass, nuisance or health or safety hazard to persons on
adjacent property.
"Indemnifiable Claim" means any Loss for or
against which any Person is entitled to indemnification under
this Agreement; "Indemnified Party" means the party entitled to
indemnity hereunder and their successors, assigns, and heirs; and
"Indemnifying Party" means the Person obligated to provide
indemnification hereunder and its successors and assigns.
"Initial REIT Year" has the meaning set forth in
Section 3.14(c) of this Agreement.
"Law" means any constitutional provision, statute
or other law, rule, regulation or interpretation of any thereof
and any Order of any Governmental Entity (including Environmental
Laws, including, without limitation, the Americans with
Disabilities Act).
"Loss" means any claim, amount paid in settlement,
cost, damage (including, without limitation, consequential
damage), disbursement, expense (including legal fees and
expenses), liability, loss, deficiency, diminution in value or
obligation.
"Material Contract" means any Contract to which
the Trust, any Subsidiary or any Trust Partnership is a party or
by which any such Person or any of their respective Properties
are bound that currently is in effect and (a) after December 31,
1995 obligates the Trust, any Subsidiary or any Trust Partnership
to pay an amount equal to $100,000 or more, (b) is one of the
group of Tenant Leases that is anticipated by the Trust to
produce 66 2/3% of the Trust's gross income during the fiscal
year ending December 31, 1997, such group of Tenant Leases
calculated beginning with the Tenant Lease that is anticipated to
produce the most gross income during such period and thereafter
in descending order of magnitude of gross income anticipated to
be earned during such period under each other Tenant Lease until
such percentage of gross income is reached, (c) is a Tenant Lease
involving the lease of space in excess of 10,000 square feet for
any Property, (d) other than any Tenant Lease, has an unexpired
term as of December 31, 1995 in excess of five (5) years, (e)
other than any Tenant Lease, contains a covenant not to compete
or otherwise significantly restricts business activities of the
Trust, any Subsidiary or any Trust Partnership, (f) provides for
the extension of credit by the Trust, any Subsidiary or any Trust
Partnership or a line of credit to the Trust, any Subsidiary or
any Trust Partnership in excess of $50,000, (g) provides for a
guaranty or indemnity by the Trust, any Subsidiary or any Trust
Partnership, (h) grants a power of attorney, agency or similar
authority to another Person, (i) contains an option to purchase
or a right of first refusal relating to any of the Properties,
(j) relates to the sale or issuance of any equity securities of
the Trust or securities exercisable for or convertible into any
equity securities of the Trust, or (k) any other Contract that is
not within the general descriptions of clauses (a) through (j)
(i.e., is not a Tenant Lease or within any of the other general
categories listed above) but is material to the business,
financial condition, assets, results of operations or prospects
of the Trust, Subsidiaries or Trust Partnerships.
"Notification" means any summons, citation,
directive, order, claim, litigation, pleading, investigation,
proceeding, judgment, letter or any other written or oral
communication from any Governmental Entity, any entity or any
individual, concerning any intentional or unintentional act or
omission which has resulted in or which may result in any
Environmental Noncompliance or Environmental Claim.
"Order" means any decree, injunction, judgment,
order, ruling, assessment or writ.
"Permit" means any license, permit, franchise,
certificate of authority or order, or any waiver of the
foregoing, required to be issued by any Governmental Entity.
"Person" means an association, a corporation, an
individual, a partnership, a joint venture, a limited liability
company, a trust or any other entity or organization, including a
Governmental Entity.
"Properties" means the real property owned or
leased the Trust, Subsidiaries and Trust Partnerships listed on
Schedule 3.13 hereto.
"Purchase Price" has the meaning set forth in
Section 2.2 of this Agreement.
"Pure World Litigation" means that case pending in
the United States District Court for the Northern District of
Texas Dallas Division, Civil No. 3:96-CV-0068-H, involving the
Trust, Pure World, Inc., Robert Strougo, et. al.
"Registration Rights Agreement" means the
registration rights agreement between Buyer and the Trust to be
executed contemporaneously with the Closing.
"REIT" has the meaning set forth in Section
3.14(b) of this Agreement.
"Release" means releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, ejecting,
escaping, leaching, disposing, seeping, infiltrating, draining or
dumping of any Hazardous Material. This term shall be interpreted
to include both the present and past tense, as appropriate.
"Schedule" means any schedule attached to this
Agreement.
"SEC" means the Securities and Exchange Commission
or any successor entity.
"SEC Filings" has the meaning set forth in Section
3.4 of this Agreement.
"Securities Act" means the Securities Act of 1933,
as amended.
"Seller" means American Industrial Properties
REIT, Inc., a Maryland corporation and a wholly-owned subsidiary
of the Trust.
"Seller Indemnified Parties" has the meaning set
forth in Section 11.2 of this Agreement.
"Selling Shareholder Agreements" has the meaning
set forth in Section 3.5 of this Agreement.
"Settlement Agreement" shall mean the settlement
agreement by and among the Trust, Charles W. Wolcott and William
H. Bricker on the one hand and Pure World, Inc., Paul O. Koether
and Robert Strougo on the other hand attached hereto as Exhibit
A.
"Shares" has the meaning set forth in Section 2.1
of this Agreement.
"Subsidiaries" has the meaning set forth in
Section 3.1 of this Agreement. All references herein to
Subsidiaries shall include Seller.
"Taxes" has the meaning set forth in Section
3.14(a) of this Agreement.
"Tax Return" has the meaning set forth in Section
3.14(b) of this Agreement.
"Tenant Leases" has the meaning set forth in
Section 3.13(b) of this Agreement.
"Trust" means American Industrial Properties REIT,
a Texas real estate investment trust.
"Trust Benefit Plans" has the meaning set forth in
Section 3.11 of this Agreement.
"Trust Managers" means the Trust Managers of the
Trust.
"Trust Partnerships" has the meaning set forth in
Section 3.1 of this
Agreement.
"Trust Permits" has the meaning set forth in
Section 3.7(b) of this Agreement.
"Unaudited Financial Statements" has the meaning
set forth in Section 3.3(b) of this Agreement.
"USAA Group" means United Services Automobile
Association, a reciprocal interinsurance exchange under the Texas
Insurance Code ("USAA"), and, as designated by USAA from time to
time, any entity in which USAA directly or indirectly owns 100%
of the issued and outstanding equity securities.
1 Rules of Construction. This Agreement shall be
construed in accordance with the following rules of construction:
(a) the terms defined in this Agreement include the
plural as well as the singular;
(b) all accounting terms not otherwise defined herein
have the meanings given such terms under GAAP;
(c) all references in the Agreement to designated
"Sections" and other subdivisions are to the designated Sections
and other subdivisions of the body of this Agreement;
(d) pronouns of either gender or neuter shall
include, as appropriate, the other pronoun forms;
(e) the words "herein," "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole
and not to any particular Section or other subdivision;
(f) the words "includes" and "including" are not
limiting; and
(g) knowledge of any Subsidiary or any Trust
Partnership shall be deemed to be knowledge of Seller and the
Trust.
1. PURCHASE AND SALE
0 Purchase and Sale of the Shares. Subject to the terms
and conditions set forth herein, on the Closing Date, Seller
shall sell to Buyer, and Buyer shall purchase from Seller, an
aggregate of 998,100 Common Shares (the "Shares").
1 Purchase Price; Payment. The aggregate purchase
price for the Shares (the "Purchase Price") is payable on the
Closing Date by the cancellation of all principal and interest
outstanding under the Promissory Note dated November 25, 1996 in
the principal amount of $2,769,775 between the Trust and Buyer
(the "Demand Note").
2 The Closing.
( ) The closing of the purchase and sale of the Shares
(the "Closing") will take place at 10:00 a.m. at the offices of
Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., counsel to Seller
and the Trust, within one (1) or two (2) business days of final
approval of the settlement of the Pure World Litigation by the
court overseeing such settlement (the "Closing Date").
(a) At the Closing, Seller shall deliver to Buyer the
certificate or certificates evidencing the Shares. In addition,
all other actions shall be taken and all other documents shall be
delivered which are necessary to consummate the purchase and sale
of the Shares, other than such actions and documents as are to be
taken or delivered at another date, as specifically provided in
this Agreement.
(b) At the Closing, Buyer shall pay and deliver to Seller
the Purchase Price in the manner set forth in Section 2.2 above.
0. REPRESENTATIONS AND WARRANTIES OF SELLER AND TRUST
Seller and the Trust, jointly and severally, represent
and warrant to, and agree with, Buyer as follows:
0 Organization and Related Matters. Seller is duly
organized, validly existing and in good standing under the laws
of the State of Maryland. Seller has all necessary corporate
power and corporate authority to execute, deliver and perform
this Agreement. The Trust is duly organized, validly existing
and in good standing under the laws of the State of Texas. The
Trust has all necessary power and authority to execute, deliver
and perform this Agreement. Schedule 3.1 lists all Subsidiaries
(the "Subsidiaries," which term includes Seller) and all Trust
Partnerships (the "Trust Partnerships") of the Trust and
correctly sets forth the Trust's ownership interest therein, the
jurisdiction in which each Subsidiary and each Trust Partnership
is organized and each jurisdiction in which the Trust, each
Subsidiary and each Trust Partnership is and is required to be
qualified or licensed to do business as a foreign Person. Each
Subsidiary and each Trust Partnership is duly organized, validly
existing and, with respect to each Subsidiary, in good standing
under the laws of the jurisdiction of its incorporation or
organization. The Trust, Subsidiaries and Trust Partnerships have
all necessary power (whether corporate, partnership or other
power, as applicable) and authority to own their respective
properties and assets and to carry on their respective businesses
as now conducted. The Trust, Subsidiaries and Trust Partnerships
are duly qualified or licensed to do business as foreign Persons
in good standing in all jurisdictions in which the character or
the location of the assets owned or leased by any of them or the
nature of the business conducted by any of them requires
licensing or qualification, except where the failure to be so
qualified or licensed is not and will not be material to their
respective businesses, financial condition, assets, results of
operations or prospects. Schedule 3.1 correctly lists the current
Trust Managers, directors, general partners and executive
officers of the Trust, Subsidiaries and Trust Partnerships.
True, correct and complete copies of the Charter Documents and
the charter or organizational documents of Subsidiaries and Trust
Partnerships (including the declaration of trust, articles or
certificate of incorporation, bylaws and partnership agreements,
as applicable) as in effect on the date hereof have been
delivered to Buyer. The Trust is registered and is a reporting
company under the Exchange Act. Neither any Subsidiary nor any
Trust Partnership is registered or is a reporting company under
the Exchange Act. Except as listed on Schedule 3.1, the Trust
does not directly or indirectly own or control any equity
interest in any Person.
1 Capital Stock; Title to Shares. The authorized
Capital Stock of the Trust consists of 10,000,000 Common Shares
of which 10,000,000 Common Shares are issued and outstanding.
The Trust owns all of the outstanding Capital Stock of
Subsidiaries free and clear of any Encumbrances, equities and
claims except as specified in Schedule 3.2. The Trust owns the
equity interest in each Trust Partnership free and clear of any
Encumbrances, equities and claims except as specified in Schedule
3.2. No Common Shares or Capital Stock of any Subsidiary are
held in treasury. Except as set forth in Schedule 3.2 or as
contemplated in this Agreement, there are no outstanding
Contracts or other rights to subscribe for or purchase, or
Contracts or other obligations to issue or grant any rights to
acquire, any Common Shares, any Capital Stock of any Subsidiary
or any Trust Partnership or to restructure or recapitalize the
Trust, any Subsidiary or any Trust Partnership. Except as set
forth in Schedule 3.2, there are no outstanding Contracts of the
Trust, any Subsidiary or any Trust Partnership to repurchase,
redeem or otherwise acquire any of their respective Common Shares
or Capital Stock, as applicable. No bonds, debentures, notes or
other indebtedness having general voting rights (or convertible
into securities having general voting rights) of the Trust, any
Subsidiary or any Trust Partnership are issued or outstanding.
There are no voting trusts or other agreements or understandings
to which the Trust, any Subsidiary or any Trust Partnership is a
party or is bound, or to the knowledge of the Trust and Seller,
to which any other Person is a party or is bound, with respect to
the voting of the Common Shares or the Capital Stock of any
Subsidiary or any Trust Partnership. All issued and outstanding
Common Shares and Capital Stock of all Subsidiaries and Trust
Partnerships were duly authorized and validly issued at the time
of issuance and are fully paid and nonassessable. There are no
preemptive rights in respect of any Common Shares or Capital
Stock of any Subsidiary or any Trust Partnership. Upon the sale
of the Shares to Buyer at the Closing, the Shares will have been
validly issued and be validly outstanding, fully paid and
nonassessable, and the sale of such Shares is not and will not be
subject to preemptive rights of any other shareholder of the
Trust. Buyer shall receive good and marketable title to the
Shares, free and clear of all Encumbrances, except for
restrictions on the transferability of the Shares set forth in
the Charter Documents or generally imposed on securities under
federal and state securities laws. Such Shares will rank equally
with all other Common Shares of the Trust with respect to
priority in payment of dividends and the distribution of assets
upon any liquidation of the Trust, and there are no shares of any
class of Capital Stock of the Trust having any priority in
respect thereof.
2 Financial Statements.
( ) Audited Financial Statements. The Trust has delivered
to Buyer the consolidated balance sheets of the Trust (which
reflect the financial position of all Subsidiaries and Trust
Partnerships), as of December 31, 1993, 1994 and 1995, and the
respective related consolidated statements of operations, cash
flows and stockholders' equity for the periods then ended
(collectively, the "Audited Financial Statements"). The Audited
Financial Statements have been examined by the Auditors whose
report thereon is attached to such financial statements. All
Audited Financial Statements have been prepared in conformity
with GAAP applied on a consistent basis (except for changes, if
any, disclosed therein). The Audited Financial Statements present
fairly, in all material respects, the consolidated financial
condition and results of operations of the Trust, Subsidiaries
and Trust Partnerships as of their respective dates and periods.
Since December 31, 1995, there has been no change in the
significant accounting policies or procedures of the Trust, any
Subsidiary or any Trust Partnership. The Trust has not received
any annual management letters from the Auditors since March 29,
1996.
(a) Unaudited Financial Statements. The Trust has
delivered to Buyer the consolidated balance sheets of the Trust
(which reflect the financial position of all Subsidiaries and
Trust Partnerships), as of March 31, June 30 and September 30,
1996, and the respective related consolidated statements of
operations, cash flows and stockholders' equity for the periods
then ended (collectively, the "Unaudited Financial Statements").
All Unaudited Financial Statements have been prepared in
conformity with GAAP applied on a consistent basis (except for
changes, if any, disclosed therein). The Unaudited Financial
Statements present fairly, in all material respects, the
consolidated financial condition and results of operations of the
Trust, Subsidiaries and Trust Partnerships as of their respective
dates and periods.
(b) No Material Adverse Changes. Since September 30, 1996,
except as set forth in Schedule 3.3, specifically contemplated by
this Agreement, specifically disclosed in any SEC Filings filed
since September 30, 1996 and prior to the date of this Agreement
(copies of which have been provided to Buyer), and except the
settlement of the Pure World Litigation, the Trust, Subsidiaries
and Trust Partnerships have conducted their respective businesses
only in the ordinary course and in a manner consistent with past
practice and, whether or not in the ordinary course of business,
there has not been, occurred or arisen:
( ) any change in or event affecting the business of the
Trust, Subsidiaries and Trust Partnerships that has had a
material adverse effect on such business or any materially
adverse change or trend in the business, financial condition,
assets, results of operations or prospects of the Trust,
Subsidiaries or Trust Partnerships, or
(i) any condition or action which would be proscribed by
(or require consent under) Section 5.3 had it existed, occurred
or arisen after the date of this Agreement, or
(ii) any casualty, loss, damage or destruction of any real
property of the Trust, any Subsidiary or any Trust Partnership
that has involved or may involve a Loss (whether or not covered
by insurance) to the Trust, any Subsidiary or any Trust
Partnership of more than $100,000 individually, or $300,000 in
the aggregate.
(c) No Other Liabilities or Contingencies. Neither the
Trust nor any Subsidiary nor any Trust Partnership has any
material liability of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due,
probable of assertion or not, except liabilities that (i) were
incurred after September 30, 1996 in the ordinary course of
business in a manner consistent with past practice and are not
material in amount or which involve the Pure World Litigation, or
(ii) are set forth in Schedule 3.3 hereto.
3 SEC Reports. The Trust has filed with the SEC all
forms, reports, statements, including registration statements,
and other material documents, together with any amendments
required to be made with respect thereto, that were required to
be filed with the SEC since December 31, 1993. Such forms,
reports, statements, including registration statements, and other
material documents required to be filed with the SEC by the Trust
since December 31, 1993 are collectively referred to in this
Agreement as the "SEC Filings." The Trust has made available to
Buyer all SEC Filings. As of their respective dates, (x) each of
the SEC Filings, including the financial statements contained
therein, was true and complete in all material respects, (y) each
of the SEC Filings, including the financial statements contained
therein, complied in all material respects with the Securities
Act and Exchange Act, as applicable, and the rules and
regulations promulgated thereunder, and (z) none contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading.
4 Authorization; No Conflicts. Seller has the requisite
corporate power and corporate authority to enter into this
Agreement and to carry out its obligations hereunder. The Trust
has the requisite power and authority to enter into this
Agreement and the Registration Rights Agreement and to carry out
its obligations hereunder and thereunder. The execution,
delivery and performance of this Agreement by Seller has been
duly and validly authorized by its Board of Directors and by all
other necessary action on the part of Seller, and no other
proceedings on the part of Seller (including shareholder
approval) are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by the Trust has been
duly and validly authorized by the Trust Managers and by all
other necessary action on the part of the Trust, and no other
proceedings on the part of the Trust (including shareholder
approval) are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Seller and constitutes
the legally valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws and equitable
principles relating to or limiting creditors' rights generally.
This Agreement has been duly executed and delivered by the Trust
and constitutes the legally valid and binding obligation of the
Trust, enforceable against the Trust in accordance with its
terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other
similar laws and equitable principles relating to or limiting
creditors' rights generally. Except as set forth in Schedule
3.5, the execution, delivery and performance of this Agreement by
Seller and the Trust and the consummation by Seller and the Trust
of the transactions contemplated hereby, by the Share Purchase
Agreement between the Trust and Buyer, dated as of December 13,
1996 (the "December 13 Agreement") and by the share purchase
agreements dated as of November 25, 1996 between Buyer and
(i) Pure World, Inc. and (ii) Jonathan Tratt, Stanley D. L.
Horwitz, Keith Sexton and C. J. Scott (the "Selling Shareholder
Agreements") will not (i) conflict with or result in the breach
of any provisions of, or trigger any preferential rights under,
the Charter Documents or the charter or organizational documents
of Subsidiaries or Trust Partnerships, (ii) result in a breach or
violation of, a default under, or the triggering of any payment
or other material obligations pursuant to, or accelerate vesting
under, any Trust Benefit Plans or any grant or award thereunder
or any employment or consulting agreement or arrangement of the
Trust, any Subsidiary or any Trust Partnership, (iii) violate,
conflict with, result in a breach of any provision of, constitute
a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, result in the
termination or in a right of termination or cancellation of,
accelerate the performance required by, result in the creation of
any Encumbrance upon any Properties under, result in the
triggering of any rights under, or result in being declared void,
voidable or without further binding effect, any of the terms or
provisions of any Material Contract of the Trust, any Subsidiary
or any Trust Partnership or (iv) violate any Law. Schedule 3.5
lists all Permits and Approvals required to be obtained by
Seller, the Trust, Subsidiaries and Trust Partnerships to
consummate the transactions contemplated hereby and by the
December 13 Agreement. Except for matters identified in Schedule
3.5 as requiring that certain actions be taken by or with respect
to a third party or Governmental Entity, the execution and
delivery of this Agreement by Seller and the Trust and the
consummation of the transactions contemplated hereby and by the
December 13 Agreement will not require the consent, authorization
or approval of filing or registration with, or the issuance of
any Permit by, any other third party or Governmental Entity under
the terms of any applicable Laws or Material Contracts of Seller,
the Trust, Subsidiaries or Trust Partnerships.
5 Legal Proceedings. Except as set forth in Schedule
3.6 and except with respect to the Pure World Litigation, there
is no Order or Action pending, or to the knowledge of Seller or
the Trust threatened, against or affecting the Trust, any
Subsidiary, any Trust Partnership, any Trust Manager in his
capacity as a trust manager of the Trust or any of the Properties
which (i) questions the validity of this Agreement, the
Registration Rights Agreement, the Settlement Agreement or any
action taken or to be taken pursuant hereto or thereto, or (ii)
individually or when aggregated with one or more other Orders or
Actions has, or if determined adversely will have, a material
adverse effect on the business, financial condition, assets,
results of operations or prospects of the Trust, any Subsidiary
or any Trust Partnership or on the Trust's ability to perform
this Agreement. To Seller's and the Trust's knowledge, Schedule
3.6 lists each Order and each Action that (i) involves a claim or
potential claim of aggregate liability in excess of $50,000
against the Trust, any Subsidiary or any Trust Partnership that
is not covered by insurance, (ii) involves a claim or potential
claim of aggregate liability brought by the Trust, any Subsidiary
or any Trust Partnership against a tenant under any Tenant Lease
which Tenant Lease obligates such tenant to pay rent to the
Trust, any Subsidiary or any Trust Partnership during the year
ending December 31, 1996 in an amount equal to or in excess of
$150,000, or (iii) that enjoins or seeks to enjoin any activity
by the Trust, any Subsidiary or any Trust Partnership. There is
no matter as to which the Trust, any Subsidiary or any Trust
Partnership has received any notice, claim or assertion in
connection with which any such Person has or may reasonably be
expected to have any right to be indemnified by the Trust, any
Subsidiary or any Trust Partnership.
6
Compliance with Law and Permits.
( ) The Trust, Subsidiaries and Trust Partnerships
are organized and have conducted their respective businesses in
accordance with applicable Laws, neither the Trust nor any
Subsidiaries or Trust Partnerships has received any notice of
violation of any Laws which remains uncorrected, and the
respective forms, procedures and practices of the Trust,
Subsidiaries and Trust Partnerships are in compliance with all
such Laws, to the extent applicable, the violation of which would
have a material adverse effect on the respective businesses,
financial condition, assets, results of operations or prospects
of the Trust, Subsidiaries and Trust Partnerships.
(a) Except as set forth in Schedule 3.7, the Trust,
Subsidiaries and Trust Partnerships hold all permits, licenses,
variances, exemptions, authorizations, orders and approvals of
all Governmental Entities necessary for the lawful conduct of
their respective businesses (the "the Trust Permits") and the
Trust, Subsidiaries and Trust Partnerships are in compliance with
the terms of the Trust Permits relating to each such Person,
except where the failure to hold such Trust Permits or be in
compliance therewith would not, individually or in the aggregate,
have a material adverse effect on the business, financial
condition, assets, results of operations or prospects of the
Trust, Subsidiaries or Trust Partnerships. The Trust has made
available to Buyer correct and complete copies of all Trust
Permits. Except as set forth in Schedule 3.7, to the knowledge of
the Seller and the Trust, no investigation or review by any
Governmental Entity with respect to the Trust Permits is pending
or threatened.
7 Dividends and Other Distributions. Except as set
forth in Schedule 3.8, there has been no dividend or other
distribution of assets or securities by the Trust or Trust
Partnerships (other than Trust Partnerships in which the Trust
owns 100% beneficial interest) whether consisting of money,
property or any other thing of value, declared, issued or paid to
or for the benefit of the Trust subsequent to the date of the
Audited Financial Statements.
8 Certain Interests. Except as set forth in Schedule
3.1 and Schedule 3.9, no Affiliate of the Trust, any Subsidiary
or any Trust Partnership, nor any of their respective officers,
Trust Managers, directors or partners, nor any Associate of any
such individual, has any material interest in any property used
in or pertaining to the respective businesses of the Trust, any
Subsidiary or any Trust Partnership. Except as set forth in
Schedule 3.1 and Schedule 3.9, no such Person is indebted or
otherwise obligated to the Trust, any Subsidiary or any Trust
Partnership. Except as set forth in Schedule 3.9, the Trust,
Subsidiaries and Trust Partnerships are not indebted or otherwise
obligated to any such Person, except for amounts due under normal
arrangements applicable to all employees generally as to salary
or reimbursement of ordinary business expenses not unusual in
amount or significance. Except as set forth in Schedule 3.1 and
Schedule 3.9, there are no material transactions between the
Trust, any Subsidiary or any Trust Partnership and any Affiliate
of the Trust, any Subsidiary or any Trust Partnership or any
Associate of any such Affiliate that have continuing obligations
of any party thereunder. Except as set forth in Schedule 3.9, the
consummation of the transactions contemplated by this Agreement
will not (either alone, or upon the occurrence of any act or
event, or with the lapse of time, or both) result in any
compensation or severance or other payment or benefit arising or
becoming due from the Trust, any Subsidiary or any Trust
Partnership or any of its assigns to any Person.
9 No Brokers or Finders. No agent, broker, finder, or
investment or commercial banker, or other Person or firm engaged
by or acting on behalf of Seller, the Trust or any of their
Affiliates in connection with the negotiation, execution or
performance of this Agreement or the transactions contemplated by
this Agreement, is or will be entitled to any brokerage or
finder's or similar fee or other commission as a result of this
Agreement or such transactions except for a fee payable to
EVEREN.
10 Employee Benefit Plans. Schedule 3.11 lists all
employee benefit plans and collective bargaining, labor and
employment agreements or other similar benefit arrangements to
which either the Trust, any Subsidiary, or any Trust Partnership
is a party or by which either the Trust, any Subsidiary, or any
Trust Partnership is bound (collectively, the "the Trust Benefit
Plans"), including (i) any profit-sharing, deferred compensation,
bonus, stock option, stock purchase, pension, retainer,
consulting, retirement, severance, welfare or incentive plan,
agreement or arrangement, (ii) any plan, agreement or arrangement
providing for "fringe benefits" or perquisites to employees,
officers, directors, trust managers or agents, including benefits
relating to automobiles, clubs, vacation, child care, parenting,
sabbatical, sick leave, medical, dental, hospitalization, life
insurance and other types of insurance, (iii) any employment
agreement not terminable on 30 days (or less) written notice or
(iv) any other "employee benefit plan" within the meaning of
Section 3(3) of ERISA. True and complete copies of the Trust
Benefit Plans, current descriptive booklets and summary plan
descriptions of the Trust Benefit Plans, any relevant trust
agreements or insurance policies or contracts and, if applicable,
the most recent annual return on Form 5500 (or equivalent form)
have been made available to Buyer. To the extent applicable, the
Trust Benefit Plans comply, in all material respects, with the
requirements of ERISA and the Code. Except as set forth in
Schedule 3.11, no Trust Benefit Plan is or is intended to be a
stock bonus, pension or profit-sharing plan within the meaning of
Section 401(a) of the Code. Neither any Trust Benefit Plan nor
the Trust, any Subsidiary, or any Trust Partnership has incurred
any liability or penalty under Section 4975 of the Code or
Section 502(i) of ERISA. Each Trust Benefit Plan has been
maintained and administered in all material respects in
compliance with its terms and with ERISA and the Code to the
extent applicable thereto. Except as set forth in Schedule 3.11,
there are no pending, or to the knowledge of Seller and the Trust
threatened, claims (other than pursuant to the terms of any such
plan) against or otherwise involving any of the Trust Benefit
Plans and no Action has been brought against or with respect to
any Trust Benefit Plan, and neither the Trust nor any Subsidiary
nor any Trust Partnership has incurred any liability to any party
with respect to any Trust Benefit Plan. All contributions
required to be made to the Trust Benefit Plans have been made or
provided for. Except as set forth in Schedule 3.11, neither the
Trust nor any Subsidiary nor any Trust Partnership maintains or
contributes to any plan or arrangement which provides or has any
liability to provide life insurance or medical or other employee
welfare benefits to any employee or former employee upon his
retirement or termination of employment and neither the Trust nor
any Subsidiary nor any Trust Partnership has represented,
promised or contracted (whether in oral or written form) to any
employee or former employee that such benefits would be provided.
Except as set forth in Schedule 3.11, the execution of, and
performance of the transactions contemplated by, this Agreement
will not (either alone or upon the occurrence of any additional
or subsequent event) constitute an event under any Trust Benefit
Plan or other policy, arrangement or any trust or loan that will
or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits
with respect to any employee. No Trust Benefit Plan is subject to
Title IV of ERISA and neither the Trust nor any Subsidiary nor
any Trust Partnership has, within six years prior to the date of
this Agreement, contributed to or had any obligation to
contribute to any employee benefit plan subject to Title IV of
ERISA. For purposes of this Section 3.11, (i) the term "Trust"
includes any entity required to be aggregated with the Trust
pursuant to Code Section 414(b), (c), (m) or (o) and (ii)
provisions of ERISA or the Code include regulations prescribed
under such provisions.
11 Labor Matters. Neither the Trust nor any Subsidiary
nor any Trust Partnership is a party to or bound by any
collective bargaining or other labor union contracts. There is no
pending or, to the knowledge of Seller and the Trust, threatened
labor dispute, strike or work stoppage against the Trust, any
Subsidiary, or any Trust Partnership. Neither the Trust nor any
Subsidiary nor any Trust Partnership, nor their respective
representatives or employees, has committed any unfair labor
practices in connection with the operation of the respective
businesses of the Trust, each Subsidiary, and each Trust
Partnership, and there is no pending or, to the knowledge of the
Seller and the Trust, threatened charge or complaint against the
Trust, any Subsidiary, or any Trust Partnership by the National
Labor Relations Board or any comparable state agency. The Trust,
Subsidiaries, and Trust Partnerships are in compliance with all
applicable Laws respecting employment, consulting, employment
practices, wages, hours, and terms and conditions of employment.
12 Properties.
( ) Schedule 3.13 contains a complete and correct list of
all real property owned or leased by the Trust, each Subsidiary
and each Trust Partnership (collectively, the "Properties").
Except as set forth in Schedule 3.13, the Trust, Subsidiary or
Trust Partnership, as applicable, owns good and indefeasible
title to each Property, including the land and all improvements,
all personalty and the Tenant Leases (as hereinafter defined).
Except as set forth in Schedule 3.13, the Properties are free and
clear of all Encumbrances of any nature, except for (i) liens for
real property taxes or similar assessments not yet due and
payable, (ii) easements for utilities servicing the Properties
and (iii) such Encumbrances as do not materially detract from or
interfere with the present use of the Properties subject thereto
or affected thereby, or otherwise materially impair the use or
value of such Properties.
(a) The Trust has delivered to Buyer a true, correct and
complete copy of a rent roll with respect to each Property
setting forth, among other matters, the term (commencement or
renewal date and expiration date) of each lease with respect to
the Properties (collectively, the "Tenant Leases"), the square
feet for each of the Tenant Leases, the monthly base rental rates
for each of the Tenant Leases and the security deposits for each
of the Tenant Leases. Other than the Tenant Leases, no party has
been granted any license, lease or other material right relating
to the use or possession of the Properties which is material to
the use or value of the Properties. Except as set forth in
Schedule 3.13, all of the Tenant Leases are valid and subsisting
and in full force and effect with respect to the Trust,
Subsidiaries and Trust Partnerships and, to Seller's and the
Trust's knowledge, with respect to any other party thereto, and
no tenant of the Properties is more than 30 days delinquent on
its rental as of October 31, 1996 except as set forth in Schedule
3.13. To Seller's and the Trust's knowledge, no tenant of the
Properties has initiated or threatened bankruptcy since January
1, 1996. No tenant of the Properties is an Affiliate or
Associate of the Trust, any Subsidiary or any Trust Partnership.
Except as set forth in Schedule 3.13, there are no contracts or
other material obligations outstanding for the sale, exchange or
transfer of the Properties or any portion thereof. There are no
attachments, executions, assignments for the benefit of
creditors, receiverships, conservatorship or voluntary or
involuntary proceedings in bankruptcy or pursuant to any other
debtor relief laws filed by, or pending against, the Trust,
Subsidiaries, Trust Partnerships or the Properties. Except as
set forth in Schedule 3.13, since January 1, 1996, no tenants
have terminated their leases prior to expiration and, to Seller's
and the Trust's knowledge, have no intent to do so.
(c) Except as set forth in Schedule 3.13 there is no
pending condemnation or similar proceeding affecting the land,
the improvements or the personalty situated at the Properties or
any portion thereof, and neither the Trust nor any Subsidiary nor
any Trust Partnership has received any written notice and has no
knowledge that any such proceeding is contemplated.
(d) The continued ownership, operation, use and
occupancy of the land or the improvements thereon do not violate
any zoning, building, administrative or other law, ordinance,
order or regulation or any restrictive covenant applicable to the
Properties, the violation of which would have a material adverse
effect on the business, financial condition, assets, results of
operations or prospects of the Trust, Subsidiaries or Trust
Partnerships, as applicable, and no written notice of any such
violation has been received by the Trust, any Subsidiary or any
Trust Partnership from any Governmental Entity.
(e) The Trust, Subsidiaries or Trust Partnerships, as
applicable, currently has in place title, liability, casualty and
other insurance coverage with respect to the Properties in such
amounts as are reasonable and customary for properties similar to
the Properties. Each of such policies is in full force and
effect, and all premiums due and payable thereunder have been,
and on the Closing Date will be, fully paid when due. No notice
of cancellation has been received, or to the knowledge of Seller
and the Trust threatened, with respect thereto.
(f) Except as set forth in Schedule 3.13, there is no
Action pending, or to the knowledge of Seller and the Trust
contemplated, by any Governmental Entity or third party to levy
any special assessments against the Properties that, if
successful, would have a material adverse effect on the business,
financial condition, assets, results of operations or prospects
of the Trust.
(g) To the Seller's and the Trust's knowledge, each
unsatisfied brokerage obligation that is in excess of $25,000
with respect to the Properties is set forth on Schedule 3.13.
(h) To Seller's and the Trust's knowledge and except
as set forth on Schedule 3.13, no capital expenditures are
contemplated by the Trust to be incurred by the Trust, any
Subsidiary or any Trust Partnership within twelve months after
the date of this Agreement in excess of $50,000 per Property with
respect to any Property.
(i) Except as set forth in Schedule 3.13, all
management contracts with respect to the Properties are
terminable by the Trust on 30 days notice.
(j) To Seller's and the Trust's knowledge, except for
customary easements for access to building systems or utilities
and except as set forth in Schedule 3.13, each Property is an
independent unit which does not now rely on any facilities (other
than facilities of municipalities or public utilities) located on
any property that is not part of the Property for the furnishing
to the Property of any essential building systems or utilities
(including drainage facilities, catch basins and retention ponds)
that if the owner of the Property could not avail the use of
which, would materially detract from the value of the Property or
materially interfere with the use of the Property.
3.14 Tax Matters.
(a) For purposes of this Agreement, "Taxes" means any
federal (including, without limitation, tax on its undistributed
taxable income, alternative minimum tax, tax on certain sale
proceeds or other nonqualifying income from foreclosure property
or on income from prohibited transactions, and any taxes imposed
upon the Trust, Subsidiaries or Trust Partnerships under Section
857 or Section 4981 of the Code), state, county, local or foreign
taxes, charges, fees, levies, or other assessments, including,
without limitation, all net income, gross income, sales and use,
ad valorem, transfer, gains, profits, excise, franchise, real and
personal property, gross receipt, capital stock, business and
occupation, disability, employment, payroll, license, estimated,
or withholding taxes or charges imposed by any Governmental
Entity, and includes any interest and penalties (civil or
criminal) on or additions to any such taxes.
(b) For purposes of this Agreement, "Tax Return"
means a report, return or other information required to be filed
with or supplied to a Governmental Entity with respect to Taxes
including, without limitation, any notices or information reports
or returns required to be filed by the Trust, Subsidiaries or
Trust Partnerships with respect to their respective operations,
income, assets and shareholders or partners in order to maintain
the Trust's status as a real estate investment trust ("REIT")
under the Code.
(c) The Trust elected to be taxed as a REIT under
Sections 856 through 860 of the Code effective for its taxable
year ended December 31, 1985 (the "Initial REIT Year"). The
Trust, since the Initial REIT Year through the end of the
immediately preceding taxable year, has always qualified as a
REIT under the Code. At all times from and after the Initial REIT
Year to the date hereof, the Trust has complied with, and through
the Closing Date will comply with, all applicable Code and
regulatory requirements necessary to maintain its qualification
as a REIT under the Code and has otherwise operated, and through
the Closing Date will have otherwise operated, in the manner
necessary to maintain its qualification as a REIT under the Code.
No dividend will be required to be distributed before December
31, 1996 in order for the Trust to maintain its qualification as
a REIT under the Code.
(d) Except as disclosed in Schedule 3.14, the Trust,
Subsidiaries and Trust Partnerships have (i) filed all Tax
Returns required to be filed by applicable Law since December 31,
1990, and all such Tax Returns were in all material respects
(and, as to Tax Returns not filed as of the date hereof but filed
on or before the Closing Date, will be in all material respects)
true, complete and correct and filed on a timely basis and (ii)
within the time and in the manner prescribed by law, paid (and
until the Closing Date will pay within the time and in the manner
prescribed by law) all material Taxes that were or are due and
payable.
(e) Except as set forth in Schedule 3.14, the Trust,
Subsidiaries and Trust Partnerships have established (and until
the Closing Date will maintain) on their respective books and
records reserves adequate to pay all Taxes of the Trust,
Subsidiaries and Trust Partnerships not yet due and payable in
accordance with GAAP which are reflected in the Audited Financial
Statements and Unaudited Financial Statements to the extent
required by GAAP.
(f) Except as disclosed in Schedule 3.14, as of the
date hereof, there are no, and, as of the Closing Date, there
will be no, material Tax liens upon the assets of the Trust,
Subsidiaries and Trust Partnerships, except liens for Taxes not
yet due.
(g) Except as disclosed in Schedule 3.14, the Trust,
Subsidiaries, and Trust Partnerships have complied (and until the
Closing Date will comply) in all material respects with the
provisions of the Code relating to the payment and withholding of
Taxes, including the withholding and reporting requirements under
Code Sections 1441 through 1464, 3401 through 3406, and 6041
through 6049, as well as similar provisions under any other laws,
and have, within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper
governmental authorities all material amounts required by
applicable Law.
(h) Except as disclosed in Schedule 3.14, the Trust,
Subsidiaries and Trust Partnerships have not executed any
outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any
Taxes or Tax Returns.
(i) No notice of any material deficiency for any
Taxes has been received by the Trust, any Subsidiary or any Trust
Partnership that has not been resolved and paid in full or
otherwise settled, no audits or other administrative proceedings
or court proceedings are presently pending or, to Seller's and
the Trust's knowledge, threatened with regard to any Taxes or Tax
Returns of the Trust, Subsidiaries or Trust Partnerships, and no
notice of any material claim has been received by the Trust, any
Subsidiary or any Trust Partnership from any authority in a
jurisdiction where the Trust, Subsidiaries or Trust Partnerships
do not file Tax Returns that the Trust, any Subsidiary or any
Trust Partnership is or may be subject to Tax in that
jurisdiction.
(j) The Trust, Subsidiaries and Trust Partnerships
have not received a Tax Ruling or entered into a Closing
Agreement with the Internal Revenue Service that would have any
continuing effect after the Closing Date.
(k) The Trust has made available (or, with respect to
all Tax Returns filed after the date hereof, will make available)
to Buyer complete and accurate copies of all Tax Returns, and
amendments thereto, filed by the Trust, any Subsidiary or any
Trust Partnership for all taxable periods or years ending on or
prior to the Closing Date.
(l) Neither the Trust nor any Subsidiary nor any
Trust Partnership is required to include in income any adjustment
pursuant to Code Section 481(a) by reason of a voluntary change
in federal income tax accounting method (other than a change of
federal income tax accounting method required as a result of a
change in law) initiated by the Trust, and the Internal Revenue
Service has not proposed any such adjustment or change in
accounting method.
(m) The Trust has made available to Buyer all
relevant information with respect to the federal income tax net
operating loss carryovers of the Trust as of December 31, 1995,
based on the federal income Tax Returns filed by the Trust as of
such date.
(n) For all taxable years from and including its
Initial REIT Year through the Closing Date, (i) the Trust has
maintained permanent records containing the information required
to be maintained by Code Section 857(a)(2) and Treasury
Regulation Sections 1.857-(8)(a), 1.857-8(c) and 1.857-8(e) and
(ii) the Trust has demanded the written statements from its
shareholders required by Treasury Regulation Section 1.857-8(d)
in accordance with Treasury Regulation Section 1.857-8(e).
3.15 Material Contracts. Schedule 3.15 sets forth an
accurate list of all Material Contracts of the Trust,
Subsidiaries and Trust Partnerships. The Trust has made
available to Buyer complete and correct copies of all Material
Contracts. All Material Contracts are in full force and effect.
Except as set forth in Schedule 3.15, the Trust, Subsidiaries and
Trust Partnerships are not in violation of or default in any
material respect (nor is there any waiver in effect of any event
that would constitute a default but for such waiver) under, and
no event has occurred that (with notice or the lapse of time or
both) would constitute a violation of or default under, any
Material Contract. Except as set forth in Schedule 3.15, to the
knowledge of Seller and the Trust, no other party to any Material
Contract is in breach of the terms, provisions and conditions of
such Material Contract and no other party to any Material
Contract has notified the Trust, any Subsidiary or any Trust
Partnership that it intends to terminate or modify a Material
Contract.
3.16 Insurance. Schedule 3.16 sets forth a complete
and correct list of all insurance policies, except for title
insurance policies, currently in force insuring against risks of
the Trust, Subsidiaries and Trust Partnerships. The Trust,
Subsidiaries and Trust Partnerships are in compliance with the
terms of such policies applicable to them and there are no claims
by the Trust, any Subsidiary or any Trust Partnership under any
such policy as to which any insurance company is denying
liability or defending under a reservation of rights clause.
3.17 Environmental Matters.
(a) Except as set forth in the documentation provided
to the Trust pursuant to Section 3.17(b) and in Schedule 3.17,
there is no material Environmental Noncompliance with respect to
any Property and there are no material Environmental Claims with
respect to any Property or the Trust, any Subsidiary or any
Trust Partnership or, to the knowledge of Seller and the Trust,
any tenants under any of the Tenant Leases. All material
permits, consents, licenses, certificates, approvals,
registrations, and authorizations in connection with
environmental matters (collectively, "Environmental Permits")
which are required by any Law have been obtained and are valid.
The Properties (and all uses thereof and operations conducted
thereon) comply in all material respects with all Environmental
Permits. All operations on or at the Properties conducted by the
Trust are and have been conducted in all material respects in
compliance with applicable Environmental Laws. Except as set
forth in the documentation provided to the Trust pursuant to
Section 3.17(b) and in Schedule 3.17, the Trust has not received
any Notification from any Governmental Entity seeking any
information or alleging any violation of any Law regarding
Environmental Conditions. Except as set forth in the
documentation provided to the Trust pursuant to Section 3.17(b)
and in Schedule 3.17, the Trust has not caused or given its
verbal or written authorization to cause, and has no knowledge
of, any Release of any Hazardous Materials on-site or off-site of
the Properties in violation of any Environmental Law.
(b) The Trust has made available to Buyer true,
correct, and complete copies of all written reports of any
environmental assessment, compliance or regulatory audit,
inspection, or investigation of the Properties in its possession,
and the Trust has not received any other written report
containing any evidence of Environmental Noncompliance.
(c) Except as set forth in the documentation provided
to the Trust pursuant to Section 3.17(b) and in Schedule 3.17,
there is not now, nor has there been in the past, any "friable"
asbestos (as the term "friable" is defined under 40 C.F.R.
Section 61.141) or friable asbestos containing materials located
on, incorporated in, or otherwise contained in the Properties or
any portion thereof, and there are not now, and have not in the
past been, any underground storage tanks located on the
Properties or any portion thereof.
(d) Except as set forth in the documentation provided
to the Trust pursuant to Section 3.17(b), and in Schedule 3.17,
none of the tenants under any Tenant Lease handle or store any
Hazardous Material as a principal or primary business.
3.18 Trust Records; Accounting Records. The minute
books of Seller and the Trust accurately reflect in all material
respects all actions taken to the date of this Agreement by the
shareholder of Seller, the holders of Common Shares, the Board of
Directors of Seller, the Trust Managers and committees of the
Trust Managers, as applicable, except for those matters set forth
in Schedule 3.18 for which minutes of such actions have not yet
been prepared or approved. The share certificate books and
records of the Trust accurately reflect the ownership of the
Common Shares. The Trust maintains accounting records which
fairly reflect, in all material respects, the Trust's
transactions.
3.19 New York Stock Exchange Listing. The
outstanding Common Shares are listed on the New York Stock
Exchange. The sale and delivery of the Shares to Buyer pursuant
to this Agreement along with the subsequent sale and delivery of
any other Common Shares to Buyer will not violate any listing
requirements of the New York Stock Exchange for the listing of
Common Shares, including the Shares.
3.20 Disclosure of Facts. There are no facts peculiar
to the Trust, Subsidiaries or the Trust Partnerships that the
Trust has not disclosed to Buyer that materially adversely
affect, or insofar as Seller and the Trust can reasonably
foresee, will materially adversely affect, the business,
financial condition, assets, results of operations or prospects
of the Trust, Subsidiaries or Trust Partnerships.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to, and agrees with,
Seller and the Trust as follows:
0 Organization and Related Matters. Buyer is a
corporation duly organized and validly existing under the laws of
the State of Delaware. Buyer has all necessary corporate power
and corporate authority to carry on its business as now being
conducted. Buyer has all necessary corporate power and corporate
authority to execute, deliver and perform this Agreement and the
transactions contemplated hereby. USAA beneficially owns, and at
Closing will beneficially own, directly or indirectly, all of the
capital stock of Buyer.
1 Authorization. The execution, delivery and
performance of this Agreement by Buyer has been duly and validly
authorized by Buyer and by all other necessary corporate action
on the part of Buyer and no other corporate proceedings on the
part of Buyer are necessary to authorize this Agreement or
consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Buyer and constitutes the
legally valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws and equitable
principles relating to or limiting creditors' rights generally.
The execution and delivery of this Agreement by Buyer and the
consummation of the transactions contemplated hereby will not
require filing or registration with, or the issuance of any
Permit by, any other third party or Governmental Entity under the
terms of any applicable Law or material Contracts of Buyer, other
than any filing required under the Exchange Act.
2 No Conflicts. The execution, delivery and
performance of this Agreement by Buyer will not violate the
provisions of, or constitute a breach or default (whether upon
lapse of time and/or the occurrence of any act or event or
otherwise) under, (a) Buyer's certificate of incorporation and
bylaws, pursuant to which Buyer was organized and by which Buyer
is governed, (b) any Law to which Buyer is subject or (c) any
Contract to which Buyer is a party that is material to the
financial condition, results of operations or conduct of the
business of Buyer.
3 No Brokers or Finders. No agent, broker, finder or
investment or commercial banker, or other Person or firms engaged
by or acting on behalf of Buyer or their respective Affiliates in
connection with the negotiation, execution or performance of this
Agreement or the transactions contemplated by this Agreement, is
or will be entitled to any broker's or finder's or similar fees
or other commissions as a result of this Agreement or such
transactions.
4 Legal Proceedings. There is no Order or Action
pending against or, to the knowledge of Buyer, affecting Buyer
that individually or when aggregated with one or more other
Actions has, or if determined adversely would have, a material
adverse effect on the business, properties, or financial
condition of Buyer or on Buyer's ability to perform this
Agreement.
5 Investment Representation. Buyer is acquiring the
Shares from Seller for Buyer's own account, for investment
purposes only and not with a view to or for sale in connection
with the distribution thereof. Buyer agrees to execute any
further certificate or other document representing Buyer's
investment intent or as to any other matter reasonably requested
by Seller or the Trust to assure compliance with applicable
securities laws.
6
Legends; Stop-Transfer Orders.
( ) The certificates for the Shares will bear a legend
relating to restrictions on transfer imposed pursuant to the
percentage ownership limitation contained in the Charter
Documents.
(a) The Trust may impose appropriate stop-transfer
instructions relating to the restrictions set forth herein.
7 Status for REIT Ownership and Income Tests. At the
Closing, applying the stock ownership rules of Code Section
856(h), Buyer will be treated as a corporation, and the Shares
that it owns will be treated as owned proportionately by Buyer's
policyholders (its "shareholders" for this purpose).
2. COVENANTS WITH RESPECT TO CONDUCT OF SELLER PRIOR TO
CLOSING
From the date of this Agreement up to and including
the Closing Date, Seller and the Trust, jointly and severally,
covenant and agree to take such actions, or refrain from taking
such actions, as are set forth in this Section 5.
0 Access. The Trust shall, and shall cause the
Subsidiaries and Trust Partnerships to, authorize and permit
Buyer and its representatives (which term shall be deemed to
include its independent accountants and counsel) to have
reasonable access during normal business hours, upon reasonable
notice and in such manner as will not unreasonably interfere with
the conduct of business, to all of the Properties, books,
records, operating instructions and procedures, Tax Returns and
all other information with respect to the businesses of the
Trust, Subsidiaries and Trust Partnerships as Buyer may from time
to time reasonably request, and to make copies of such books,
records and other documents and to discuss the business of the
Trust, Subsidiaries and Trust Partnerships with Buyer and its
partners and their respective officers, employees, accountants
and counsel, as Buyer considers necessary or appropriate for the
purposes of familiarizing itself with the business of the Trust,
obtaining any necessary Approvals of, or Permits for, the
transactions contemplated by this Agreement and conducting an
evaluation of the organization and business of the Trust. From
the date of this Agreement up to and including the Closing Date,
the Trust will permit, and cause Subsidiaries and Trust
Partnerships to permit, Buyer and its partners, and their
respective officers, directors, agents, attorneys, accountants,
and representatives, to audit such books and records, to meet
with tenants of the Properties, and to conduct such
investigations, tests, or inspections of the Properties as the
Trust shall approve in the Trust's sole discretion, including
intrusive sampling studies to ascertain whether or not there are
any Hazardous Materials on, in, or under the Properties.
1 Material Adverse Changes; SEC Filings; Reports;
Financial Statements.
( ) The Trust shall promptly notify Buyer of any event of
which Seller or the Trust obtains knowledge which has had or
might reasonably be expected to have a material adverse effect on
the Trust's business or which if known as of the date hereof
would have been required to be disclosed to Buyer.
(a) The Trust will, and will cause the Subsidiaries and
Trust Partnerships to, furnish to Buyer as soon as available
copies of all SEC Filings, reports, renewals, filings,
certificates, statements and other documents filed with any
Governmental Entity.
2 Conduct of Business. Except as set forth in Schedule
5.3 and as provided in Section 5.4, from the date of this
Agreement until December 24, 1996, the Trust agrees with and for
the benefit of Buyer that the Trust shall not, and the Trust
shall cause Subsidiaries and Trust Partnerships not to, without
the prior written consent of Buyer, which consent may not
unreasonably be withheld:
( ) conduct the business of the Trust, Subsidiaries and
Trust Partnerships in any manner except in the ordinary course
consistent with past practices; or
(a) purchase any real property; or
(b) declare, issue, make or pay any dividend or other
distribution of assets, whether consisting of money, other
tangible or intangible personal property, real property or other
thing of value, to its shareholders, or split, combine, dividend,
distribute or reclassify any Common Shares or any shares of its
Capital Stock, as applicable, except for dividends the record
date of which is after the Closing Date; or
(c) issue, sell, redeem or acquire for value, or agree to
do so, any debt obligations, Common Shares or Capital Stock; or
(d) incur or agree to incur any obligation or liability
(absolute or contingent) that individually calls for payment by
the Trust, any Subsidiary or any Trust Partnership of more than
$50,000 individually or in the aggregate except for (i)
liabilities (other than indebtedness for borrowed money) incurred
in the ordinary course of business consistent with past practices
(including, but not limited to, tenant improvements and capital
improvements to Properties) and (ii) liabilities arising out of,
incurred in connection with, or related to the consummation of
the transactions contemplated by this Agreement; or
(e) merge, sell substantially all of its assets or enter
into any other contract involving any other form of business
combination or liquidate, wind-up or dissolve (or suffer any
liquidation or dissolution) or adopt any plan of liquidation or
dissolution; or
(f) change the number of Trust Managers or the Board of
Directors of any of the Subsidiaries, or admit any additional
partners to the Trust Partnerships; or
(g) amend the Charter Documents or the charter or
organizational documents of the Subsidiaries or Trust
Partnerships; or
(h) sell, lease, transfer or otherwise dispose of, or
mortgage, pledge or otherwise encumber, other than the lease of
any Property or space therein in the ordinary course of business
consistent with past practices, any of the Properties; or
(i) cancel, satisfy or prepay any debt, obligation,
liability or encumbrance, or waive any claim or right of value of
the Trust, Subsidiaries or Trust Partnerships; or
(j) (i) increase in any manner the compensation or fringe
benefits (including, but not limited to, severance benefits)
payable or to become payable by the Trust, Subsidiaries, or Trust
Partnerships to any officer, Trust Manager, director, partner,
consultant or independent contractor as salary or wages or under
any bonus, insurance, welfare, severance, deferred compensation,
pension, retirement, profit sharing, stock option (including,
without limitation, the granting of any stock option or stock
appreciation right or performance or restricted stock award),
stock purchase or other employee benefit plan, (ii) increase in
any manner the compensation or fringe benefits (including, but
not limited to, severance benefits) payable or to become payable
by the Trust, Subsidiaries or Trust Partnerships to any employee
who is not an officer, Trust Manager, director or partner of the
Trust, Subsidiaries or Trust Partnerships as salary or wages or
under any bonus, insurance, welfare, severance, deferred
compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of any stock option
or stock appreciation right or performance or restricted stock
award) stock purchase or other employee benefit plan, except for
such increase in salary, bonuses or severance benefits to such
employees in the ordinary course of business consistent with past
practices and provided that all such increases in salary, bonuses
or severance benefits do not have a material adverse effect on
the business, assets, financial condition or prospects of the
Trust, Subsidiaries or Trust Partnerships, or (iii) enter into,
adopt, amend in any material respect (except as required by law)
or terminate any Trust Benefit Plan or any agreement,
arrangement, plan or policy between the Trust, Subsidiaries or
Trust Partnerships, as applicable, and one or more of its Trust
Managers, directors, partners, officers, employees or independent
contractors; or
(k) make any tax election other than in connection with
maintaining the Trust's qualification as a REIT or take any
action that would cause the Trust not to qualify as a REIT, or
fail to take any reasonable action to preserve the Trust's
qualification as a REIT; or
(l) make any change in any significant accounting
principles or practices used by the Trust, Subsidiaries or Trust
Partnerships, except as required by the SEC; or
(m) amend, modify or change the terms of any Material
Contract other than in the ordinary course of business consistent
with past practice and provided that such amendment, modification
or change does not have a material adverse effect on the
business, assets, financial condition or prospects of the Trust,
Subsidiaries or Trust Partnerships; or
(n) acquire any Person (or interest therein) or any
material amount of assets, or make any loans, advances or capital
contributions to, or investments in, any Person; or
(o) incur any indebtedness for borrowed money or assume,
endorse (other than endorsements of negotiable instruments in the
ordinary course of business), guarantee or otherwise become
liable or responsible (whether directly, contingently or
otherwise) for the liabilities or obligations of any Person; or
(p) take any action that would, or fail to take any action
which failure would, result in any of Seller's and the Trust's
representations and warranties set forth in this Agreement not
being true; or
(q) agree to or make any commitment to take any action
prohibited by this Section 5.3.
3 Prohibition of Solicitation.
( ) General Prohibition. The Trust shall not, and it
shall direct and use its best efforts to cause its officers,
Trust Managers, employees, agents and representatives (including,
without limitation, any investment banker, attorney or accountant
retained by it), and Seller to not, directly or indirectly,
initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to
facilitate, the making or implementation of any proposal or offer
(including, without limitation, any proposal or offer to its
shareholders) with respect to a merger, acquisition,
consolidation or similar transaction involving, or any purchase
of all or any significant portion of the assets or Common Shares
of the Trust (any such proposal or offer being hereinafter
referred to as an "Alternative Proposal") or engage in any
negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any Person relating to
an Alternative Proposal, or otherwise facilitate any effort or
attempt to make or implement an Alternative Proposal. Except as
disclosed to Buyer in writing prior to the date of this
Agreement, Seller and the Trust represent and warrant to Buyer
that there are no existing activities, discussions or
negotiations with any Person with respect to an Alternative
Proposal. Seller and the Trust hereby agree to notify Buyer
immediately if any inquiries or proposals are received by, any
information is requested from, or any negotiations or discussions
are sought to be initiated or continued with Seller or the Trust
with respect to an Alternative Proposal.
(a) Unsolicited Offers. Nothing contained in Section
5.4(a) shall prohibit the Trust Managers or Board of Directors of
Seller from: (i) furnishing information to or entering into
discussions or negotiations with any Person that makes an
unsolicited bona fide Alternative Proposal if, and only to the
extent that, (1) prior to furnishing such information to, or
entering into discussions or negotiations with, such Person, the
Trust or Seller provides written notice to Buyer to the effect
that it is furnishing information to, or entering into
discussions or negotiations with, such Person, (2) prior to
furnishing such information to, or entering into discussions or
negotiations with, such Person, the Trust or Seller receives from
such Person an executed confidentiality agreement in customary
form on terms not less favorable in any material respect to the
Trust or Seller than the terms of the letter agreement, dated
July 12, 1996 by and between Buyer and the Trust (the
"Confidentiality Agreement"), (3) the Trust or Seller keeps Buyer
informed of the status of any such discussions or negotiations
and (4) the Trust and Seller shall not disclose the terms of this
Agreement and other information with respect to transactions
among Seller, the Trust and Buyer except as permitted under
Section 12.9 hereto; and (ii) to the extent applicable, complying
with Rule 14e-2 promulgated under the Exchange Act with regard to
an Alternative Proposal. Nothing in this Section 5.4 shall permit
Seller or the Trust to terminate this Agreement or affect any
other obligation of Seller or the Trust under this Agreement.
(b) Buyer's Continuing Rights. Seller or the Trust shall
be permitted to enter into a binding agreement relating to an
Alternative Proposal only if the Trust Managers or the Board of
Directors of Seller, as applicable, determine, after considering
the advice of its legal counsel, that the failure to consummate
such a transaction might reasonably be expected to subject the
Trust Managers or Board of Directors of Seller to liability for
breach of their fiduciary duties to the Trust's or Seller's
shareholders. The terms of any Alternative Proposal to which the
Trust or Seller is a party in which the Trust is the surviving
entity shall provide that Buyer shall have the right, at its
election, to purchase the Shares upon payment of the Purchase
Price prior to consummation of any such transaction. In the event
that the Trust shall not be the surviving entity of such
transaction, upon consummation of such transaction the Trust and
Seller shall cause such third party to assume the obligations of
Seller and the Trust under this Agreement and Buyer shall have
the right, at its election, to acquire, upon payment of the
Purchase Price, such securities or other property as it would
have been entitled to receive upon exchange of the Shares if
Buyer had purchased the Shares immediately prior to the
consummation of such transaction.
(c) Reimbursement of Expenses. If for any reason,
regardless of fault, the Shares are not sold by Seller to Buyer,
Seller or the Trust shall reimburse Buyer for all out-of-pocket
expenses incurred by Buyer in connection with the transactions
contemplated by this Agreement upon the submission by Buyer to
Seller and the Trust of documentation evidencing the incurrence
of such expenses.
4 Notification of Certain Matters. Seller and the
Trust shall give prompt notice to Buyer, and Buyer shall give
prompt notice to Seller and the Trust, of (a) the occurrence, or
failure to occur, of any event that causes any representation or
warranty contained in this Agreement to be untrue or inaccurate
at any time from the date of this Agreement to the Closing Date
and (b) any failure of Buyer, the Trust or Seller, as the case
may be, to comply with or satisfy, in any material respect, any
covenant, condition or agreement to be complied with or satisfied
by it under this Agreement.
5 Permits and Approvals.
( ) Seller, the Trust and Buyer each agree to cooperate
and use their best efforts to obtain (and will immediately
prepare all registrations, filings and applications, requests and
notices preliminary to all) Approvals and Permits that may be
necessary or which may be reasonably requested by Seller, the
Trust or Buyer to consummate the transactions contemplated by
this Agreement.
(a) To the extent that the Approval of a third party with
respect to any Material Contract is required in connection with
the transactions contemplated by this Agreement, Seller and the
Trust shall use their best efforts to obtain such Approval prior
to the Closing Date.
3. ADDITIONAL CONTINUING COVENANTS AND AGREEMENTS
0 Use of Proceeds. The proceeds from the sale of the
Shares to Buyer, net of any costs (including any accounting and
legal costs and expenses) associated with the transactions
contemplated by this Agreement, shall be applied by Seller to
expenses provided for in the Settlement Agreement and general
reserves.
1 Environmental Matters. Seller and the Trust will
advise Buyer promptly (a) upon obtaining knowledge that a Release
has occurred at or upon the Properties and/or (b) upon receipt of
a Notification pertaining to the Properties.
2 Status for REIT Ownership and Income Tests. Following
the Closing, and at all subsequent times during which Buyer owns
any of the Shares, applying the stock ownership rules of Code
Section 856(h), Buyer will be treated as a corporation, and the
Shares that it owns will be treated as owned proportionately by
Buyer's policyholders (its "shareholders" for this purpose).
3 Prohibited Transactions. The Trust shall not effect
any business transactions, or agree to effect any business
transactions, with Affiliates, Trust Managers or employees of the
Trust except in the ordinary course of business and unless the
consideration paid by the Trust in any such business transaction
is fair value at market rates.
4 Registration Rights Agreement. Contemporaneously
with the Closing, Buyer and the Trust shall enter into a
Registration Rights Agreement substantially in the form of
Exhibit B.
5 REIT Qualification. The Trust shall take all actions
necessary to maintain the Trust's qualification as a REIT and,
without the written consent of Buyer, shall take no action that
would cause the Trust not to qualify as a REIT or fail to take
any action that would preserve the Trust's qualification as a
REIT.
6 Services by Buyer. To the extent permitted by law and
the Charter Documents, Buyer shall have the right to provide
management and leasing services to the Trust at fair market
rates.
GENERAL CONDITIONS OF PURCHASE
The obligations of the parties to effect the Closing
shall be subject to the following conditions unless waived in
writing by all parties:
0 No Orders. No Law or Order shall have been enacted,
entered, issued, promulgated or enforced by any Governmental
Entity which prohibits or restricts the transactions contemplated
by this Agreement. No Governmental Entity shall have notified any
party to this Agreement that consummation of the transactions
contemplated by this Agreement would constitute a violation of
any Law of any jurisdiction or that it intends to commence
proceedings to restrain or prohibit such transactions or force
divestiture or rescission, unless such Governmental Entity shall
have withdrawn such notice and abandoned any such proceedings
prior to the time which otherwise would have been the Closing
Date.
1 Approvals. To the extent required by applicable Law,
all Permits and Approvals required to be obtained in connection
with the Closing from any Governmental Entity or any consent from
a third party material to the Trust or its business shall have
been received or obtained on or prior to the Closing Date.
2 Absence of Litigation. No Action before any
Governmental Entity pertaining to the transactions contemplated
by this Agreement shall have been instituted on or before the
Closing Date whether or not Buyer or its Affiliates is a party.
3 New York Stock Exchange. The Trust will use its best
efforts to maintain the listing of its Common Shares on the New
York Stock Exchange.
5. CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer to effect the Closing shall
be subject to the following conditions except to the extent
waived in writing by Buyer:
0 Settlement Agreement. The final settlement of the
Pure World Litigation by the court overseeing such settlement
shall have occurred on or before the Closing Date.
1 Accuracy of Representations and Warranties. All
representations and warranties of Seller and the Trust set forth
in this Agreement shall be true and correct at the Closing Date
as if made on and as of the Closing Date.
2 Performance by Seller and the Trust. Seller and the
Trust shall have in all material respects performed, satisfied
and complied with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied
with by Seller and the Trust on or before the Closing Date,
including the covenants set forth in Section 5.
3 No Material Adverse Change. During the period from
the date of the Audited Financial Statements to the Closing Date,
(i) there shall not have been any material adverse change in the
business, assets, prospects, financial condition or the results
of operations of the Trust, and the Trust shall not have
sustained any material Loss or damage to its assets (including
those of Subsidiaries and Trust Partnerships), except for Losses
covered by insurance, that adversely affects its ability to
conduct a material part of its business and (ii) there shall not
have occurred any material adverse change in the financial
markets in the United States, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or
international political, financial or economic conditions, in
each case the effect of which is such as to, in the judgment of
Buyer, significantly impair the marketability or value of the
Shares, (iii) the trading in any securities of the Company shall
not have been suspended or limited by the Commission or the New
York Stock Exchange, trading generally on the American Stock
Exchange or the New York Stock Exchange or in the Nasdaq National
Market shall not have been suspended or limited, minimum or
maximum prices for trading shall not have been fixed, and maximum
ranges for prices shall not have been required, by any of said
exchanges or by such system or by order of the Commission, the
National Association of Securities Dealers, Inc. or any other
Governmental Entity, and (iv) a banking moratorium shall not have
been declared by Federal, Texas or New York authorities.
4 Certification by Seller and the Trust. Buyer shall
have received a certificate, dated as of the Closing Date, signed
by the President of Seller and by the President of the Trust,
certifying, in such detail as Buyer and its counsel reasonably
may request, that the conditions specified in Section 8.1,
Section 8.2, Section 8.3, and Section 8.4 have been fulfilled.
5 Opinion of Seller and the Trust's Counsel. Buyer
shall have received from counsel for Seller and the Trust an
opinion, dated as of the Closing Date, in form and substance
reasonably satisfactory to Buyer as to the matters set forth in
Schedule 8.6.
6 No Other Business Combination Transaction. Seller or
the Trust shall not have entered into an agreement relating to an
Alternative Proposal and the Board of Directors of Seller or the
Trust Managers shall not have recommended an Alternative
Proposal.
6. CONDITIONS TO OBLIGATIONS OF SELLER AND THE TRUST
The obligations of Seller and the Trust to effect the
Closing shall be subject to the following conditions, except to
the extent waived in writing by Seller and the Trust:
0 Settlement Agreement. The final settlement of the
Pure World Litigation by the court overseeing such settlement
shall have occurred on or before the Closing Date.
1 Accuracy of Buyer's Representations and Warranties.
All representations and warranties of Buyer set forth in this
Agreement shall be true and correct at the Closing Date as if
made on and as of the Closing Date.
2 Buyer's Performance. Buyer shall have in all
material respects performed, satisfied and complied with all
covenants, agreements and conditions required by this Agreement
to be performed, satisfied or complied with by Buyer on or before
the Closing Date.
3 Certification by Buyer. Seller and the Trust shall
have received a certificate, dated as of the Closing Date, signed
by the President or a Vice President of Buyer, certifying, in
such detail as Seller, the Trust and their counsel reasonably may
request, that the conditions specified in Section 9.2 and Section
9.3 have been fulfilled.
4 Opinion of Buyer's Counsel. Seller and the Trust
shall have received from counsel to Buyer an opinion, dated as of
the Closing Date, in form and substance reasonably satisfactory
to the Trust as to the matters set forth in Schedule 9.5.
7. TERMINATION OF OBLIGATIONS; SURVIVAL
0 Termination of Agreement. This Agreement and the
transactions contemplated by this Agreement may be terminated at
any time before the Closing Date, as follows and in no other
manner:
( ) Mutual Consent. By mutual consent in writing of
Buyer, the Trust and Seller.
(a) Conditions to Buyer's Performance Not Met. By Buyer
with written notice to Seller and the Trust if the Closing Date
has not occurred on or before December 31, 1996. Notwithstanding
the foregoing, Buyer may not exercise any right to terminate this
Agreement pursuant to this paragraph if Buyer has breached in any
material respect its covenants or agreements set forth in this
Agreement in any manner that shall have proximately contributed
to the failure of the Closing Date to occur on or before December
31, 1996.
(b) Conditions to Seller's and the Trust's Performance Not
Met. By Seller and the Trust with written notice to Buyer if
the Closing Date has not occurred on or before December 31, 1996.
Notwithstanding the foregoing, Seller and the Trust may not
exercise any right to terminate this Agreement pursuant to this
paragraph if Seller or the Trust has breached in any material
respect its covenants or agreements set forth in this Agreement
in any manner that shall have proximately contributed to the
failure of the Closing Date to occur on or before December 31,
1996.
(c) Misrepresentation or Material Breach. By Buyer,
Seller or the Trust with written notice to the other party if
there has been a misrepresentation or material breach on the part
of Seller, the Trust or Buyer, respectively, in their respective
representations, warranties and covenants set forth herein,
which, with respect to a breach of a covenant, if curable, has
not been cured within ten business days after receipt of notice
from Buyer, Seller or the Trust of the terminating party's
intention to terminate.
(d) Environmental Noncompliance. By Buyer in the event
of the discovery of any Release or other matter prior to the
Closing Date which, if known to Seller or the Trust as of the
date of this Agreement, would have constituted a breach of the
representations and warranties contained in Section 3.17.
1 Effect of Termination. In the event that this
Agreement shall be terminated pursuant to Section 10.1, all
further obligations of the parties under this Agreement shall
terminate; provided that the obligations of the parties contained
in this Section 10.2, Section 11, and Section 12, (other than
Sections 12.3 and 12.8) shall survive any such termination. A
termination under Section 10.1 shall not relieve any party of any
liability for a breach of, or for any misrepresentation under,
this Agreement, or be deemed to constitute a waiver of any
available remedy (including specific performance if available)
for any such breach or misrepresentation.
2 Survival of Representations and Warranties. The
representations and warranties contained in or made pursuant to
this Agreement shall expire on the third anniversary of the
Closing except that (a) the representations and warranties
contained in Section 3.2 shall continue forever (subject to all
defenses of Seller and the Trust available under applicable Law,
including the expiration of the applicable statute of limitations
period), (b) the representations and warranties contained in
Section 3.14 shall continue through the applicable statute of
limitations, (c) representations and warranties which are
intentionally misrepresented shall continue through the later of
the first anniversary of the Closing Date and one year following
the date of actual discovery of such intentional
misrepresentation, and (d) if a claim or notice is given under
Section 11 with respect to the breach of any representation or
warranty prior to the applicable expiration date, such
representation or warranty shall continue indefinitely until such
claim is finally resolved. All covenants and agreements of the
parties hereto shall be continuing and shall survive the Closing
Date pursuant to the terms thereof.
8. INDEMNIFICATION
0 Obligations of Seller and the Trust. Seller and the
Trust, jointly and severally, agree to indemnify, defend and hold
harmless Buyer and its officers, employees, agents, directors and
Affiliates (collectively, the "Buyer Indemnified Parties") from
and against any and all Losses of the Buyer Indemnified Parties
(as incurred) as a result of, or based upon, relating to or
arising out of, directly or indirectly, the transactions
contemplated hereby or by the Registration Rights Agreement,
including, without limitation, as a consequence of (a) any
inaccuracy in, or breach or nonperformance of, any of the
representations, warranties, covenants or agreements made by
Seller and the Trust in, or pursuant to, this Agreement, or (b)
any pending or threatened Action brought by the Trust's
shareholders or creditors or any other Person other than the
Buyer Indemnified Parties or their creditors relating to, or
arising out of or in connection with, directly or indirectly, the
transactions contemplated under this Agreement; provided,
however, that Seller and the Trust shall not be obligated to
indemnify, defend or hold harmless any of the Buyer Indemnified
Parties for any claims based solely on actions taken by any of
the Buyer Indemnified Parties other than the performance of the
covenants and agreements to be undertaken by Buyer pursuant to
the terms and conditions of this Agreement and any other action
authorized in writing by Seller and the Trust. As a condition to
the rights of any of the Buyer Indemnified Parties under this
Section 11, Seller and the Trust may require that any such Person
provide a written undertaking that such Person will repay to
Seller or the Trust, as applicable, any amount expended by Seller
or the Trust to indemnify, defend or hold harmless such Person in
the event and to the extent a court determines that Seller's and
the Trust's indemnification or defense of such Person is
prohibited by applicable Law.
1 Obligations of Buyer. Buyer agrees to indemnify,
defend and hold harmless Seller and the Trust and their Trust
Managers, officers, employees, agents, directors and Affiliates
(collectively, the "Seller Indemnified Parties") from and against
any Losses of the Seller Indemnified Parties as a result of, or
based upon or arising out of, directly or indirectly, (a) any
material inaccuracy in, or material breach or material
nonperformance of, any of the representations, warranties,
covenants or agreements made by Buyer in, or pursuant to, this
Agreement, or (b) any pending or threatened Action brought by
Buyer's policyholders or creditors relating to, or arising out of
or in connection with, directly or indirectly, the transactions
contemplated under this Agreement; provided, however, that Buyer
shall not be obligated to indemnify, defend or hold harmless any
of the Seller Indemnified Parties for any claims based solely on
actions taken by any of the Seller Indemnified Parties other than
the performance of the covenants and agreements to be undertaken
by Seller and the Trust pursuant to the terms and conditions of
this Agreement and any other action authorized in writing by
Buyer. As a condition to the rights of any of the Seller
Indemnified Parties under this Section 11, Buyer may require that
any such Person provide a written undertaking that such Person
will repay to Buyer any amount expended by Buyer to indemnify,
defend or hold harmless such Person in the event and to the
extent a court determines that Buyer's indemnification or defense
of such Person is prohibited by applicable Law.
2 Procedure.
( ) Notice. Any party seeking indemnification with
respect to any Loss shall give notice to the party required to
provide indemnity hereunder (the "Indemnifying Party") on or
before the date specified in Section 11.4.
(a) Defense of Claim. If any claim, demand or liability
is asserted by any third party against any Indemnified Party, the
Indemnifying Party shall have the right, unless otherwise
precluded by applicable law, to conduct and control the defense,
compromise or settlement of any Action or threatened Action
brought against the Indemnified Party in respect of matters
embraced by the indemnity set forth in this Section 11. The
Indemnified Party shall have the right to employ counsel separate
from counsel employed by the Indemnifying Party in connection
with any such Action or threatened Action and to participate in
the defense thereof, but the fees and expenses of such counsel
employed by the Indemnified Party shall be at the sole expense of
the Indemnified Party unless (i) the Indemnifying Party shall
have elected not, or, after reasonable written notice of any such
Action or threatened Action, shall have failed, to assume or
participate in the defense thereof, (ii) the employment thereof
has been specifically authorized by the Indemnifying Party in
writing, or (iii) the parties to any such Action or threatened
Action (including any impleaded parties) include both the
Indemnifying Party and the Indemnified Party and the Indemnified
Party shall have been advised in writing by counsel for the
Indemnified Party that there may be one or more defenses
available to the Indemnified Party that are not available to the
Indemnifying Party or legal conflicts of interest pursuant to
applicable rules of professional conduct between the Indemnifying
Party and the Indemnified Party (in any which case, the
Indemnifying Party shall not have the right to assume the defense
of such Action on behalf of the Indemnified Party), in either of
which events referred to in clauses (i), (ii) and (iii) the fees
and expenses of such counsel employed by the Indemnified Party
shall be at the expense of the Indemnifying Party. The
Indemnifying Party shall not, without the written consent of the
Indemnified Party, settle or compromise any such Action or
threatened Action or consent to the entry of any judgment which
does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnified Party a release
from all liability in respect of such Action or threatened
Action. Unless the Indemnifying Party shall have elected not, or
shall have after reasonable written notice of any such Action or
threatened Action failed, to assume or participate in the defense
thereof, the Indemnified Party may not settle or compromise any
Action or threatened Action without the written consent of the
Indemnifying Party. If, after reasonable written notice of any
such Action or threatened Action, the Indemnifying Party neglects
to defend the Indemnified Party, a recovery against the latter
suffered by it in good faith, is conclusive in its favor against
the Indemnifying Party; provided, however, that no such
conclusive presumption shall be made if the Indemnifying Party
has not received reasonable written notice of the Action against
the Indemnified Party.
3 Survival. The indemnity set forth in this Section 11
shall survive the Closing or termination of this Agreement and
shall remain in effect for a period of (a) with respect to a
breach of a representation or warranty, for the period through
which such representation or warranty shall continue pursuant to
Section 10.3 (including such period of time through which such
representation or warranty shall be extended until resolution of
a claim with respect thereto) and (b) with respect to a breach of
a covenant or agreement or an Action referred to in clause (b) of
Sections 11.1 or 11.2, forever.
4 Notice by Seller and the Trust. Seller, the Trust
and Buyer agree to notify in writing the other party of any
liabilities, claims or misrepresentations, breaches or other
matters covered by this Section 11 upon discovery or receipt of
notice thereof (other than from such other party), whether before
or after Closing.
9. GENERAL
0 Amendments; Waivers. This Agreement and any Schedule
or Exhibit attached hereto or referenced herein may be amended
only by agreement in writing of all parties. No waiver of any
provision nor consent to any exception to the terms of this
Agreement shall be effective unless in writing and signed by the
party to be bound and then only to the specific purpose, extent
and instance so provided.
1 Schedules; Exhibits; Integration. Each Exhibit and
Schedule delivered pursuant to the terms of this Agreement shall
be in writing and shall constitute a part of the Agreement. This
Agreement, together with such Exhibits and Schedules, constitutes
the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements and
understandings of the parties in connection therewith.
2 Best Efforts; Further Assurances. Each party will
use its best efforts to cause all conditions to its obligations
to be timely satisfied and to perform and fulfill all obligations
on its part to be performed and fulfilled under this Agreement.
The parties shall cooperate with each other in such actions and
in securing requisite Approvals. Each party shall execute and
deliver such further certificates, agreements and other documents
and take such other actions as the other party may reasonably
request to consummate or implement the transactions contemplated
hereby or to evidence such events or matters, including the
seeking of any necessary shareholder approvals.
3 Governing Law. ALL QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY AND INTERPRETATION OF THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS
OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW
OR CONFLICT OF LAW PROVISION (WHETHER OF THE STATE OF TEXAS OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE
LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS.
4 No Assignment. Except as otherwise specifically
provided herein, neither this Agreement nor any rights or
obligations under it are assignable by any party, except that
Buyer may assign its rights hereunder (including but not limited
to its rights under Section 11) to any member of the USAA Group.
Buyer shall remain liable to Seller for the payment of the
Purchase Price and for other obligations of Buyer hereunder
notwithstanding a permitted assignment.
5 Headings. The descriptive headings of the Sections
and subsections of this Agreement are for convenience only and do
not constitute a part of this Agreement.
6 Counterparts. This Agreement and any other
agreement or document delivered pursuant hereto may be executed
in one or more counterparts and by different parties in separate
counterparts. All of such counterparts shall constitute one and
the same agreement or other document and shall become effective
when one or more counterparts of this Agreement have been signed
by each party and delivered to the other party.
7 Publicity and Reports. The Trust and Buyer shall
coordinate all publicity relating to the transactions
contemplated by this Agreement and no party shall issue any press
release, publicity statement or other public notice relating to
this Agreement, or the transactions contemplated by this
Agreement, without obtaining the prior consent of the other
party, except to the extent that independent legal counsel to the
Trust or Buyer, as the case may be, shall advise the Trust or
Buyer in writing that a particular action is required by
applicable Law (in which event the party taking such action shall
cooperate with the other party in connection with any disclosure
or publicity resulting from such action).
8 Confidentiality. All information disclosed by any
party (or its representatives) to the other party whether before
or after the date hereof, in connection with the transactions
contemplated by, or the discussions and negotiations preceding,
this Agreement to any other party (or its representatives) shall
be kept confidential by such other party and its representatives
and shall not be used by any such Persons other than as
contemplated by this Agreement, except (a) to the extent that
such information (i) was known by the recipient when received,
(ii) is or hereafter becomes lawfully obtainable from other
public sources or (iii) is necessary or appropriate to be
disclosed to a Governmental Entity having jurisdiction over the
parties, (b) may otherwise be required by Law to be disclosed or
(c) to the extent such duty as to confidentiality is waived in
writing by the other party. If this Agreement is terminated in
accordance with its terms, each party shall use all reasonable
efforts to return upon written request from the other party all
documents (and reproductions thereof) received by it or its
representatives from such other party (and, in the case of
reproductions, all such reproductions made by the receiving
party) that include information not within the exceptions
contained in the first sentence of this Section 12.9, unless the
recipients provide assurances reasonably satisfactory to the
requesting party that such documents have been destroyed.
9 Parties in Interest. This Agreement shall be binding
upon and inure to the benefit of each party, and nothing in this
Agreement, express or implied, is intended to confer upon any
other Person any rights or remedies of any nature whatsoever
under or by reason of this Agreement. Nothing in this Agreement
is intended to relieve or discharge the obligation of any third
Person to or to confer any right of subrogation or action over or
against any party to this Agreement.
10 Notices. Any notice or other communication hereunder
must be given in writing and (a) either delivered in person, (b)
transmitted by telex, telefax or telecopy mechanism, (c) mailed
by first class mail, return receipt requested, or (d) delivered
by overnight mail or courier service, as follows:
If to Buyer, addressed to:
USAA Real Estate Company
8000 Robert F. McDermott Freeway
IH-10 West, Suite 600
San Antonio, Texas 78230-3884
Attention: David M. Holmes
Randal R. Seewald, Esq.
Telephone: (210) 498-0626
Telecopy: (210) 498-6214
If to Seller or the Trust, addressed to:
American Industrial Properties REIT
6220 North Beltline Road, Suite 205
Irving, Texas 75063-2656
Attention: Mr. Charles W. Wolcott
President and Chief Executive Officer
Telephone: (972) 550-6053
Telecopy: (972) 550-6037
or to such other address or to such other person as any
party shall have last designated by such notice to the other
parties. Each such notice or other communication shall be
effective (i) if given by telecommunication, when transmitted to
the applicable number so specified in this Section 12.11 and an
appropriate answer back is received, (ii) if given by mail, three
days after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid or (iii) if
given by any other means, when actually delivered at such
address.
11 Expenses. Seller, the Trust and Buyer shall pay
their own respective expenses incident to the negotiation,
preparation and performance of this Agreement and the
transactions contemplated hereby, including but not limited to
the fees, expenses and disbursements of their respective
financial advisers, accountants and counsel.
12 Remedies; Waiver. All rights and remedies existing
under this Agreement and any related agreements or documents are
cumulative to and not exclusive of any rights or remedies
otherwise available under applicable Law. No failure on the part
of any party to exercise or delay in exercising any right
hereunder shall be deemed a waiver thereof, nor shall any single
or partial exercise preclude any further or other exercise of
such or any other right. Buyer, Seller and the Trust shall be
entitled to seek any equitable remedy to the extent such remedy
is available under applicable Law.
13 Representation By Counsel; Interpretation. Seller,
the Trust and Buyer each acknowledge that each party to this
Agreement has been represented by counsel in connection with
this Agreement and the transactions contemplated by this
Agreement. Accordingly, any rule of Law or any legal decision
that would require interpretation of any claimed ambiguities in
this Agreement against the party that drafted it has no
application and is expressly waived. The provisions of this
Agreement shall be interpreted in a reasonable manner to effect
the intent of Buyer, Seller and the Trust, and no rule of strict
construction shall be applied against any party to this
Agreement.
14 Severability. If any provision of this Agreement is
determined to be invalid, illegal or unenforceable by any
Governmental Entity, the remaining provisions of this Agreement
to the extent permitted by Law shall remain in full force and
effect to the extent permitted by Law, and the parties hereby to
the same extent waive any provision of Law that renders any
provision hereof prohibited or unenforceable in any respect.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed by its duly authorized officers as
of the day and year first above written.
"BUYER"
USAA REAL ESTATE COMPANY
By:
T. Patrick Duncan
Senior Vice President - Operations
"SELLER"
AMERICAN INDUSTRIAL PROPERTIES REIT, INC.
By:
Charles W. Wolcott
President and Chief Executive Officer
"TRUST"
AMERICAN INDUSTRIAL PROPERTIES REIT
By:
Charles W. Wolcott
President and Chief Executive Officer
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made
and entered into as of December 19, 1996, by and between
American Industrial Properties REIT, a Texas real estate
investment trust (the "Company"), and USAA Real Estate Company,
a Delaware corporation ("USAA").
WITNESSETH:
WHEREAS, pursuant to that certain Share Purchase Agreement,
dated as of December 13, 1996, between the Company and USAA (the
"Share Purchase Agreement"), USAA purchased 924,600 Common Shares
(the "Shares"); and
WHEREAS, pursuant to the terms of the Share Purchase
Agreement, the Company and USAA agreed that the Company would
grant certain registration rights to USAA with respect to the
Shares;
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
0. Definitions.
As used in this Agreement, the following
capitalized terms shall have the following meanings:
Closing Date: The closing date as defined in the
Share Purchase Agreement.
Common Shares: The common shares of beneficial
interest, $.10 par value per share, of the Company.
Exchange Act: The Securities Exchange Act of
1934, as amended from time to time.
Person: An individual, partnership, corporation,
limited liability company, trust or unincorporated organization,
or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in any
Registration Statement, as amended or supplemented by any
prospectus supplement with respect to the terms of the offering
of any portion of the Registrable Securities covered by such
Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such
prospectus.
Registrable Securities: (a) The Shares and (b)
any securities issued or issuable with respect to the Shares by
way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or
other reorganization or otherwise. Any Registrable Security will
cease to be a Registrable Security when (i) a registration
statement covering such Registrable Security has been declared
effective by the SEC and the Registrable Security has been
disposed of pursuant to such effective registration statement,
(ii) the Registrable Security is sold under circumstances in
which all of the applicable conditions of Rule 144 (or any
similar provisions then in force) under the Securities Act are
met, or (iii) the Registrable Security has been otherwise
transferred, the Company has delivered a new certificate or other
evidence of ownership for it not bearing a legend restricting
further transfer, and it may be resold without subsequent
registration under the Securities Act.
Registration Expenses: See Section 5 hereof.
Registration Statement: The Registration
Statement of the Company that covers any of the Registrable
Securities pursuant to the provisions of this Agreement,
including the Prospectus included therein, all amendments and
supplements to such Registration Statement, including post-
effective amendments, all exhibits and all material incorporated
by reference in such Registration Statement.
SEC: The Securities and Exchange Commission or
any successor entity.
Securities Act: The Securities Act of 1933, as
amended from time to time.
Share Purchase Agreement: See the Recitals to
this Agreement.
Shares: See the Recitals to this Agreement.
Underwritten Registration or Underwritten
Offering: A registration in which securities of the Company are
sold to an underwriter for reoffering to the public.
1. Registration Rights.
( ) Shelf Registration. Upon the written request of USAA,
the Company shall file a "shelf" registration statement on any
appropriate form pursuant to Rule 415 (or similar rule that may
be adopted by the SEC) under the Securities Act (a "Shelf
Registration") for all of the then Registrable Securities,
subject to the request of USAA to exclude any Registrable
Securities.
The Company hereby agrees to file such registration
statement as promptly as practicable following the request
therefor, and in any event within 60 days following the date such
request is received by the Company, and thereafter to use its
commercially reasonable efforts to cause such Shelf Registration
to become effective and thereafter to keep it continuously
effective, and to prevent the happening of any event of the kind
described in Section 4(c)(3), (4), (5) or (6) hereof that
requires the Company to give notice pursuant to the last
paragraph of Section 4 hereof, for a period terminating on the
third year anniversary of the date on which the SEC declares the
Shelf Registration effective, or such shorter period as shall
terminate, on the date on which all the Registrable Securities
covered by the Shelf Registration have been sold pursuant to such
Shelf Registration. The Company shall be obligated to file only
one Shelf Registration and shall not be obligated to file a Shelf
Registration if three Demand Registrations (hereinafter defined)
have been effected under Section 2(b).
The Company further agrees to promptly supplement or
make amendments to the Shelf Registration, if required by the
rules, regulations or instructions applicable to the registration
form utilized by the Company or by the Securities Act or rules
and regulations thereunder for shelf registration or if requested
by USAA or any underwriter of the Registrable Securities.
If USAA so elects, the offering of Registrable
Securities pursuant to a Shelf Registration shall be in the form
of an Underwritten Offering.
(a) Demand Registration.
At any time during the five year period following the
Closing Date, USAA may make a written request (the "Demand
Notice") for registration under the Securities Act (a "Demand
Registration") of the Registrable Securities held by it.
The Demand Notice will specify the number of shares of
Registrable Securities proposed to be sold and will also specify
the intended method of disposition thereof. Unless USAA shall
consent in writing, no other party, including the Company, shall
be permitted to offer securities under any such Demand
Registration. The Company shall not be required to effect more
than three Demand Registrations under this Section 2(b). A
registration requested pursuant to this Section 2(b) will not be
deemed to have been effected (and it shall not count as one of
the three Demand Registrations) unless the Registration Statement
relating thereto has become effective under the Securities Act;
provided, however that if, after such Registration Statement has
become effective, the offering of the Registrable Securities
pursuant to such registration is interfered with by any stop
order, injunction or other order or requirement of the SEC or
other governmental agency or court, such registration will be
deemed not to have been effected (and it shall not count as one
of the three Demand Registrations). USAA may, at any time prior
to the effective date of the Registration Statement relating to
such registration, revoke its Demand Notice by providing a
written notice to the Company.
If USAA so elects, the offering of Registrable
Securities pursuant to a Demand Registration shall be in the form
of an Underwritten Offering. If the managing underwriter or
underwriters of such offering advise the Company and USAA in
writing that in their opinion the number of shares of Registrable
Securities requested to be included in such offering is
sufficiently large to materially and adversely affect the success
of such offering, the Company will include in such registration
the aggregate number of Registrable Securities which in the
opinion of such managing underwriter or underwriters can be sold
without any such material adverse effect; provided, however, that
Registrable Securities may be excluded before all shares proposed
to be sold by other parties, including the Company, have been
excluded. If any Registrable Securities are excluded, such
registration shall not count as one of the three Demand
Registrations.
No registration pursuant to a request or requests
referred to in this subsection 2(b) shall be deemed to be a Shelf
Registration.
(b) Incidental Registration. If at any time during the
five year period following the Closing Date the Company proposes
to file a registration statement under the Securities Act (other
than in connection with the Shelf Registration, a Demand
Registration or a Registration Statement on Form S-4 or S-8, or
any form that is substituting therefor or is a successor thereto)
with respect to an offering of any class of security by the
Company for its own account or for the account of any of its
security holders, then the Company shall give written notice of
such proposed filing to USAA as soon as practicable (but in no
event less than thirty days before the anticipated filing date),
and such notice shall (i) offer USAA the opportunity to register
such number of Registrable Securities as it may request and (ii)
describe such securities and specifying the form and manner and
other relevant facts involved in such proposed registration
(including, without limitation, (x) whether or not such
registration will be in connection with an Underwritten Offering
and, if so, the identity of the managing underwriter and whether
such Underwritten Offering will be pursuant to a "best efforts"
or "firm commitment" underwriting and (y) the price (net of any
underwriting commissions, discounts and the like) at which the
Registrable Securities are reasonably expected to be sold, if
such disclosure is acceptable to the managing underwriter), USAA
shall advise the Company in writing within twenty (20) days after
the date of receipt of such notice from the Company of the number
of Registrable Securities for which registration is requested.
The Company shall include in such Registration Statement all such
Registrable Securities so requested to be included therein, and,
if such registration is an Underwritten Registration, the Company
shall use its commercially reasonable efforts to cause the
managing underwriter or underwriters to permit the Registrable
Securities requested to be included in the registration statement
for such offering to be included (on the same terms and
conditions as similar securities of the Company included therein
to the extent appropriate); provided, however, that if the
managing underwriter or underwriters of such offering deliver a
written opinion to USAA that either because of (i) the kind of
securities which USAA, the Company, or any other Persons intend
to include in such offering or (ii) the size of the offering
which USAA, the Company, or such other Persons intend to make,
the success of the offering would be materially and adversely
affected by inclusion of the Registrable Securities requested to
be included, then (A) in the event that the size of the offering
is the basis of such managing underwriter's opinion, the amount
of securities to be offered for the account of USAA and other
holders registering securities of the Company pursuant to similar
incidental registration rights shall be reduced pro rata
(according to the Registrable Securities beneficially owned by
such holders) to the extent necessary to reduce the total amount
of securities to be included in such offering to the amount
recommended by such managing underwriter or underwriters; and (B)
in the event that the combination of securities to be offered is
the basis of such managing underwriter's opinion, (x) the
Registrable Securities and other securities to be included in
such offering shall be reduced as described in clause (A) above
or, (y) if the actions described in clause (A) would, in the
judgment of the managing underwriter, be insufficient to
substantially eliminate the adverse effect that inclusion of the
Registrable Securities requested to be included would have on
such offering, such Registrable Securities will be excluded from
such offering.
No registration pursuant to a request or requests
referred to in this subsection 2(c) shall be deemed to be a Shelf
Registration.
2. Hold-Back Agreements.
( ) Restrictions on Public Sale by Holder of Registrable
Securities. USAA agrees, if reasonably requested by the managing
underwriters in an Underwritten Offering, not to effect any
public sale or distribution of securities of the Company of the
same class as the securities included in such Registration
Statement, including a sale pursuant to Rule 144 under the
Securities Act (except as part of such Underwritten
Registration), during the 10-day period prior to the filing of a
Registration Statement with respect to such Underwritten
Offering, and during the 90-day period beginning on the closing
date of each Underwritten Offering made pursuant to such
Registration Statement, to the extent timely notified in writing
by the Company or the managing underwriters.
(a) Restrictions on Sale of Securities by the Company. The
Company agrees not to effect any public sale or distribution of
any securities similar to those being registered, or any
securities convertible into or exchangeable or exercisable for
such securities (except pursuant to a registration statement on
Form S-4 or S-8, or any substitute form that may be adopted by
the SEC) during the ten days prior to the filing of a
registration statement with respect to such Underwritten
Offering, and during the 90-day period beginning on the effective
date of any Registration Statement (except as part of such
registration statement (x) where USAA consents or (y) where USAA
is participating in such registration statement pursuant to
Section 2(c) hereof, such registration statement was filed by the
Company with respect to the sale of securities by the Company,
and USAA is not simultaneously participating in a registration
statement pursuant to Section 2(b) hereof) or the commencement of
a public distribution of Registrable Securities pursuant to such
registration statement.
3. Registration Procedures. In connection with the
Company's registration obligations pursuant to Section 2 hereof,
the Company will use its commercially reasonable efforts to
effect such registration to permit the sale of such Registrable
Securities in accordance with the intended method or methods of
distribution thereof, and pursuant thereto the Company will use
commercially reasonable efforts to as expeditiously as possible:
( ) prepare and file with the SEC, as soon as practicable,
and in any event within 60 days from the date of request, a
Registration Statement relating to the applicable registration on
any appropriate form under the Securities Act, which forms shall
be available for the sale of the Registrable Securities in
accordance with the intended method or methods of distribution
thereof and shall include all financial statements of the
Company, and use its commercially reasonable efforts to cause
such Registration Statement to become effective; provided that
before filing a Registration Statement or Prospectus or any
amendments or supplements thereto, including documents
incorporated by reference after the initial filing of the
Registration Statement, the Company will furnish USAA and the
underwriters, if any, copies of all such documents proposed to be
filed, which documents will be subject to the review of USAA and
the underwriters, and the Company will not file any Registration
Statement or amendment thereto or any Prospectus or any
supplement thereto (including such documents incorporated by
reference) to which USAA or the underwriters, if any, shall
reasonably object;
(a)
(a) prepare and file with the SEC such amendments and post-
effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the
applicable period, or such shorter period which will terminate
when all Registrable Securities covered by such Registration
Statement have been sold; cause the Prospectus to be supplemented
by any required Prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 under the Securities Act; and
comply with the provisions of all securities covered by such
Registration Statement during the applicable period in accordance
with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or
supplement to the Prospectus; the Company shall not be deemed to
have used commercially reasonable efforts to keep a Registration
Statement effective during the applicable period if it
voluntarily takes any action that would result in USAA not being
able to sell its Registrable Securities during that period unless
such action is required under applicable law; provided that the
foregoing shall not apply to actions taken by the Company in good
faith and for valid business reasons, including without
limitation the acquisition or divestiture of assets, so long as
the Company promptly thereafter complies with the requirements of
Section 4(l) hereof, if applicable;
(b) notify USAA and the managing underwriters, if any,
promptly, and (if requested by any such Person) confirm such
advice in writing, (1) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with
respect to the Registration Statement or any post-effective
amendment, when the same has become effective, (2) of any request
by the SEC for amendments or supplements to the Registration
Statement or the Prospectus or for additional information, (3) of
the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose, (4) if at any time the
representations and warranties of the Company contemplated by
paragraph (n) below cease to be true and correct, (5) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose and (6) of the happening of any event
which makes any statement made in the Registration Statement, the
Prospectus or any document incorporated therein by reference
untrue or which requires the making of any changes in the
Registration Statement, the Prospectus or any document
incorporated therein by reference in order to make the statements
therein not misleading;
(c) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of the Registration
Statement at the earliest possible moment;
(d) if reasonably requested by the managing underwriter or
underwriters or USAA, promptly incorporate in a Prospectus
supplement or post-effective amendment such information as the
managing underwriters and USAA agree should be included therein
relating to the sale of the Registrable Securities, including,
without limitation, information with respect to the number of
Registrable Securities being sold to such underwriters, the
purchase price being paid therefor by such underwriters and with
respect to any other terms of the Underwritten (or best efforts
underwritten) Offering of the Registrable Securities to be sold
in such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as
notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment;
(e) prior to the filing of any document which is to be
incorporated by reference into the Registration Statement or the
Prospectus (after initial filing of the Registration Statement),
make available representatives of the Company for discussion of
such document and make such changes in such document prior to the
filing thereof as USAA or the underwriters may reasonably
request;
(f) furnish to USAA and each managing underwriter, if any,
without charge, at least one signed copy of the Registration
Statement and any post-effective amendment thereto, including
financial statements and schedules, all documents incorporated
therein by reference and all exhibits (including those
incorporated by reference);
(g) deliver to USAA and the underwriters, if any, without
charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto
as such Persons may reasonably request; the Company consents to
the use of the Prospectus or any amendment or supplement thereto
by USAA and the underwriters, if any, in connection with the
offering and sale of the Registrable Securities covered by the
Prospectus or any amendment or supplement thereto;
(h) prior to any public offering of Registrable
Securities, register or qualify or cooperate with USAA, the
underwriters, if any, and their respective counsel in connection
with the registration or qualification of such Registrable
Securities for offer and sale under the securities or blue sky
laws of such jurisdictions as USAA or any underwriter reasonably
requests in writing and do any and all other acts or things
necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the
Registration Statement;
(i) cooperate with USAA and the managing underwriters, if
any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and
not bearing any restrictive legends; and enable such Registrable
Securities to be in such denominations and registered in such
names as the managing underwriters may request at least two
business days prior to any sale of Registrable Securities to the
underwriters;
(j) cause the Registrable Securities covered by the
applicable Registration Statement to be registered with or
approved by such other governmental agencies or authorities as
may be necessary to enable USAA or the underwriters, if any, to
consummate the disposition of such Registrable Securities;
(k) upon the occurrence of any event contemplated by
Section 4(c)(6) above, prepare a supplement or post-effective
amendment to the Registration Statement or the related Prospectus
or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not
misleading;
(l) cause all Registrable Securities covered by the
Registration Statement to be listed on each securities exchange
on which similar securities issued by the Company are then
listed;
(m) enter into such agreements (including an underwriting
agreement) and take all such other actions in connection
therewith in order to expedite or facilitate the disposition of
such Registrable Securities and in connection therewith, whether
or not an underwriting agreement is entered into and whether or
not the registration is an Underwritten Registration, (1) make
such representations and warranties to USAA and the underwriters,
if any, in form, substance and scope as are customarily made by
issuers to underwriters in primary underwritten offerings; (2)
obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall
be reasonably satisfactory to the managing underwriters, if any,
and USAA, covering the matters customarily covered in opinions
requested in Underwritten Offerings and such other matters as may
be reasonably requested by USAA and the underwriters, if any);
(3) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to
USAA and the underwriters, if any, such letters to be in
customary form and covering matters of the type customarily
covered in "cold comfort" letters by underwriters in connection
with primary Underwritten Offerings; (4) if an underwriting
agreement is entered into, the same shall set forth in full the
indemnification provisions and procedures of Section 6 hereof
with respect to all parties to be indemnified pursuant to said
Section; and (5) the Company shall deliver such documents and
certificates as may be requested by USAA and the managing
underwriters, if any, to evidence compliance with clause (1)
above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the
Company. The above shall be done at each closing under such
underwriting or similar agreement or as and to the extent
required thereunder;
(n)
(n) make available for inspection by a representative of
USAA, any underwriter participating in any disposition pursuant
to such registration, and any attorney or accountant retained by
USAA or any underwriter, all financial and other records,
pertinent corporate documents and properties of the Company and
cause the Company's officers, trust managers and employees to
supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection
with such registration; provided that any records, information or
documents that are designated by the Company in writing as
confidential shall be kept confidential by such Persons unless
disclosure of such records, information or documents is required
by court or administrative order;
(o) otherwise use its commercially reasonable efforts to
comply with all applicable rules and regulations of the SEC, and
make available to its security holders, as soon as reasonably
practicable, an earnings statement covering a period of 12
months, beginning within three months after the effective date of
the registration statement, which earnings statement shall
satisfy the provisions of section 11(a) of the Securities Act;
and
(p) cooperate with USAA and each underwriter participating
in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be
made with the National Association of Securities Dealers, Inc.
(the "NASD").
The Company may require USAA to furnish to the Company
such information regarding the distribution of Registrable
Securities as the Company may from time to time reasonably
request in writing.
USAA agrees by acquisition of such Registrable
Securities that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 4(l)
hereof, USAA will forthwith discontinue disposition of
Registrable Securities until USAA's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 4(l)
hereof, or until it is advised in writing (the "Advice") by the
Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings which
are incorporated by reference in the Prospectus, and, if so
directed by the Company, USAA will deliver to the Company (at the
Company's expense), all copies, other than permanent file copies
then in USAA's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the
time periods regarding the effectiveness of Registration
Statements set forth in Section 2 hereof and Section 4(b) hereof
shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to
Section 4(c)(6) hereof to the date when USAA shall receive copies
of the supplemented or amended prospectus contemplated by Section
4(l) hereof or the Advice.
4. Registration Expenses. All expenses incident to the
Company's performance of or compliance with this Agreement,
including without limitation: all registration and filing fees;
fees with respect to filings required to be made with the NASD;
fees and expenses of compliance with securities or blue sky laws
(including fees and disbursements of counsel for the underwriters
or USAA in connection with blue sky qualifications of the
Registrable Securities and determination of their eligibility for
investment under the laws of such jurisdictions as the managing
underwriters or USAA may designate); printing expenses,
messenger, telephone and delivery expenses; fees and
disbursements of counsel for the Company and fees and expenses
for independent certified public accountants retained by the
Company (including the expenses of any comfort letters or costs
associated with the delivery by independent certified public
accountants of a comfort letter or comfort letters requested
pursuant to Section 4(n) hereof); securities acts liability
insurance, if the Company so desires; all internal expenses of
the Company (including, without limitation, all salaries and
expenses of its officers and employees performing legal or
accounting duties); the expense of any annual audit; the fees and
expenses incurred in connection with the listing of the
securities to be registered on each securities exchange on which
similar securities issued by the Company are then listed; and the
fees and expenses of any Person, including special experts,
retained by the Company (all such expenses being herein called
"Registration Expenses") will be borne by the Company regardless
of whether the Registration Statement becomes effective. The
Company shall not have any obligation to pay any underwriting
fees, discounts, or commissions attributable to the sale of
Registrable Securities, or any legal fees and expenses of counsel
to USAA.
5. Indemnification; Contribution.
( ) Indemnification by Company. The Company agrees to
indemnify and hold harmless USAA and its partners, and their
respective partners, officers, directors, employees and agents,
and each Person who controls such Person (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange
Act) against all losses, claims, damages, liabilities and
expenses arising out of or based upon any untrue or alleged
untrue statement of a material fact contained in any Registration
Statement, Prospectus or preliminary prospectus or any omission
or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained
in any information furnished in writing to the Company by USAA
expressly for use therein. The Company will also indemnify
underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the
distribution, their officers and trust managers and each Person
who controls such Persons (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) to the same
extent as provided above with respect to the indemnification of
USAA, if requested.
(a) Indemnification by Holder of Registrable Securities.
USAA agrees to indemnify and hold harmless the Company and its
trust managers, officers, employees and agents, and each Person
who controls the Company (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) against any
losses, claims, damages, liabilities and expenses resulting from
any untrue statement of a material fact or any omission of a
material fact required to be stated in the Registration Statement
or Prospectus or preliminary prospectus or necessary to make the
statements therein not misleading, to the extent, but only to the
extent, that such untrue statement or omission is contained in
any information or affidavit so furnished in writing by USAA to
the Company specifically for inclusion in such Registration
Statement or Prospectus. In no event shall the liability of USAA
hereunder be greater in amount than the dollar amount of the
proceeds received by USAA upon the sale of the Registrable
Securities giving rise to such indemnification obligation. The
Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the
distribution, to the same extent as provided above with respect
to information so furnished in writing by such Persons
specifically for inclusion in any Prospectus or Registration
Statement.
(b)
(b) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder will (i) give prompt notice
to the indemnifying party of any claim with respect to which it
seeks indemnification and (ii) permit such indemnifying party to
assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, however that any
Person entitled to indemnification hereunder shall have the right
to employ separate counsel and to participate in the defense of
such claim, but the fees and expenses of such counsel shall be at
the expense of such Person unless (a) the indemnifying party has
agreed to pay such fees or expenses, (b) the indemnifying party
shall have failed to assume the defense of such claim and employ
counsel reasonably satisfactory to such Person or (c) based upon
written advice of counsel to such Person, there shall be one or
more defenses available to such Person that are not available to
the indemnifying party or there shall exist conflicts of interest
pursuant to applicable rules of professional conduct between such
Person and the indemnifying party (in which case, if the Person
notifies the indemnifying party in writing that such Person
elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such
Person), in each of which events the fees and expenses of such
counsel shall be at the expense of the indemnifying party. The
indemnifying party will not be subject to any liability for any
settlement made without its consent (but such consent will not be
unreasonably withheld), but if settled with its written consent,
or if there be a final judgment for the plaintiff in any such
action or proceeding, the indemnifying party shall indemnify and
hold harmless the indemnified parties from and against any loss
or liability (to the extent stated above) by reason of such
settlement or judgment. No indemnified party will be required to
consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of
a release from all liability in respect to such claim or
litigation.
(c) Contribution. If for any reason the indemnification
provided for in the preceding clauses (a) and (b) is unavailable
to an indemnified party or insufficient to hold it harmless as
contemplated by the preceding clauses (a) and (b), then the
indemnifying party shall contribute to the amount paid or payable
by the indemnified party as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect not
only the relative benefits received by the indemnified party and
the indemnifying party, but also the relative fault of the
indemnified party and the indemnifying party, as well as any
other relevant equitable considerations, provided, that USAA
shall not be required to contribute an amount greater than the
dollar amount of the proceeds received by USAA with respect to
the sale of the Registrable Securities giving rise to such
indemnification obligation. The relative fault of the Company on
the one hand and of USAA on the other shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied
by such party, and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such
statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 10(f) of the
Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentations.
6. Rule 144. The Company hereby agrees that it will file
the reports required to be filed by it under the Securities Act
and the Exchange Act and the rules and regulations adopted by the
SEC thereunder (or, if the Company is not required to file such
reports, it will, upon the request of USAA, make publicly
available other information so long as necessary to permit sales
pursuant to Rule 144 under the Securities Act), and it will take
such further action as USAA may reasonably request, all to the
extent required from time to time to enable USAA to sell
Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule
144 under the Securities Act, as such Rule may be amended from
time to time, or (b) any similar rule or regulation hereafter
adopted by the SEC. Upon the request of USAA, the Company will
deliver to USAA a written statement as to whether it has complied
with such information and requirements.
7. Participation in Underwritten Registrations.
( ) If any of the Registrable Securities covered by the
Shelf Registration are to be sold in an Underwritten Offering,
the investment banker or investment bankers and manager or
managers that will administer the offering will be selected by
USAA; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company.
(a) No Person may participate in any Underwritten
Registration hereunder unless such Person (i) agrees to sell such
Person's securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to
approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such
underwriting arrangements. Nothing in this Section 8 shall be
construed to create any additional rights regarding the
registration of Registrable Securities in any Person otherwise
than as set forth herein.
8. Miscellaneous.
( ) Remedies. Each party hereto, in addition to being
entitled to exercise all rights provided herein or granted by
law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement to the extent
available under applicable law. Each party hereto agrees that
monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive the defense in any action
for specific performance that a remedy at law would be adequate.
(a) Additional Registration Rights. The Company will not
on or after the date of this Agreement, enter into any agreement
granting registration rights to any other Person with respect to
the securities of the Company that are not junior or subordinate
to the rights granted to USAA hereunder without the written
consent of USAA. The Company has not previously entered into any
agreement with respect to its securities granting any
registration rights to any Person.
(b) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given without
the written consent of the Company and USAA.
(c) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telecopier, or air
courier guaranteeing overnight delivery:
( ) if to USAA, at the most current address given by USAA
to the Company in accordance with the provisions of this
subsection, which address initially is 8000 Robert F. McDermott
Freeway, IH-10, Suite 600, San Antonio, Texas 78230-3884,
Attention: David Holmes.
(i) if to the Company, initially at 6220 Beltline Road,
Suite 205, Irving, Texas 75063-2656, Attention: Charles W.
Wolcott, President and Chief Executive Officer, and thereafter at
such other address as may be designated from time to time by
notice given in accordance with the provisions of this Section
9(d).
(d) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of
each of the parties, including without limitation and without the
need for an express assignment, subsequent holders of Registrable
Securities, it being understood that the registration rights
granted to USAA hereunder shall also be for the benefit of, and
enforceable by, the single first transferee of 100% of USAA's
remaining registrable securities and, provided further, that the
Company cannot assign its rights hereunder except pursuant to a
merger.
(e) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute
one and the same agreement.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT, AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO, SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL
SUBSTANTIVE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAWS.
(h) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in
any circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(i) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject
matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to
such subject matter.
In any proceeding brought to enforce any provision of
this Agreement the successful party shall be entitled to recover
reasonable attorneys' fees in addition to its costs and expenses
and any other available remedy.
IN WITNESS WHEREOF, the parties hereto have executed
this Registration Rights Agreement as of the date first written
above.
"COMPANY"
AMERICAN INDUSTRIAL PROPERTIES REIT
By:
Charles W. Wolcott
President and Chief Executive Officer
USAA REAL ESTATE COMPANY
By:
T. Patrick Duncan
Senior Vice President - Operations
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made
and entered into as of December 20, 1996, by and between
American Industrial Properties REIT, a Texas real estate
investment trust (the "Company"), and USAA Real Estate Company,
a Delaware corporation ("USAA").
WITNESSETH:
WHEREAS, pursuant to that certain Share Purchase Agreement,
dated as of December 20, 1996, among the Company, American
Industrial Properties REIT, Inc., a Maryland corporation ("Sub"),
and USAA (the "Share Purchase Agreement"), USAA purchased 998,100
Common Shares (the "Shares") from Sub; and
WHEREAS, pursuant to the terms of the Share Purchase
Agreement, the Company and USAA agreed that the Company would
grant certain registration rights to USAA with respect to the
Shares;
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions.
As used in this Agreement, the following
capitalized terms shall have the following meanings:
Closing Date: The closing date as defined in the
Share Purchase Agreement.
Common Shares: The common shares of beneficial
interest, $.10 par value per share, of the Company.
Exchange Act: The Securities Exchange Act of
1934, as amended from time to time.
Person: An individual, partnership, corporation,
limited liability company, trust or unincorporated organization,
or a government or agency or political subdivision thereof.
Prospectus: The prospectus included in any
Registration Statement, as amended or supplemented by any
prospectus supplement with respect to the terms of the offering
of any portion of the Registrable Securities covered by such
Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such
prospectus.
Registrable Securities: (a) The Shares and (b)
any securities issued or issuable with respect to the Shares by
way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or
other reorganization or otherwise. Any Registrable Security will
cease to be a Registrable Security when (i) a registration
statement covering such Registrable Security has been declared
effective by the SEC and the Registrable Security has been
disposed of pursuant to such effective registration statement,
(ii) the Registrable Security is sold under circumstances in
which all of the applicable conditions of Rule 144 (or any
similar provisions then in force) under the Securities Act are
met, or (iii) the Registrable Security has been otherwise
transferred, the Company has delivered a new certificate or other
evidence of ownership for it not bearing a legend restricting
further transfer, and it may be resold without subsequent
registration under the Securities Act.
Registration Expenses: See Section 5 hereof.
Registration Statement: The Registration
Statement of the Company that covers any of the Registrable
Securities pursuant to the provisions of this Agreement,
including the Prospectus included therein, all amendments and
supplements to such Registration Statement, including post-
effective amendments, all exhibits and all material incorporated
by reference in such Registration Statement.
SEC: The Securities and Exchange Commission or
any successor entity.
Securities Act: The Securities Act of 1933, as
amended from time to time.
Share Purchase Agreement: See the Recitals to
this Agreement.
Shares: See the Recitals to this Agreement.
Underwritten Registration or Underwritten
Offering: A registration in which securities of the Company are
sold to an underwriter for reoffering to the public.
2. Registration Rights.
( ) Shelf Registration. Upon the written request of
USAA, the Company shall file a "shelf" registration statement on
any appropriate form pursuant to Rule 415 (or similar rule that
may be adopted by the SEC) under the Securities Act (a "Shelf
Registration") for all of the then Registrable Securities,
subject to the request of USAA to exclude any Registrable
Securities.
The Company hereby agrees to file such registration
statement as promptly as practicable following the request
therefor, and in any event within 60 days following the date such
request is received by the Company, and thereafter to use its
commercially reasonable efforts to cause such Shelf Registration
to become effective and thereafter to keep it continuously
effective, and to prevent the happening of any event of the kind
described in Section 4(c)(3), (4), (5) or (6) hereof that
requires the Company to give notice pursuant to the last
paragraph of Section 4 hereof, for a period terminating on the
third year anniversary of the date on which the SEC declares the
Shelf Registration effective, or such shorter period as shall
terminate, on the date on which all the Registrable Securities
covered by the Shelf Registration have been sold pursuant to such
Shelf Registration. The Company shall be obligated to file only
one Shelf Registration and shall not be obligated to file a Shelf
Registration if three Demand Registrations (hereinafter defined)
have been effected under Section 2(b).
The Company further agrees to promptly supplement or
make amendments to the Shelf Registration, if required by the
rules, regulations or instructions applicable to the registration
form utilized by the Company or by the Securities Act or rules
and regulations thereunder for shelf registration or if requested
by USAA or any underwriter of the Registrable Securities.
If USAA so elects, the offering of Registrable
Securities pursuant to a Shelf Registration shall be in the form
of an Underwritten Offering.
(a) Demand Registration.
At any time during the five year period following the
Closing Date, USAA may make a written request (the "Demand
Notice") for registration under the Securities Act (a "Demand
Registration") of the Registrable Securities held by it.
The Demand Notice will specify the number of shares of
Registrable Securities proposed to be sold and will also specify
the intended method of disposition thereof. Unless USAA shall
consent in writing, no other party, including the Company, shall
be permitted to offer securities under any such Demand
Registration. The Company shall not be required to effect more
than three Demand Registrations under this Section 2(b). A
registration requested pursuant to this Section 2(b) will not be
deemed to have been effected (and it shall not count as one of
the three Demand Registrations) unless the Registration Statement
relating thereto has become effective under the Securities Act;
provided, however that if, after such Registration Statement has
become effective, the offering of the Registrable Securities
pursuant to such registration is interfered with by any stop
order, injunction or other order or requirement of the SEC or
other governmental agency or court, such registration will be
deemed not to have been effected (and it shall not count as one
of the three Demand Registrations). USAA may, at any time prior
to the effective date of the Registration Statement relating to
such registration, revoke its Demand Notice by providing a
written notice to the Company.
If USAA so elects, the offering of Registrable
Securities pursuant to a Demand Registration shall be in the form
of an Underwritten Offering. If the managing underwriter or
underwriters of such offering advise the Company and USAA in
writing that in their opinion the number of shares of Registrable
Securities requested to be included in such offering is
sufficiently large to materially and adversely affect the success
of such offering, the Company will include in such registration
the aggregate number of Registrable Securities which in the
opinion of such managing underwriter or underwriters can be sold
without any such material adverse effect; provided, however, that
Registrable Securities may be excluded before all shares proposed
to be sold by other parties, including the Company, have been
excluded. If any Registrable Securities are excluded, such
registration shall not count as one of the three Demand
Registrations.
No registration pursuant to a request or requests
referred to in this subsection 2(b) shall be deemed to be a Shelf
Registration.
(b) Incidental Registration. If at any time during the
five year period following the Closing Date the Company proposes
to file a registration statement under the Securities Act (other
than in connection with the Shelf Registration, a Demand
Registration or a Registration Statement on Form S-4 or S-8, or
any form that is substituting therefor or is a successor thereto)
with respect to an offering of any class of security by the
Company for its own account or for the account of any of its
security holders, then the Company shall give written notice of
such proposed filing to USAA as soon as practicable (but in no
event less than thirty days before the anticipated filing date),
and such notice shall (i) offer USAA the opportunity to register
such number of Registrable Securities as it may request and (ii)
describe such securities and specifying the form and manner and
other relevant facts involved in such proposed registration
(including, without limitation, (x) whether or not such
registration will be in connection with an Underwritten Offering
and, if so, the identity of the managing underwriter and whether
such Underwritten Offering will be pursuant to a "best efforts"
or "firm commitment" underwriting and (y) the price (net of any
underwriting commissions, discounts and the like) at which the
Registrable Securities are reasonably expected to be sold, if
such disclosure is acceptable to the managing underwriter), USAA
shall advise the Company in writing within twenty (20) days after
the date of receipt of such notice from the Company of the number
of Registrable Securities for which registration is requested.
The Company shall include in such Registration Statement all such
Registrable Securities so requested to be included therein, and,
if such registration is an Underwritten Registration, the Company
shall use its commercially reasonable efforts to cause the
managing underwriter or underwriters to permit the Registrable
Securities requested to be included in the registration statement
for such offering to be included (on the same terms and
conditions as similar securities of the Company included therein
to the extent appropriate); provided, however, that if the
managing underwriter or underwriters of such offering deliver a
written opinion to USAA that either because of (i) the kind of
securities which USAA, the Company, or any other Persons intend
to include in such offering or (ii) the size of the offering
which USAA, the Company, or such other Persons intend to make,
the success of the offering would be materially and adversely
affected by inclusion of the Registrable Securities requested to
be included, then (A) in the event that the size of the offering
is the basis of such managing underwriter's opinion, the amount
of securities to be offered for the account of USAA and other
holders registering securities of the Company pursuant to similar
incidental registration rights shall be reduced pro rata
(according to the Registrable Securities beneficially owned by
such holders) to the extent necessary to reduce the total amount
of securities to be included in such offering to the amount
recommended by such managing underwriter or underwriters; and (B)
in the event that the combination of securities to be offered is
the basis of such managing underwriter's opinion, (x) the
Registrable Securities and other securities to be included in
such offering shall be reduced as described in clause (A) above
or, (y) if the actions described in clause (A) would, in the
judgment of the managing underwriter, be insufficient to
substantially eliminate the adverse effect that inclusion of the
Registrable Securities requested to be included would have on
such offering, such Registrable Securities will be excluded from
such offering.
No registration pursuant to a request or requests
referred to in this subsection 2(c) shall be deemed to be a Shelf
Registration.
3.
Hold-Back Agreements.
( ) Restrictions on Public Sale by Holder of Registrable
Securities. USAA agrees, if reasonably requested by the managing
underwriters in an Underwritten Offering, not to effect any
public sale or distribution of securities of the Company of the
same class as the securities included in such Registration
Statement, including a sale pursuant to Rule 144 under the
Securities Act (except as part of such Underwritten
Registration), during the 10-day period prior to the filing of a
Registration Statement with respect to such Underwritten
Offering, and during the 90-day period beginning on the closing
date of each Underwritten Offering made pursuant to such
Registration Statement, to the extent timely notified in writing
by the Company or the managing underwriters.
(a) Restrictions on Sale of Securities by the Company. The
Company agrees not to effect any public sale or distribution of
any securities similar to those being registered, or any
securities convertible into or exchangeable or exercisable for
such securities (except pursuant to a registration statement on
Form S-4 or S-8, or any substitute form that may be adopted by
the SEC) during the ten days prior to the filing of a
registration statement with respect to such Underwritten
Offering, and during the 90-day period beginning on the effective
date of any Registration Statement (except as part of such
registration statement (x) where USAA consents or (y) where USAA
is participating in such registration statement pursuant to
Section 2(c) hereof, such registration statement was filed by the
Company with respect to the sale of securities by the Company,
and USAA is not simultaneously participating in a registration
statement pursuant to Section 2(b) hereof) or the commencement of
a public distribution of Registrable Securities pursuant to such
registration statement.
4. Registration Procedures. In connection with the
Company's registration obligations pursuant to Section 2 hereof,
the Company will use its commercially reasonable efforts to
effect such registration to permit the sale of such Registrable
Securities in accordance with the intended method or methods of
distribution thereof, and pursuant thereto the Company will use
commercially reasonable efforts to as expeditiously as possible:
( ) prepare and file with the SEC, as soon as practicable,
and in any event within 60 days from the date of request, a
Registration Statement relating to the applicable registration on
any appropriate form under the Securities Act, which forms shall
be available for the sale of the Registrable Securities in
accordance with the intended method or methods of distribution
thereof and shall include all financial statements of the
Company, and use its commercially reasonable efforts to cause
such Registration Statement to become effective; provided that
before filing a Registration Statement or Prospectus or any
amendments or supplements thereto, including documents
incorporated by reference after the initial filing of the
Registration Statement, the Company will furnish USAA and the
underwriters, if any, copies of all such documents proposed to be
filed, which documents will be subject to the review of USAA and
the underwriters, and the Company will not file any Registration
Statement or amendment thereto or any Prospectus or any
supplement thereto (including such documents incorporated by
reference) to which USAA or the underwriters, if any, shall
reasonably object;
(a) prepare and file with the SEC such amendments and post-
effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the
applicable period, or such shorter period which will terminate
when all Registrable Securities covered by such Registration
Statement have been sold; cause the Prospectus to be supplemented
by any required Prospectus supplement, and as so supplemented to
be filed pursuant to Rule 424 under the Securities Act; and
comply with the provisions of all securities covered by such
Registration Statement during the applicable period in accordance
with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or
supplement to the Prospectus; the Company shall not be deemed to
have used commercially reasonable efforts to keep a Registration
Statement effective during the applicable period if it
voluntarily takes any action that would result in USAA not being
able to sell its Registrable Securities during that period unless
such action is required under applicable law; provided that the
foregoing shall not apply to actions taken by the Company in good
faith and for valid business reasons, including without
limitation the acquisition or divestiture of assets, so long as
the Company promptly thereafter complies with the requirements of
Section 4(l) hereof, if applicable;
(b) notify USAA and the managing underwriters, if any,
promptly, and (if requested by any such Person) confirm such
advice in writing, (1) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with
respect to the Registration Statement or any post-effective
amendment, when the same has become effective, (2) of any request
by the SEC for amendments or supplements to the Registration
Statement or the Prospectus or for additional information, (3) of
the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose, (4) if at any time the
representations and warranties of the Company contemplated by
paragraph (n) below cease to be true and correct, (5) of the
receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose and (6) of the happening of any event
which makes any statement made in the Registration Statement, the
Prospectus or any document incorporated therein by reference
untrue or which requires the making of any changes in the
Registration Statement, the Prospectus or any document
incorporated therein by reference in order to make the statements
therein not misleading;
(c) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of the Registration
Statement at the earliest possible moment;
(d) if reasonably requested by the managing underwriter or
underwriters or USAA, promptly incorporate in a Prospectus
supplement or post-effective amendment such information as the
managing underwriters and USAA agree should be included therein
relating to the sale of the Registrable Securities, including,
without limitation, information with respect to the number of
Registrable Securities being sold to such underwriters, the
purchase price being paid therefor by such underwriters and with
respect to any other terms of the Underwritten (or best efforts
underwritten) Offering of the Registrable Securities to be sold
in such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as
notified of the matters to be incorporated in such Prospectus
supplement or post-effective amendment;
(e) prior to the filing of any document which is to be
incorporated by reference into the Registration Statement or the
Prospectus (after initial filing of the Registration Statement),
make available representatives of the Company for discussion of
such document and make such changes in such document prior to the
filing thereof as USAA or the underwriters may reasonably
request;
(f) furnish to USAA and each managing underwriter, if any,
without charge, at least one signed copy of the Registration
Statement and any post-effective amendment thereto, including
financial statements and schedules, all documents incorporated
therein by reference and all exhibits (including those
incorporated by reference);
(g) deliver to USAA and the underwriters, if any, without
charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto
as such Persons may reasonably request; the Company consents to
the use of the Prospectus or any amendment or supplement thereto
by USAA and the underwriters, if any, in connection with the
offering and sale of the Registrable Securities covered by the
Prospectus or any amendment or supplement thereto;
(h) prior to any public offering of Registrable
Securities, register or qualify or cooperate with USAA, the
underwriters, if any, and their respective counsel in connection
with the registration or qualification of such Registrable
Securities for offer and sale under the securities or blue sky
laws of such jurisdictions as USAA or any underwriter reasonably
requests in writing and do any and all other acts or things
necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the
Registration Statement;
(i) cooperate with USAA and the managing underwriters, if
any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and
not bearing any restrictive legends; and enable such Registrable
Securities to be in such denominations and registered in such
names as the managing underwriters may request at least two
business days prior to any sale of Registrable Securities to the
underwriters;
(j) cause the Registrable Securities covered by the
applicable Registration Statement to be registered with or
approved by such other governmental agencies or authorities as
may be necessary to enable USAA or the underwriters, if any, to
consummate the disposition of such Registrable Securities;
(k) upon the occurrence of any event contemplated by
Section 4(c)(6) above, prepare a supplement or post-effective
amendment to the Registration Statement or the related Prospectus
or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein not
misleading;
(l) cause all Registrable Securities covered by the
Registration Statement to be listed on each securities exchange
on which similar securities issued by the Company are then
listed;
(m) enter into such agreements (including an underwriting
agreement) and take all such other actions in connection
therewith in order to expedite or facilitate the disposition of
such Registrable Securities and in connection therewith, whether
or not an underwriting agreement is entered into and whether or
not the registration is an Underwritten Registration, (1) make
such representations and warranties to USAA and the underwriters,
if any, in form, substance and scope as are customarily made by
issuers to underwriters in primary underwritten offerings; (2)
obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall
be reasonably satisfactory to the managing underwriters, if any,
and USAA, covering the matters customarily covered in opinions
requested in Underwritten Offerings and such other matters as may
be reasonably requested by USAA and the underwriters, if any);
(3) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to
USAA and the underwriters, if any, such letters to be in
customary form and covering matters of the type customarily
covered in "cold comfort" letters by underwriters in connection
with primary Underwritten Offerings; (4) if an underwriting
agreement is entered into, the same shall set forth in full the
indemnification provisions and procedures of Section 6 hereof
with respect to all parties to be indemnified pursuant to said
Section; and (5) the Company shall deliver such documents and
certificates as may be requested by USAA and the managing
underwriters, if any, to evidence compliance with clause (1)
above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the
Company. The above shall be done at each closing under such
underwriting or similar agreement or as and to the extent
required thereunder;
(n) make available for inspection by a representative of
USAA, any underwriter participating in any disposition pursuant
to such registration, and any attorney or accountant retained by
USAA or any underwriter, all financial and other records,
pertinent corporate documents and properties of the Company and
cause the Company's officers, trust managers and employees to
supply all information reasonably requested by any such
representative, underwriter, attorney or accountant in connection
with such registration; provided that any records, information or
documents that are designated by the Company in writing as
confidential shall be kept confidential by such Persons unless
disclosure of such records, information or documents is required
by court or administrative order;
(o) otherwise use its commercially reasonable efforts to
comply with all applicable rules and regulations of the SEC, and
make available to its security holders, as soon as reasonably
practicable, an earnings statement covering a period of 12
months, beginning within three months after the effective date of
the registration statement, which earnings statement shall
satisfy the provisions of section 11(a) of the Securities Act;
and
(p) cooperate with USAA and each underwriter participating
in the disposition of such Registrable Securities and their
respective counsel in connection with any filings required to be
made with the National Association of Securities Dealers, Inc.
(the "NASD").
The Company may require USAA to furnish to the Company
such information regarding the distribution of Registrable
Securities as the Company may from time to time reasonably
request in writing.
USAA agrees by acquisition of such Registrable
Securities that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 4(l)
hereof, USAA will forthwith discontinue disposition of
Registrable Securities until USAA's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 4(l)
hereof, or until it is advised in writing (the "Advice") by the
Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings which
are incorporated by reference in the Prospectus, and, if so
directed by the Company, USAA will deliver to the Company (at the
Company's expense), all copies, other than permanent file copies
then in USAA's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such
notice. In the event the Company shall give any such notice, the
time periods regarding the effectiveness of Registration
Statements set forth in Section 2 hereof and Section 4(b) hereof
shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to
Section 4(c)(6) hereof to the date when USAA shall receive copies
of the supplemented or amended prospectus contemplated by Section
4(l) hereof or the Advice.
5. Registration Expenses. All expenses incident to the
Company's performance of or compliance with this Agreement,
including without limitation: all registration and filing fees;
fees with respect to filings required to be made with the NASD;
fees and expenses of compliance with securities or blue sky laws
(including fees and disbursements of counsel for the underwriters
or USAA in connection with blue sky qualifications of the
Registrable Securities and determination of their eligibility for
investment under the laws of such jurisdictions as the managing
underwriters or USAA may designate); printing expenses,
messenger, telephone and delivery expenses; fees and
disbursements of counsel for the Company and fees and expenses
for independent certified public accountants retained by the
Company (including the expenses of any comfort letters or costs
associated with the delivery by independent certified public
accountants of a comfort letter or comfort letters requested
pursuant to Section 4(n) hereof); securities acts liability
insurance, if the Company so desires; all internal expenses of
the Company (including, without limitation, all salaries and
expenses of its officers and employees performing legal or
accounting duties); the expense of any annual audit; the fees and
expenses incurred in connection with the listing of the
securities to be registered on each securities exchange on which
similar securities issued by the Company are then listed; and the
fees and expenses of any Person, including special experts,
retained by the Company (all such expenses being herein called
"Registration Expenses") will be borne by the Company regardless
of whether the Registration Statement becomes effective. The
Company shall not have any obligation to pay any underwriting
fees, discounts, or commissions attributable to the sale of
Registrable Securities, or any legal fees and expenses of counsel
to USAA.
6. Indemnification; Contribution.
( ) Indemnification by Company. The Company agrees to
indemnify and hold harmless USAA and its partners, and their
respective partners, officers, directors, employees and agents,
and each Person who controls such Person (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange
Act) against all losses, claims, damages, liabilities and
expenses arising out of or based upon any untrue or alleged
untrue statement of a material fact contained in any Registration
Statement, Prospectus or preliminary prospectus or any omission
or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained
in any information furnished in writing to the Company by USAA
expressly for use therein. The Company will also indemnify
underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the
distribution, their officers and trust managers and each Person
who controls such Persons (within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act) to the same
extent as provided above with respect to the indemnification of
USAA, if requested.
(a) Indemnification by Holder of Registrable Securities.
USAA agrees to indemnify and hold harmless the Company and its
trust managers, officers, employees and agents, and each Person
who controls the Company (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) against any
losses, claims, damages, liabilities and expenses resulting from
any untrue statement of a material fact or any omission of a
material fact required to be stated in the Registration Statement
or Prospectus or preliminary prospectus or necessary to make the
statements therein not misleading, to the extent, but only to the
extent, that such untrue statement or omission is contained in
any information or affidavit so furnished in writing by USAA to
the Company specifically for inclusion in such Registration
Statement or Prospectus. In no event shall the liability of USAA
hereunder be greater in amount than the dollar amount of the
proceeds received by USAA upon the sale of the Registrable
Securities giving rise to such indemnification obligation. The
Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the
distribution, to the same extent as provided above with respect
to information so furnished in writing by such Persons
specifically for inclusion in any Prospectus or Registration
Statement.
(b) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder will (i) give prompt notice
to the indemnifying party of any claim with respect to which it
seeks indemnification and (ii) permit such indemnifying party to
assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, however that any
Person entitled to indemnification hereunder shall have the right
to employ separate counsel and to participate in the defense of
such claim, but the fees and expenses of such counsel shall be at
the expense of such Person unless (a) the indemnifying party has
agreed to pay such fees or expenses, (b) the indemnifying party
shall have failed to assume the defense of such claim and employ
counsel reasonably satisfactory to such Person or (c) based upon
written advice of counsel to such Person, there shall be one or
more defenses available to such Person that are not available to
the indemnifying party or there shall exist conflicts of interest
pursuant to applicable rules of professional conduct between such
Person and the indemnifying party (in which case, if the Person
notifies the indemnifying party in writing that such Person
elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the
right to assume the defense of such claim on behalf of such
Person), in each of which events the fees and expenses of such
counsel shall be at the expense of the indemnifying party. The
indemnifying party will not be subject to any liability for any
settlement made without its consent (but such consent will not be
unreasonably withheld), but if settled with its written consent,
or if there be a final judgment for the plaintiff in any such
action or proceeding, the indemnifying party shall indemnify and
hold harmless the indemnified parties from and against any loss
or liability (to the extent stated above) by reason of such
settlement or judgment. No indemnified party will be required to
consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of
a release from all liability in respect to such claim or
litigation.
(c) Contribution. If for any reason the indemnification
provided for in the preceding clauses (a) and (b) is unavailable
to an indemnified party or insufficient to hold it harmless as
contemplated by the preceding clauses (a) and (b), then the
indemnifying party shall contribute to the amount paid or payable
by the indemnified party as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect not
only the relative benefits received by the indemnified party and
the indemnifying party, but also the relative fault of the
indemnified party and the indemnifying party, as well as any
other relevant equitable considerations, provided, that USAA
shall not be required to contribute an amount greater than the
dollar amount of the proceeds received by USAA with respect to
the sale of the Registrable Securities giving rise to such
indemnification obligation. The relative fault of the Company on
the one hand and of USAA on the other shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied
by such party, and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such
statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 10(f) of the
Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentations.
7. Rule 144. The Company hereby agrees that it will
file the reports required to be filed by it under the Securities
Act and the Exchange Act and the rules and regulations adopted by
the SEC thereunder (or, if the Company is not required to file
such reports, it will, upon the request of USAA, make publicly
available other information so long as necessary to permit sales
pursuant to Rule 144 under the Securities Act), and it will take
such further action as USAA may reasonably request, all to the
extent required from time to time to enable USAA to sell
Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule
144 under the Securities Act, as such Rule may be amended from
time to time, or (b) any similar rule or regulation hereafter
adopted by the SEC. Upon the request of USAA, the Company will
deliver to USAA a written statement as to whether it has complied
with such information and requirements.
8. Participation in Underwritten Registrations.
( ) If any of the Registrable Securities covered by the
Shelf Registration are to be sold in an Underwritten Offering,
the investment banker or investment bankers and manager or
managers that will administer the offering will be selected by
USAA; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company.
(a) No Person may participate in any Underwritten
Registration hereunder unless such Person (i) agrees to sell such
Person's securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to
approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such
underwriting arrangements. Nothing in this Section 8 shall be
construed to create any additional rights regarding the
registration of Registrable Securities in any Person otherwise
than as set forth herein.
9. Miscellaneous.
( ) Remedies. Each party hereto, in addition to being
entitled to exercise all rights provided herein or granted by
law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement to the extent
available under applicable law. Each party hereto agrees that
monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by it of the provisions of this
Agreement and hereby agrees to waive the defense in any action
for specific performance that a remedy at law would be adequate.
(a) Additional Registration Rights. The Company will not
on or after the date of this Agreement, enter into any agreement
granting registration rights to any other Person with respect to
the securities of the Company that are not junior or subordinate
to the rights granted to USAA hereunder without the written
consent of USAA. The Company has not previously entered into any
agreement with respect to its securities granting any
registration rights to any Person.
(b) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given without
the written consent of the Company and USAA.
(c) Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telecopier, or air
courier guaranteeing overnight delivery:
( ) if to USAA, at the most current address given by USAA
to the Company in accordance with the provisions of this
subsection, which address initially is 8000 Robert F. McDermott
Freeway, IH-10, Suite 600, San Antonio, Texas 78230-3884,
Attention: David Holmes.
(i) if to the Company, initially at 6220 Beltline Road,
Suite 205, Irving, Texas 75063-2656, Attention: Charles W.
Wolcott, President and Chief Executive Officer, and thereafter at
such other address as may be designated from time to time by
notice given in accordance with the provisions of this Section
9(d).
(d) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors and assigns of
each of the parties, including without limitation and without the
need for an express assignment, subsequent holders of Registrable
Securities, it being understood that the registration rights
granted to USAA hereunder shall also be for the benefit of, and
enforceable by, the single first transferee of 100% of USAA's
remaining registrable securities and, provided further, that the
Company cannot assign its rights hereunder except pursuant to a
merger.
(e) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be
deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(f) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(g) Governing Law. THIS AGREEMENT, AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO, SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL
SUBSTANTIVE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICTS OF LAWS.
(h) Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in
any circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(i) Entire Agreement. This Agreement is intended by the
parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject
matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to
such subject matter.
In any proceeding brought to enforce any provision of
this Agreement the successful party shall be entitled to recover
reasonable attorneys' fees in addition to its costs and expenses
and any other available remedy.
IN WITNESS WHEREOF, the parties hereto have executed this
Registration Rights Agreement as of the date first written above.
"COMPANY"
AMERICAN INDUSTRIAL PROPERTIES REIT
By:
Charles W. Wolcott
President and Chief Executive Officer
USAA REAL ESTATE COMPANY
By:
T. Patrick Duncan
Senior Vice President - Operations
