<PAGE> 1
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): June 30, 1997
----------------------
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 Identification
of Incorporation) Number) Number)
6210 NORTH BELTLINE, SUITE 170, IRVING, TEXAS 75063
(Address of principal executive offices) (zip code)
(972) 756-6000
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 5. OTHER EVENTS
On June 30, 1997, the Trust held its Annual Meeting of Shareholders
for 1995. Results of the items voted on are as follows:
1. Authorization of additional 490,000,000 Shares of Beneficial Interest
For Against Abstain
6,981,043 1,100,958 82,758
2. Adoption of Third Amended and Restated Declaration of Trust
For Against Abstain
7,109,419 949,729 105,611
3. Authorization of 50,000,000 Preferred Shares
For Against Abstain
6,736,036 1,317,008 111,715
4. Elimination of Cumulative Voting
For Against Abstain
6,801,305 1,236,479 126,974
5. Conversion of Debt by USAA Real Estate Company
For Against Abstain
7,206,715 867,272 90,772
6. Conversion of Debt by MS Real Estate Special Situations Inc.
For Against Abstain
7,193,272 867,532 103,955
7. Issuance of $15,000,000 Additional Convertible Debt
For Against Abstain
6,915,641 1,142,203 106,915
8. Employee and Trust Manager Incentive Share Plan
For Against Abstain
6,751,846 1,281,834 131,080
9. Election of Five Trust Managers
<TABLE>
<CAPTION>
Withhold Withhold
For All Authority All Authority
Nominees All Nominees Individual
<S> <C> <C> <C>
William H. Bricker 9,215,881 338,965 68,779
T. Patrick Duncan 9,256,995 338,965 27,665
Robert E. Giles 9,240,266 338,965 44,394
Edward B. Kelley 9,257,670 338,965 26,990
Charles W. Wolcott 9,208,841 338,965 75,819
</TABLE>
10. Ratification of Ernst & Young as Independent Auditors
For Against Abstain
9,479,693 90,315 53,219
11. Postponement or Adjournment of Annual Meeting
For Against Abstain
8,367,838 1,133,297 122,089
All of the preceding proposals were approved by the shareholders of
the Trust.
2
<PAGE> 3
ITEM 5. OTHER EVENTS
On July 7, 1997, the Trust signed definitive merger agreements with
USAA Real Estate Income Investments I, A California Limited Partnership, USAA
Real Estate Income Investments II Limited Partnership, USAA Income Properties
III Limited Partnership, and USAA Income Properties IV Limited Partnership
(collectively, the "RELPs") pursuant to which the RELPs will be merged into the
Trust (the "Merger"). As a result of the Merger, the Trust will acquire nine
real estate properties consisting of three office buildings totaling 550,000
square feet, two industrial properties totaling 320,000 square feet, three
office/research and development properties totaling 156,000 square feet, and
one retail property totaling 77,000 square feet. In addition, the Trust will
acquire a 55.84% joint venture interest in a 291,000 square foot office
property. The agreed value of the interests in these properties, including
assumption of $31,704,000 in related debt, is $89,622,000.
Pursuant to the terms of the agreements, the Trust will issue an
aggregate of 22,064,147 shares of beneficial interest at $2.625 per share (for
a total value of $57,918,385) in exchange for the limited partnership interests
in the RELPs. The number of Shares to be issued to each RELP will be equal to
the net asset value for each RELP (as agreed by the Trust and each RELP)
divided by $2.625. The number of Shares to be received by a limited partner in
each RELP will be computed in accordance with such partner's percentage
interest in the RELP. The general partner of each RELP has waived any right it
may have to receive Shares in exchange for its general partnership interest.
The Merger, which has been approved by the Trust's Board of Trust
Managers and the Board of Directors of each of the general partners of the
RELPs, is subject to due diligence by both parties and certain other
conditions, including approval by the shareholders of the Trust and the limited
partners of each of the RELPs. The Merger is a taxable transaction to the
partners in the RELPs and will be subject to the completion of a joint proxy
statement/prospectus filed on Form S-4 with the Securities and Exchange
Commission. No date has been scheduled for the shareholder meeting for the
Trust and the joint limited partner meetings for the RELPs to vote on the
proposed transaction. Prudential Securities Inc., on behalf of the Trust, and
Houlihan Lokey Howard & Zukin, on behalf of the RELPs, have rendered opinions
to their respective parties that the transaction is fair from a financial point
of view.
ITEM 5. OTHER EVENTS
Pursuant to a previously announced agreement and approval by the
shareholders at the Trust's annual meeting held on June 30, 1997, the Trust
sold approximately $12,687,000 of Shares at $2.45 per Share to an investment
group headed by Morgan Stanley Asset Management Inc. ("MSAM"). The agreement
with MSAM allows the investment group to purchase up to $20,000,000 in Shares
at the price of $2.45 per Share. On July 17, 1997, the investment group
acquired an additional $4,873,000 in Shares and it will acquire the balance
after the Trust places additional equity.
3
<PAGE> 4
Also in accordance with approval by the shareholders at the Trust's
annual meeting held on June 30, 1997, the Trust sold $15,000,000 of Shares at
$2.45 per Share on July 10, 1997 to ABKB/LaSalle Securities Limited and LaSalle
Advisors Limited Partnership on behalf of certain of their clients
(collectively, "ABKB").
The Trust will use the proceeds from these transactions to acquire
additional industrial properties.
ITEM 5. OTHER EVENTS
As provided in the agreements with MSAM and ABKB, the Board of Trust
Managers has amended the Bylaws of the Trust to increase the number of Trust
Managers from five to eight and has appointed Russell C. Platt and Theodore R.
Bigman from MSAM and Stanley J. Kraska, Jr. from ABKB to fill the vacancies
created by the increase in the number of Trust Managers.
4
<PAGE> 5
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(C) EXHIBITS
10.1 Agreement and Plan of Merger by and between the Trust and
USAA Real Estate Investments I, A California Limited
Partnership dated as of June 30, 1997
10.2 Agreement and Plan of Merger by and between the Trust and
USAA Real Estate Investments II Limited Partnership dated as
of June 30, 1997
10.3 Agreement and Plan of Merger by and between the Trust and
USAA Income Properties III Limited Partnership dated as of
June 30, 1997
10.4 Agreement and Plan of Merger by and between the Trust and
USAA Income Properties IV Limited Partnership dated as of
June 30, 1997
10.5 Common Share Purchase Agreement dated as of June 20,
1997, by and among the Trust, MS Real Estate Special
Situations, Inc. ("MSRE") and Morgan Stanley Asset Management
Inc.("MSAM") as agent and attorney-in-fact for specified
clients (the "MSAM Purchasers")
10.6 Registration Rights Agreement dated as of June 20,
1997, by and among the Trust, MSRE and MSAM on behalf of the
MSAM Purchasers
10.7 Common Share Purchase Agreement dated as of July 3,
1997, by and between the Trust and ABKB/LaSalle Securities
Limited Partnership as agent for and for the benefit of a
certain client.
10.8 Common Share Purchase Agreement dated as of July 3,
1997, by and between the Trust and ABKB/LaSalle Securities
Limited Partnership as agent for and for the benefit of a
certain client.
10.9 Common Share Purchase Agreement dated as of July 3,
1997, by and between the Trust and LaSalle Advisors Limited
Partnership as agent for and for the benefit of a certain
client.
10.10 Registration Rights Agreement dated as of July 10,
1997, by and among the Trust, ABKB/LaSalle Securities
Limited Partnership as agent for and for the benefit of
certain clients, and LaSalle Advisors Limited Partnership as
agent for and for the benefit of a certain client.
99.1 Final Report of Inspectors of Election
5
<PAGE> 6
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: July 22, 1997
6
<PAGE> 7
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
No Description Pages
- -------- ----------- -----
<S> <C>
10.1 Agreement and Plan of Merger by and between the Trust and USAA
Real Estate Investments I, A California Limited Partnership
dated as of June 30, 1997
10.2 Agreement and Plan of Merger by and between the Trust and USAA
Real Estate Investments II Limited Partnership dated as of
June 30, 1997
10.3 Agreement and Plan of Merger by and between the Trust and
USAA Income Properties III Limited Partnership dated as of
June 30, 1997
10.4 Agreement and Plan of Merger by and between the Trust and
USAA Income Properties IV Limited Partnership dated as of
June 30, 1997
10.5 Common Share Purchase Agreement dated as of June 20, 1997, by
and among the Trust, MS Real Estate Special Situations,
Inc. ("MSRE") and Morgan Stanley Asset Management, Inc.
("MSAM") as agent and attorney-in-fact for specified clients
(the "MSAM Purchasers")
10.6 Registration Rights Agreement dated as of June 20, 1997, by
and among the Trust, MSRE and MSAM on behalf of the MSAM
Purchasers
10.7 Common Share Purchase Agreement dated as of July 3, 1997, by
and between the Trust and ABKB/LaSalle Securities Limited
Partnership as agent for and for the benefit of a certain
client
10.8 Common Share Purchase Agreement dated as of July 3, 1997, by
and between the Trust and ABKB/LaSalle Securities Limited
Partnership as agent for and for the benefit of a certain
client
10.9 Common Share Purchase Agreement dated as of July 3, 1997, by
and between the Trust and LaSalle Advisors Limited Partnership
as agent for and for the benefit of a certain client.
10.10 Registration Rights Agreement dated as of July 10, 1997, by
and between the Trust, ABKB/LaSalle Securities Limited
Partnership as agent for and for the benefit of certain
clients and LaSalle Securities Limited Partnership as agent for
and for the benefit of a certain client.
99.1 Final Report of Inspectors of Election
</TABLE>
7
<PAGE> 1
EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June
30, 1997, is entered into by and between American Industrial Properties REIT, a
Texas real estate investment trust ("AIP") , and USAA Real Estate Income
Investments I, A California Limited Partnership, a California limited
partnership ("RELP"). USAA Real Estate Company, a Delaware corporation
("Realco"), is a party to this Agreement solely for the purpose of binding
itself to the provisions of Section 7.10 hereunder.
RECITALS
A. The Board of Trust Managers of AIP (the "Board of Trust
Managers") and the general partner of RELP have each determined that a business
combination between AIP and RELP is in the best interests of their shareholders
and partners, respectively, and presents an opportunity for their respective
businesses to achieve strategic and financial benefits, and accordingly have
agreed to effect a merger subject to the terms and conditions set forth herein.
B. AIP and RELP desire to make certain representations, warranties
and agreements in connection with the merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, AIP and
RELP hereby agree as follows:
ARTICLE I. THE MERGER
1.1. The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.3), RELP shall be
merged with and into AIP in accordance with this Agreement and the Plan of
Merger (the "Plan of Merger") in substantially the form attached hereto as
Exhibit A, with such completions, additions and substitutions conforming to the
terms of this Agreement as the parties shall approve, such approval to be
conclusively evidenced by their causing the Plan of Merger containing such
completions, additions or substitutions to be filed in accordance with
applicable laws; and the separate existence of RELP shall thereupon cease (the
"Merger"). AIP shall be the surviving entity in the Merger (sometimes
hereinafter referred to as the "Survivor"). The Merger shall have the effects
specified in Section 23.60 of the Texas Real Estate Investment Trust Act, as
amended (the "Texas REIT Act") and Section 15678.6 of the California Revised
Limited Partnership Act (the "LP Act").
1.2. The Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place at the
offices of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P. ("Liddell, Sapp"),
located at 2200 Ross Avenue, Suite 900, Dallas, Texas at 10:00 a.m., local
time, within five business days after receipt of approval of the Merger by
AIP's shareholders and RELP's partners, or at such other time, date or place as
AIP and RELP may agree. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
<PAGE> 2
1.3. Effective Time. If all the conditions to the Merger set forth in
Article VIII shall have been fulfilled or waived (and this Agreement shall not
have been terminated as provided in Article IX), AIP and RELP shall cause
Articles of Merger satisfying the requirements of the Texas REIT Act and
Articles of Merger satisfying the requirements of the LP Act to be properly
executed, verified and delivered for filing in accordance with the LP Act and
the Texas REIT Act on the Closing Date. The Merger shall become effective for
accounting and all other purposes to the fullest extent permitted by law as of
the close of business on December 31, 1997 (the "Effective Time") or such other
date as may be agreed to by the parties. For state law purposes, the Merger
shall become effective upon the issuance of a certificate of merger by the
Secretary of State of the State of California in accordance with the LP Act or
at such later time which AIP and RELP shall have agreed upon and designated in
such filings in accordance with applicable law.
ARTICLE II. DECLARATION OF TRUST
AND BYLAWS OF THE SURVIVOR
2.1. Declaration of Trust. The Declaration of Trust of AIP in effect
immediately prior to the Effective Time shall be the Declaration of Trust of
the Survivor until duly amended in accordance with applicable law.
2.2. Bylaws. The Bylaws of AIP in effect immediately prior to the
Effective Time shall be the Bylaws of the Survivor until duly amended in
accordance with applicable law.
ARTICLE III. TRUST MANAGERS AND OFFICERS OF AIP
3.1. Trust Managers. The Trust Managers of AIP immediately prior to
the Effective Time shall be the Trust Managers of AIP as of the Effective Time.
3.2. Officers. The officers of AIP immediately prior to the
Effective Time shall be the officers of AIP as of the Effective Time.
ARTICLE IV. RELP PARTNERSHIP INTERESTS
4.1. Conversion of the RELP Partnership Interest. (a) At the
Effective Time, each Common Share of Beneficial Interest of AIP outstanding
immediately prior to the Effective Time shall remain outstanding and shall
represent one Common Share of Beneficial Interest of AIP.
(b) At the Effective Time, the general and limited partnership
interests of RELP (each a "RELP Interest"), issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of holder thereof, be converted into the right
to receive Common Shares of Beneficial Interest, $0.10 par value per share (the
"AIP Common Shares"), of AIP. The aggregate number of AIP Common Shares to be
issued to the RELP partners in connection with the Merger shall be equal to
$11,400,000 (the "Purchase Price") divided by the Share Price (the "Total
Shares"). If RELP repays any mortgage indebtedness existing on the date hereof
during the period from the date hereof to and including the Closing Date, the
Purchase Price shall be appropriately adjusted. The term "Share Price" shall
mean $2.625. The number of AIP
<PAGE> 3
Common Shares to be received by a partner shall be equal to the Total Shares
multiplied by such partner's percentage interest in RELP plus each limited
partner's pro rata portion of the general partnership interest of the RELP's
general partner.
(c) As a result of the Merger and without any action on the part of
the holder thereof, at the Effective Time, all RELP Interests shall cease to
be outstanding and shall be canceled and retired, and each holder of a RELP
Interest shall thereafter cease to have any rights with respect to such RELP
Interest, except the right to receive, without interest, the AIP Common Shares
and cash for fractional shares of AIP Common Shares in accordance with Sections
4.1(b) and 4.2(e).
4.2. Exchange of RELP Interests. (a) As of the Effective Time, AIP
shall deposit, or shall cause to be deposited, with an exchange agent selected
by AIP, which shall be AIP's Transfer Agent or such other party reasonably
satisfactory to RELP (the "Exchange Agent"), for the benefit of the holders of
RELP Interests, for exchange in accordance with this Article IV, certificates
representing the Total Shares and the cash in lieu of fractional shares (such
cash and certificates for the Total Shares together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund") to be issued pursuant to Section 4.1 and paid pursuant to this
Section 4.2 in exchange for outstanding RELP Interests.
(b) Promptly after the Effective Time, AIP shall cause the Exchange
Agent to mail to each holder of record of a RELP Interest (x) a certificate
representing the number of whole shares of AIP Common Shares and (y) a check
representing the amount of cash in lieu of fractional shares, if any, and
unpaid dividends and distributions, if any, which such holder has the right to
receive in respect of the RELP Interest surrendered pursuant to the provisions
of this Article IV, after giving effect to any required withholding tax. No
interest will be paid or accrued on the cash in lieu of fractional shares and
unpaid dividends and distributions, if any, payable to holders of RELP
Interests. In the event of a transfer of ownership of RELP Interests which is
not registered in the transfer records of RELP, a certificate representing the
proper number of AIP Common Shares, together with a check for the cash to be
paid in lieu of fractional shares, may be issued to such a transferee if such
holder presents to the Exchange Agent, all documents required to evidence and
effect such transfer and to evidence that any applicable transfer taxes have
been paid.
(c) At and after the Effective Time, there shall be no transfers on
the transfer books of RELP of RELP Interests which were outstanding immediately
prior to the Effective Time.
(d) No fractional AIP Common Shares shall be issued pursuant hereto.
In lieu of the issuance of any fractional AIP Common Shares pursuant to Section
4.1(b), cash adjustments will be paid to holders in respect of any fractional
AIP Common Shares that would otherwise be issuable, and the amount of such cash
adjustment shall be equal to such fractional proportion of the Share Price.
(e) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any AIP Common Shares) that remains unclaimed by the
former partners of RELP one year after the Effective Time shall be delivered to
AIP. Any former partners of RELP who have not theretofore complied with this
Article IV shall thereafter look only to AIP for delivery of their AIP Common
<PAGE> 4
Shares, and payment of cash in lieu of fractional shares and unpaid dividends
and distributions on the AIP Common Shares deliverable in respect of each RELP
Interest such partners hold as determined pursuant to this Agreement, in each
case, without any interest thereon.
(f) None of AIP, RELP, the Exchange Agent or any other person shall
be liable to any former holder of RELP Interests for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF RELP
RELP represents and warrants to AIP as set forth below. As contemplated
below, a "RELP Disclosure Letter" will be delivered to AIP on or before August
11, 1997. The RELP Disclosure Letter shall provide the information or
exceptions described below and shall list all of the assets of the RELP that
will not be transferred in connection with the Merger. The RELP Disclosure
Letter shall be amended prior to Closing to cause such representations and
warranties to be materially true and correct on the Closing Date, but RELP
shall remain liable for any material breach of such representations and
warranties reflected in such amendment only as provided in Section 9.5(d),
below.
5.1. Existence; Good Standing; Authority; Compliance with Law. (a)
RELP is a limited partnership, duly formed, validly existing and in good
standing under the laws of the State of California. To its actual knowledge,
RELP is duly licensed or qualified to do business as a foreign limited
partnership and is in good standing under the laws of any other state of the
United States in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified would not have a
material adverse effect on the business, results of operations or financial
condition of RELP (a "RELP Material Adverse Effect"). RELP has all requisite
power and authority to own, operate, lease and encumber its properties and
carry on its business as now conducted.
(b) To the RELP's actual knowledge, it is not in violation of any
order of any court, governmental authority or arbitration board or tribunal, or
any law, ordinance, governmental rule or regulation to which RELP or any of its
properties or assets is subject, where such violation would have a RELP
Material Adverse Effect. RELP has obtained all licenses, permits and other
authorizations and has taken all actions required by applicable law or
governmental regulations in connection with its business as now conducted,
where the failure to obtain any such item or to take any such action would have
a RELP Material Adverse Effect. A copy of RELP's Agreement of Limited
Partnership and Certificate of Limited Partnership (collectively, the "RELP
Organizational Documents") have been delivered or made available to AIP and its
counsel and such documents will be listed in the RELP Disclosure Letter and
were or will be true and correct when delivered or made available.
5.2. Authorization, Validity and Effect of Agreements. RELP has the
requisite power and authority to enter into the transactions contemplated
hereby and to execute and deliver this Agreement and all other documents,
agreements and instruments related to the transactions
<PAGE> 5
contemplated by this Agreement (the "RELP Ancillary Agreements"). Subject only
to the approval of this Agreement and the transactions contemplated hereby in
accordance with the Agreement of Limited Partnership of the RELP, the
consummation by RELP of this Agreement, the RELP Ancillary Agreements and the
transactions contemplated hereby have been duly authorized by all requisite
action on the part of RELP. In reliance upon the legal opinion described in
Section 8.2(e), RELP believes this Agreement constitutes, and the RELP
Ancillary Agreements (when executed and delivered pursuant hereto for value
received) will constitute, the valid and legally binding obligations of RELP,
enforceable against RELP in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity (collectively, "Equitable
Remedies").
5.3. Future Issuances. To RELP's actual knowledge, there are not at
the date of this Agreement any existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate RELP to issue, transfer or sell any RELP Interests.
After the Effective Time, AIP will have no obligation to issue, transfer or
sell any RELP Interest.
5.4. Other Interests. Except as set forth in the RELP Disclosure
Letter, RELP does not own directly or indirectly any interest or investment
(whether equity or debt) in any corporation, partnership, joint venture,
business, trust or entity (other than investments in short-term investment
securities).
5.5. No Violation. To RELP's actual knowledge, neither the execution
and delivery by RELP of this Agreement nor the consummation by RELP of the
transactions contemplated hereby in accordance with the terms hereof, will: (i)
conflict with or result in a breach of any provisions of the Agreement of
Limited Partnership of RELP; (ii) except as contemplated by the RELP Ancillary
Agreements or as will be set forth in the RELP Disclosure Letter, violate, or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties of RELP under, or result in being declared void,
voidable or without further binding effect, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust or any
license, franchise, permit, lease, contract, agreement or other instrument,
commitment or obligation to which RELP is a party, or by which RELP or any of
its properties is bound or affected, except for any of the foregoing matters
which, individually or in the aggregate, would not have a RELP Material Adverse
Effect; or (iii) other than the filings provided for in Article I, any filings
required under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Securities Act or applicable state securities and "Blue Sky" laws
(collectively, the "Regulatory Filings"), require any consent, approval or
authorization of, or declaration, filing or registration with, any domestic
governmental or regulatory authority, except where the failure to obtain any
such consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority would not have an
RELP Material Adverse Effect.
5.6. SEC Documents. (a) RELP has made available or will make
available to AIP prior to July 31, 1997, each registration statement, report,
proxy statement or information statement and
<PAGE> 6
all exhibits thereto prepared by it or relating to its properties (including
registration statements covering mortgage pass-through certificates) since
January 1, 1994, each in the form (including exhibits and any amendments
thereto) filed with the SEC (collectively, the "RELP Reports"). The RELP
Reports, which were or will be filed with the SEC in a timely manner,
constitute all forms, reports and documents required to be filed by RELP under
the Securities Act of 1933, as amended (the "Securities Act"), the Exchange Act
and the rules and regulations promulgated thereunder (collectively the
"Securities Laws") for the periods stated above.
(b) To the RELP's actual knowledge, as of their respective dates, the
RELP Reports (i) complied as to form in all material respects with the
applicable requirements of the Securities Laws and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. To the
RELP's actual knowledge, each of the balance sheets of RELP included in or
incorporated by reference into the RELP Reports (including the related notes
and schedules) fairly presents the financial position of RELP as of its date
and each of the consolidated statements of income, retained earnings and cash
flows of RELP included in or incorporated by reference into the RELP Reports
(including any related notes and schedules) fairly presents the results of
operations, retained earnings and cash flows, as the case may be, of RELP for
the periods set forth therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments which would not be material in amount or
effect), in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as may be
noted therein and except, in the case of the unaudited statements, as permitted
by the Securities Laws.
(c) Except as and to the extent set forth on the balance sheet of
RELP at March 31, 1997, including all notes thereto, or as set forth in the
RELP Reports, RELP has no material liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on, or reserved against in, a balance sheet of RELP or in the
notes thereto, prepared in accordance with generally accepted accounting
principles consistently applied, except liabilities arising in the ordinary
course of business since such date which would not have a RELP Material Adverse
Effect.
5.7. Litigation. To the RELP's actual knowledge, there are (i) no
continuing orders, injunctions or decrees of any court, arbitrator or
governmental authority to which RELP is a party or by which any of its
properties or assets are bound or to which USAA Investors I, Inc. (the "General
Partner") or the General Partner's, directors, officers, or affiliates is a
party or by which any of their properties or assets are bound, and (ii) except
as will be set forth in the RELP Disclosure Letter, no actions, suits or
proceedings pending against RELP or against the General Partner or the General
Partner's directors, officers or affiliates or, to the knowledge of the General
Partner, threatened against RELP or against the General Partner or the General
Partner's directors, officers or affiliates, at law or in equity, or before
or by any federal or state commission, board, bureau, agency or
instrumentality, that in the case of clauses (i) or (ii) above are reasonably
likely, individually or in the aggregate, to have a RELP Material Adverse
Effect.
<PAGE> 7
5.8. Absence of Certain Changes. Except as disclosed in the RELP
Reports filed prior to the date hereof, since March 31, 1997, (i) RELP
conducted its business only in the ordinary course of such business (which for
purposes of this section only, shall include all acquisitions of real estate
properties and financing arrangements made in connection therewith or otherwise
will be set forth in the RELP Disclosure Letter); (ii) there has not been any
RELP Material Adverse Effect; (iii) there has not been any distribution,
setting aside or payment of any distribution with respect to any RELP Interest,
and (iv) there has not been any material change in RELP's accounting
principles, practices or methods.
5.9. Taxes. (a) Except as may be set forth in the RELP Disclosure
Letter, RELP (i) has timely filed all federal, state and foreign tax returns
including, without limitation, information returns and reports required to be
filed by it for tax periods ended prior to the date of this Agreement or
requests for extensions have been timely filed and any such request has been
granted and has not expired and all such returns are accurate and complete in
all material respects, (ii) has paid or accrued all taxes shown to be due and
payable on such returns or which have become due and payable pursuant to any
assessment, deficiency notice, 30-day letter or other notice received by it and
(iii) has properly accrued all taxes for such periods and periods subsequent to
the periods covered by such returns. RELP has not received notice that the
federal, state and local income and franchise tax returns of RELP has been or
will be examined by any taxing authority. RELP has not executed or filed with
the Internal Revenue Service (the "IRS") or any other taxing authority any
agreement now in effect extending the period for assessment or collection of
any income or other taxes.
(b) Except as may be set forth in the RELP Disclosure Letter, RELP is
not a party to any pending action or proceeding by any governmental authority
for assessment or collection of taxes, and no claim for assessment or
collection of taxes has been asserted against it. True, correct and complete
copies of all federal, state and local income or franchise tax returns filed by
RELP since January 1, 1991 and all communications relating thereto have been
delivered to AIP or made available to representatives of AIP or will be so
delivered or made available prior to July 31, 1997. RELP does not hold any
asset (i) the disposition of which could be subject to rules similar to Section
1374 of the Internal Revenue Code of 1986, as amended (the "Code") as a result
of an election under IRS Notice 88-19 or (ii) that is subject to a consent
filed pursuant to Section 341(f) of the Code and regulations thereunder. For
purposes of this Section 5.9, "taxes" includes any interest, penalty or
additional amount payable with respect to any tax.
5.10. Books and Records. The books of account and other financial
records of RELP are in all material respects true, complete and correct, have
been maintained in accordance with good business practices, and are accurately
reflected in all material respects in the financial statements included in the
RELP Reports.
5.11. Properties. (a) RELP owns fee simple title to each of the real
properties reflected on the most recent balance sheet of RELP included in the
RELP Reports or as may be identified in the RELP Disclosure Letter (the "RELP
Properties"), which are all of the real estate properties owned by it, free
and clear of liens, mortgages or deeds of trust, claims against title, charges
which are liens or security interests ("Encumbrances") except as will be noted
in the RELP Disclosure
<PAGE> 8
Letter. To RELP's actual knowledge, the RELP Properties are not subject to any
rights of way, written agreements, laws, ordinances and regulations affecting
building use or occupancy, or reservations of an interest in title
(collectively, "Property Restrictions"), except for (i) Encumbrances and
Property Restrictions that will be set forth in the RELP Disclosure Letter,
(ii) Property Restrictions imposed or promulgated by law or any governmental
body or authority with respect to real property, including zoning regulations,
provided they do not materially adversely affect the current use of the
property, (iii) Encumbrances and Property Restrictions disclosed on existing
title reports or current surveys (in either case copies of which title reports
and surveys have been or will be delivered or made available to AIP July 31,
1997), (iv) mechanics', carriers', workmen's, repairmen's liens and other
Encumbrances, Property Restrictions and other limitations of any kind, if any,
which have heretofore been bonded (and that will be listed in the RELP
Disclosure Letter) or which individually or in the aggregate do not exceed
$100,000, do not materially detract from the value of or materially interfere
with the present use of any of the RELP Properties subject thereto or affected
thereby, and do not otherwise materially impair business operations conducted
by RELP and which have arisen or been incurred only in its construction
activities or in the ordinary course of business.
(b) Valid policies of title insurance have been issued insuring
either (a) RELP's fee simple title to the RELP Properties or (b) first mortgage
liens thereon, subject only to the matters disclosed above and as may be set
forth in the RELP Disclosure Letter, and such policies are, at the date hereof,
in full force and effect and no claim has been made against any such policy. To
RELP's actual knowledge, except as will be set forth in the RELP Disclosure
Letter: (i) there is no certificate, permit or license from any governmental
authority having jurisdiction over any of the RELP Properties or any agreement,
easement or other right which is necessary to permit the lawful use and
operation of the buildings and improvements on any of the RELP Properties or
which is necessary to permit the lawful use and operation of all driveways,
roads and other means of egress and ingress to and from any of the RELP
Properties that has not been obtained and is not in full force and effect, or
of any pending threat of modification or cancellation of any of same; (ii) RELP
has not received written notice of any material violation of any federal, state
or municipal law, ordinance, order, regulation or requirement affecting any
portion of any of the RELP Properties issued by any governmental authority;
(iii) there are no structural defects relating to the RELP Properties and no
RELP Properties whose building systems are not in working order in any material
respect; and (iv) there is (A) no physical damage to any RELP Property in
excess of $100,000 for which there is no insurance in effect covering the cost
of the restoration, (B) no current renovation to any RELP Property the cost of
which exceeds $100,000 and (C) no current restoration (excluding tenant
improvements) of any RELP Property, the cost of which exceeds $100,000.
(c) Except as will be set forth in the RELP Disclosure Letter, RELP
has not received notice to the effect that and there are no (A) condemnation or
rezoning proceedings that are pending or threatened with respect to any of the
RELP Properties or (B) zoning, building or similar laws, codes, ordinances,
orders or regulations that are or will be violated by the continued
maintenance, operation or use of any buildings or other improvements on any of
the RELP Properties or by the continued maintenance, operation or use of the
parking areas. All work to be performed, payments to be made and actions to be
taken by RELP prior to the date hereof pursuant to any agreement entered into
with a governmental body or authority in connection with a site approval,
zoning
<PAGE> 9
reclassification or other similar action relating to the RELP Properties (e.g.,
Local Improvement District, Road Improvement District, Environmental
Mitigation) has been performed, paid or taken, as the case may be, and RELP is
not aware of any planned or proposed work, payments or actions that may be
required after the date hereof pursuant to such agreements, except as will be
set forth in the RELP Disclosure Letter.
5.12. Environmental Matters. To RELP's actual knowledge, RELP has not
caused (i) the unlawful presence of any hazardous substances, hazardous
materials, toxic substances or waste materials (collectively, "Hazardous
Materials") on any of the RELP Properties, or (ii) any unlawful spills,
releases, discharges or disposal of Hazardous Materials to have occurred or be
presently occurring on or from the RELP Properties as a result of any
construction on or operation and use of such properties, which presence or
occurrence would, individually or in the aggregate, have a RELP Material
Adverse Effect; and in connection with the construction on or operation and use
of the RELP Properties, RELP has not failed to comply, in any material respect,
with any applicable local, state and federal environmental laws, regulations,
ordinances and administrative and judicial orders relating to the generation,
recycling, reuse, sale, storage, handling, transport and disposal of any
Hazardous Materials.
5.13. Labor Matters. RELP is not a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor union organization. There is no unfair labor
practice or labor arbitration proceeding pending or, to the knowledge of the
General Partner, threatened against RELP relating to its business, except for
any such proceeding which would not have a RELP Material Adverse Effect. To the
knowledge of the General Partner, there are no organizational efforts with
respect to the formation of a collective bargaining unit presently being made
or threatened involving employees of RELP or any of its Subsidiaries.
5.14. No Brokers. Except the fee that is to be paid to Houlihan Lokey
Howard & Zukin ("Houlihan") by RELP as described in Section 5.15 below, RELP
has not entered into any contract, arrangement or understanding with any person
or firm which may result in the obligation of RELP or AIP to pay any finder's
fees, brokerage or agent's commissions or other like payments in connection
with the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby. RELP is not aware of any claim for payment of
any finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
5.15. Opinion of Financial Advisor. RELP has retained Houlihan to
review the transaction contemplated by this Agreement and to issue an opinion
to the effect that, as of the date of such opinion, the Purchase Price is fair
to the holders of RELP Interests from a financial point of view.
5.16. Related Party Transactions. Except as set forth in the RELP
Disclosure Letter, there are no arrangements, agreements or contracts entered
into by RELP with (i) any consultant, (ii) any person who is an officer,
director or affiliate of RELP or its General Partner, any relative of any of
the foregoing or any entity of which any of the foregoing is an affiliate, or
(iii) any person who acquired RELP Interests in a private placement.
<PAGE> 10
5.17. Contracts and Commitments. The RELP Disclosure Letter will set
forth (i) all unsecured notes or other obligations of RELP which individually
may result in total payments in excess of $100,000, (ii) all notes, debentures,
bonds and other evidence of indebtedness which are secured or collateralized by
mortgages, deeds of trust or other security interests in the RELP Properties or
personal property of RELP, and (iii) each commitment entered into by RELP
which may result in total payments or liability in excess of $100,000. Copies
of the foregoing will be delivered or made available to AIP prior to July 31,
1997, will be listed on the RELP Disclosure Letter and will be materially true
and correct when delivered or made available. RELP has not received any notice
of a default that has not been cured under any of the documents described in
clause (i) above or is in default respecting any payment obligations thereunder
beyond any applicable grace periods. All options of RELP to purchase real
property will be set forth on the RELP Disclosure Letter and such options and
RELP's rights thereunder are in full force and effect. All joint venture
agreements to which RELP is a party will be set forth on the RELP Disclosure
Letter and RELP is not in default with respect to any obligations, which
individually or in the aggregate are material, thereunder.
5.18. Development Rights. Set forth in the RELP Disclosure Letter
will be a list of all material agreements entered into by RELP relating to the
development, rehabilitation, capital improvement or construction of office
buildings, industrial facilities or other real estate properties, which
development or construction has not been substantially completed as of the date
of this Agreement. Such agreements, true and correct copies of all of which
will be delivered or made available to AIP prior to July 31, 1997, will be
listed in the RELP Disclosure Letter, have not been modified and are valid and
binding in accordance with their respective terms.
5.19. Convertible Securities. To RELP's actual knowledge, RELP has no
outstanding options, warrants or other securities exercisable for, or
convertible into, RELP Interests, the terms of which would require any anti-
dilution adjustments by reason of the consummation of the transactions
contemplated hereby.
ARTICLE VI . REPRESENTATIONS AND WARRANTIES OF AIP
AIP represents and warrants to RELP as set forth below. As contemplated
below, an "AIP Disclosure Letter" will be delivered to RELP on or before August
11, 1997. The AIP Disclosure Letter shall provide the information or
exceptions described below. The AIP Disclosure Letter shall be amended prior to
Closing to cause such representations and warranties to be materially true and
correct on the Closing Date, but AIP shall remain liable for any material
breach of such representations and warranties reflected in such amendment only
as provided in Section 9.5(d), below.
6.1. Existence; Good Standing; Authority; Compliance with Law. (a)
AIP is a real estate investment trust duly organized and validly existing
under the laws of the State of Texas. To AIP's actual knowledge, AIP is duly
licensed or qualified to do business and is in good standing under the laws of
any other state of the United States in which the character of the properties
owned or leased by it therein or in which the transaction of its business makes
such qualification necessary, except where the failure to be so qualified would
not have a material adverse effect on the business, results
<PAGE> 11
of operations or financial condition of AIP and its subsidiaries taken as a
whole (an "AIP Material Adverse Effect"). AIP has all requisite power and
authority to own, operate, lease and encumber its properties and carry on its
business as now conducted. Each of AIP's Subsidiaries is a corporation, limited
liability company or partnership duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has the requisite power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business and
is in good standing in each jurisdiction in which the ownership of its property
or the conduct of its business requires such qualification, except for
jurisdictions in which such failure to be so qualified or to be in good
standing would not have an AIP Material Adverse Effect.
(b) To AIP's actual acknowledge, neither AIP nor any AIP Subsidiary
is in violation of any order of any court, governmental authority or
arbitration board or tribunal, or any law, ordinance, governmental rule or
regulation to which AIP or any AIP Subsidiary or any of their respective
properties or assets is subject, where such violation would have an AIP
Material Adverse Effect. AIP and its Subsidiaries have obtained all licenses,
permits and other authorizations and have taken all actions required by
applicable law or governmental regulations in connection with their business as
now conducted, where the failure to obtain any such item or to take any such
action would have an AIP Material Adverse Effect. Copies of AIP's and its
Subsidiaries' Declaration of Trust, Articles of Incorporation, Bylaws,
organizational documents and partnership and joint venture agreements have been
or will be prior to July 31, 1997, delivered or made available to RELP and such
documents will be listed in the AIP Disclosure Letter and were or will be true
and correct when delivered or made available. For the purposes of the
immediately preceding sentence, the term "Subsidiary"shall include the entities
set forth in the AIP Disclosure Letter, which are all of AIP's Subsidiaries.
6.2. Authorization, Validity and Effect of Agreements. AIP has the
requisite power and authority to enter into the transactions contemplated
hereby and to execute and deliver this Agreement and all other documents,
agreements and instruments related to the transactions contemplated by this
Agreement to which it is a party (the "AIP Ancillary Agreements"). Subject only
to the approval of the issuance of AIP Common Shares pursuant to the Merger
contemplated hereby by the holders of two-thirds of the outstanding AIP Common
Shares, present and voting thereon, the consummation by AIP of this Agreement,
the AIP Ancillary Agreements and the transactions contemplated hereby have been
duly authorized by all requisite action on the part of AIP. This Agreement
constitutes, and the AIP Ancillary Agreements (when executed and delivered
pursuant hereto for value received) will constitute, the valid and legally
binding obligations of AIP enforceable against AIP in accordance with their
respective terms, subject to Equitable Remedies.
6.3. Capitalization. On June 15, 1997, the authorized capital stock
of AIP consists of 10,000,000 Common Shares. As of the date hereof, all
10,000,000 Common Shares are outstanding. AIP has no outstanding bonds,
debentures, notes or other obligations (other than to Realco), the holders of
which have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the shareholders of AIP on any
matter. Except as set forth in the AIP Disclosure Letter, all such issued and
outstanding of AIP Common Shares are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights. Except as set forth in the
AIP Disclosure Letter, there are not at the date of this Agreement any existing
options, warrants, calls,
<PAGE> 12
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate AIP or any of its Subsidiaries to issue, transfer or
sell any shares or other equity interest of AIP or any of its Subsidiaries
except under any employee incentive plan approved by AIP's shareholders. There
are no agreements or understandings to which AIP is a party with respect to the
voting of any AIP Common Shares or which restrict the transfer of any such
shares, except in order to protect its REIT status.
6.4. Subsidiaries. Except as set forth in the AIP Disclosure Letter,
AIP owns directly or indirectly each of the outstanding shares of capital stock
or all of the partnership or other equity interests of each of AIP's
Subsidiaries free and clear of all liens, pledges, security interests, claims
or other encumbrances other than liens imposed by local law which are not
material.
6.5. Other Interests. Except as will be disclosed in the AIP
Disclosure Letter and except for interests in the AIP Subsidiaries, neither AIP
nor any AIP Subsidiary owns directly or indirectly any interest or investment
(whether equity or debt) in any corporation, partnership, joint venture,
business, trust or entity (other than investments in short-term investment
securities).
6.6. No Violation. Neither the execution and delivery by AIP of this
Agreement nor the consummation by AIP of the transactions contemplated hereby
in accordance with the terms hereof, will: (i) conflict with or result in a
breach of any provisions of AIP's Declaration of Trust; (ii) violate, or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties of AIP or its Subsidiaries under, or result in being
declared void, voidable or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which AIP or any of its Subsidiaries is
a party, or by which AIP or any of its Subsidiaries or any of their properties
is bound or affected, except for any of the foregoing matters which,
individually or in the aggregate, would not have an AIP Material Adverse
Effect; or (iii) other than the Regulatory Filings require any consent,
approval or authorization of, or declaration, filing or registration with, any
domestic governmental or regulatory authority, except where the failure to
obtain such consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority would not have an
AIP Material Adverse Effect.
6.7. SEC Documents. (a) AIP has made available or will make
available to RELP prior to July 31, 1997, the registration statements of AIP
filed with the SEC in connection with public offerings of AIP securities since
January 1, 1994 and all exhibits, amendments and supplements thereto (the "AIP
Registration Statements"), and each registration statement, report, proxy
statement or information statement and all exhibits thereto prepared by it or
relating to its properties since the effective date of the latest AIP
Registration Statement, each in the form (including exhibits and any amendments
thereto) filed with the SEC (collectively, the "AIP Reports"). The AIP Reports,
which were or will be filed with the SEC in a timely manner, constitute all
forms, reports and documents required to be filed by AIP under the Securities
Laws.
<PAGE> 13
(b) To AIP's actual knowledge, as of their respective dates, the AIP
Reports (i) complied as to form in all material respects with the applicable
requirements of the Securities Laws, and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. To AIP's
actual acknowledge, each of the consolidated balance sheets of AIP included in
or incorporated by reference into the AIP Reports (including the related notes
and schedules) fairly presents the consolidated financial position of AIP and
the AIP Subsidiaries as of its date and each of the consolidated statements of
income, retained earnings and cash flows of AIP included in or incorporated by
reference into the AIP Reports (including any related notes and schedules)
fairly presents the results of operations, retained earnings or cash flows, as
the case may be, of AIP and the AIP Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein and except, in the
case of the unaudited statements, as permitted by the Securities Laws.
(c) Except as and to the extent set forth on the consolidated balance
sheet of AIP and its Subsidiaries at March 31, 1997, including all notes
thereto, or as set forth in the AIP Reports, neither AIP nor any of the AIP
Subsidiaries has any material liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on, or reserved against in, a balance sheet of AIP or in the notes
thereto, prepared in accordance with generally accepted accounting principles
consistently applied, except liabilities arising in the ordinary course of
business since such date which would not have an AIP Material Adverse Effect.
6.8. Litigation. To AIP's actual knowledge, there are (i) no
continuing orders, injunctions or decrees of any court, arbitrator or
governmental authority to which AIP or any AIP Subsidiary is a party or by
which any of its properties or assets are bound or, to which any of its
directors, officers, or affiliates is a party or by which any of their
properties or assets are bound, and (ii) except as will be set forth in the AIP
Disclosure Letter, no actions, suits or proceedings pending against AIP or any
AIP Subsidiary or, to the knowledge of AIP, against any of its Trust Managers,
officers, or affiliates or, to the knowledge of AIP, threatened against AIP or
any AIP Subsidiary or against any of its Trust Managers, officers, or
affiliates, at law or in equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality, that in the case of
clauses (i) or (ii) above are reasonably likely, individually or in the
aggregate, to have an AIP Material Adverse Effect.
6.9. Absence of Certain Changes. Except as disclosed in the AIP
Reports filed with the SEC prior to the date hereof, (i) AIP and its
Subsidiaries have conducted their business only in the ordinary course of such
business (which, for purposes of this section only, shall include all
acquisitions of real estate properties and financing arrangements made in
connection therewith); (ii) there has not been any AIP Material Adverse Effect;
(iii) there has not been any declaration, setting aside or payment of any
dividend or other distribution with respect to the AIP Common Shares; and (iv)
there has not been any material change in AIP's accounting principles,
practices or methods.
<PAGE> 14
6.10. Taxes. (a) Except as may be set forth in the AIP Disclosure
Letter, AIP and each of its Subsidiaries (i) has timely filed all federal,
state and foreign tax returns including, without limitation, information
returns and reports required to be filed by any of them for tax periods ended
prior to the date of this Agreement or requests for extensions have been timely
filed and any such request has been granted and has not expired and all such
returns are absolute and complete in all material respects, (ii) has paid or
accrued all taxes shown to be due and payable on such returns or which have
become due and payable pursuant to any assessment, deficiency notice, 30-day
letter or other notice received by it and (iii) has properly accrued all taxes
for such periods subsequent to the periods covered by such returns. Neither AIP
nor any of its Subsidiaries has received notice that the federal, state and
local income and franchise tax returns of AIP or any such Subsidiary has been
or will be examined by any taxing authority. Neither AIP nor any of its
Subsidiaries has executed or filed with the IRS or any other taxing authority
any agreement now in effect extending the period for assessment or collection
of any income or other taxes.
(b) Except as will be disclosed in the AIP Disclosure Letter, neither
AIP nor any of its Subsidiaries is a party to any pending action or proceeding
by any governmental authority for assessment or collection of taxes, and no
claim for assessment or collection of taxes has been asserted against it. True,
correct and complete copies of all federal, state and local income or franchise
tax returns filed by AIP and each of its Subsidiaries and all communications
relating thereto have been delivered to RELP or made available to
representatives of RELP or will be so delivered or made available prior to July
31, 1997. AIP (i) has qualified to be taxed as a REIT pursuant to Sections 856
through 859 of the Code for its taxable years ended December 31, 1985 through
1996, inclusive (ii) has operated, and intends to continue to operate, in such
a manner as to qualify to be taxed as a REIT pursuant to Sections 856 through
859 of the Code for its taxable year ended on the effective date of the Merger,
and (iii) has not taken or omitted to take any action which could result in,
and each of the executive officers of AIP, each acting in his respective
capacity as such, has no actual knowledge of, a challenge to its status as a
REIT. AIP represents that each of its Subsidiaries is a Qualified REIT
Subsidiary as defined in Section 856 (i) of the Code. Neither AIP nor any of
its Subsidiaries holds any asset (i) the disposition of which could be subject
to rules similar to Section 1374 of the Code as a result of an election under
IRS Notice 88-19 or (ii) that is subject to a consent filed pursuant to Section
341(f) of the Code and regulations thereunder. For purposes of this Section
6.10, "taxes" includes any interest, penalty or additional amount payable with
respect to any tax.
6.11. Books and Records. (a) The books of account and other financial
records of AIP and its Subsidiaries are in all material respects true, complete
and correct, have been maintained in accordance with good business practices,
and are accurately reflected in all material respects in the financial
statements included in the AIP Reports.
(b) The minute books and other records of AIP and its Subsidiaries
contain in all material respects accurate records of all meetings and
accurately reflect in all material respects all other corporate action of the
shareholders and Trust Managers and any committees of the Board of Trust
Managers of AIP and its Subsidiaries.
<PAGE> 15
6.12. Properties. (a) AIP and its Subsidiaries own fee simple title
to each of the real properties reflected on the most recent balance sheet of
AIP included in the AIP Reports or as may be identified in the AIP Disclosure
Letter (the "AIP Properties"), which are all of the real estate properties
owned by them, free and clear of Encumbrances. To AIP's actual knowledge, the
AIP Properties are not subject to any rights of way, written agreements, laws,
ordinances and regulations affecting building use or occupancy, or reservations
of an interest in title (collectively, "Property Restrictions"), except for (i)
Encumbrances and Property Restrictions that will be set forth in the AIP
Disclosure Letter, (ii) Property Restrictions imposed or promulgated by law or
any governmental body or authority with respect to real property, including
zoning regulations, provided they do not materially adversely affect the
current use of the property, (iii) Encumbrances and Property Restrictions
disclosed on existing title reports or surveys (in either case copies of which
title reports and surveys have been or will be delivered or made available to
RELP prior to July 31, 1997), and (iv) mechanics', carriers', workmen's,
repairmen's liens and other Encumbrances, Property Restrictions and other
limitations of any kind, if any, which have heretofore been bonded (and that
will be listed in the AIP Disclosure Letter) or which individually or in the
aggregate, do not exceed $100,000, do not materially detract from the value of
or materially interfere with the present use of any of the AIP Properties
subject thereto or affected thereby, and do not otherwise materially impair
business operations conducted by AIP and its Subsidiaries and which have arisen
or been incurred only in its construction activities or in the ordinary course
of business.
(b) Valid policies of title insurance have been issued insuring AIP's
or any of its Subsidiaries' fee simple title to the AIP Properties, subject
only to the matters disclosed above and as may be set forth in the AIP
Disclosure Letter, and such policies are, at the date hereof, in full force and
effect and no material claim has been made against any such policy. To AIP's
actual knowledge, except as will be set forth in the AIP Disclosure Letter, (i)
there is no certificate, permit or license from any governmental authority
having jurisdiction over any of the AIP Properties or any agreement, easement
or other right which is necessary to permit the lawful use and operation of the
buildings and improvements on any of the AIP Properties or which is necessary
to permit the lawful use and operation of all driveways, roads and other means
of egress and ingress to and from any of the AIP Properties that has not been
obtained and is not in full force and effect, or of any pending threat of
modification or cancellation of any of same; (ii) neither AIP nor its
Subsidiaries has received written notice of any material violation of any
federal, state or municipal law, ordinance, order, regulation or requirement
affecting any portion of any of the AIP Properties issued by any governmental
authority; (iii) there are no structural defects relating to the AIP Properties
and no AIP Properties whose building systems are not in working order in any
material respect; and (iv) there is (A) no physical damage to any AIP Property
in excess of $100,000 for which there is no insurance in effect covering the
cost of the restoration, (B) no current renovation to any AIP Property the cost
of which exceeds $100,000 and (C) no current restoration (excluding tenant
improvements) of any AIP Property the cost of which exceeds $100,000.
(c) Except as will be set forth in the AIP Disclosure Letter, AIP or
its Subsidiaries have received no notice to the effect that and there are no
(A) condemnation or rezoning proceedings that are pending or threatened with
respect to any of the AIP Properties or (B) any zoning, building or similar
laws, codes, ordinances, orders or regulations that are or will be violated by
the continued maintenance, operation or use of any buildings or other
improvements on any of the AIP Properties
<PAGE> 16
or by the continued maintenance, operation or use of the parking areas in any
material respect. All work to be performed, payments to be made and actions to
be taken by AIP or its Subsidiaries prior to the date hereof pursuant to any
agreement entered into with a governmental body or authority in connection with
a site approval, zoning reclassification or other similar action relating to
the AIP Properties (e.g., Local Improvement District, Road Improvement
District, Environmental Mitigation) has been performed, paid or taken, as the
case may be, and AIP is not aware of any planned or proposed work, payments or
actions that may be required after the date hereof pursuant to such agreements,
except as will be set forth in the AIP Disclosure Letter.
6.13. Environmental Matters. To the actual knowledge of AIP, none of
AIP, any of its Subsidiaries or, any other person has caused or permitted (i)
the unlawful presence of any Hazardous Materials on any of the AIP Properties,
or (ii) any unlawful spills, releases, discharges or disposal of Hazardous
Materials to have occurred or be presently occurring on or from the AIP
Properties as a result of any construction on or operation and use of such
properties, which presence or occurrence would, individually or in the
aggregate, have an AIP Material Adverse Effect; and in connection with the
construction on or operation and use of the AIP Properties, AIP and its
Subsidiaries have not failed to comply, in any material respect, with any
applicable local, state and federal environmental laws, regulations, ordinances
and administrative and judicial orders relating to the generation, recycling,
reuse, sale, storage, handling, transport and disposal of any Hazardous
Materials.
6.14. Labor Matters. Neither AIP nor any of its Subsidiaries is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor union organization.
There is no unfair labor practice or labor arbitration proceeding pending or,
to the knowledge of the executive officers of AIP, threatened against AIP or
its Subsidiaries relating to their business, except for any such proceeding
which would not have an AIP Material Adverse Effect. To the knowledge of AIP,
there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of AIP or any of its Subsidiaries.
6.15. No Brokers. Except for the fee payable to Prudential Securities
Incorporated ("Prudential") as described in Section 6.16 below, AIP has not
entered into any contract, arrangement or understanding with any person or
firm which may result in the obligation of AIP or RELP to pay any finder's
fees, brokerage or agent's commissions or other like payments in connection
with the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby. AIP is not aware of any claim for payment of
any finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
6.16. Opinion of Financial Advisor. AIP has retained Prudential to
review the transaction contemplated by this Agreement and to issue an opinion
as to the fairness to AIP, from a financial point of view, of the consideration
to be paid by AIP pursuant to the Merger.
6.17. RELP Share Ownership. Except as may be set forth in the AIP
Disclosure Letter, neither AIP nor any of its Subsidiaries owns any RELP
Interests or other securities convertible into RELP interests.
<PAGE> 17
6.18. AIP Common Shares. The issuance and delivery by AIP of AIP
Common Shares in connection with the Merger and this Agreement have been duly
and validly authorized by all necessary action on the part of AIP except for
the approval of its shareholders contemplated by this Agreement. The AIP Common
Shares to be issued in connection with the Merger and this Agreement, when
issued in accordance with the terms of this Agreement, will be validly issued,
fully paid and nonassessable, except that shareholders may be subject to
further assessment with respect to certain claims for tort, contract, taxes,
statutory liability and otherwise in some jurisdictions to the extent such
claims are not satisfied by AIP.
6.19. Convertible Securities. AIP has no outstanding options, warrants
or other securities exercisable for, or convertible into, shares of AIP Common
Shares, the terms of which would require any anti-dilution adjustments by
reason of the consummation of the transactions contemplated hereby, except the
preemptive rights held by certain clients of Morgan Stanley Asset Management,
Inc. and held by MS Real Estate Special Situations, Inc. and the convertible
debt securities held by Realco.
6.20. Related Party Transactions. Set forth in the AIP Disclosure
Letter will be a list of all arrangements, agreements and contracts entered
into by AIP or any of its Subsidiaries with (i) any person who is an officer,
Trust Manager or affiliate of AIP or any of its Subsidiaries, any relative of
any of the foregoing or any entity of which any of the foregoing is an
affiliate or (ii) any person who acquired AIP Common Shares in a private
placement. The copies of such documents, all of which have been or will be
delivered or made available to RELP prior to July 31, 1997, are or will be
true, complete and correct when delivered or made available.
6.21. Contracts and Commitments. The AIP Disclosure Letter will set
forth (i) all unsecured notes or other obligations of AIP and AIP Subsidiaries
which individually may result in total payments in excess of $100,000, (ii)
notes, debentures, bonds and other evidence of indebtedness which are secured
or collateralized by mortgages, deeds of trust or other security interests in
the AIP Properties or personal property of AIP and its Subsidiaries, and (iii)
each commitment entered into by AIP or any of its Subsidiaries which
individually may result in total payments or liability in excess of $100,000.
Copies of the foregoing have been or will be delivered or made available to
RELP prior to July 31, 1997, will be listed on the AIP Disclosure Letter and
are or will be materially true and correct when delivered or made available.
None of AIP or any of its Subsidiaries has received any notice of a default
that has not been cured under any of the documents described in clause (i) or
(ii) above or is in default respecting any payment obligations thereunder
beyond any applicable grace periods. All options of AIP or any of its
Subsidiaries to purchase real property will be set forth on the AIP Disclosure
Letter and such options and AIP's or its Subsidiaries' rights thereunder are in
full force and effect. All joint venture agreements to which AIP or any of its
Subsidiaries is a party will be set forth on the AIP Disclosure Letter and AIP
or its Subsidiaries are not in default with respect to any obligations, which
individually or in the aggregate are material, thereunder.
6.22. Development Rights. Set forth in the AIP Disclosure Letter will
be a list of all material agreements entered into by AIP or any of its
Subsidiaries relating to the development, rehabilitation, capital improvement
or construction of office buildings, industrial facilities or other
<PAGE> 18
real estate properties which development or construction has not been
substantially completed as of the date of this Agreement. Such agreements,
true, complete and correct copies of all of which have been or will be
delivered or made available to RELP prior to July 31, 1997, will be listed in
the AIP Disclosure Letter.
6.23. Certain Payments Resulting From Transactions. The execution of,
and performance of the transactions contemplated by, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
(i) constitute an event under any AIP Benefit Plan, policy, practice, agreement
or other arrangement or any trust or loan (the "Employee Arrangements") that
will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee, director
or consultant of AIP or any of its Subsidiaries unless such rights have been
waived by any such person, or (ii) result in the triggering or imposition of
any restrictions or limitations on the right of AIP or RELP to amend or
terminate any Employee Arrangement and receive the full amount of any excess
assets remaining or resulting from such amendment or termination, subject to
applicable taxes. No payment or benefit which will be required to be made
pursuant to the terms of any agreement, commitment or AIP Benefit Plan, as a
result of the transactions contemplated by this Agreement, to any officer,
director or employee of AIP or any of its Subsidiaries, will be characterized
as an "excess parachute payment" within the meaning of Section 280G(b)(1) of
the Code.
ARTICLE VII. COVENANTS
7.1. Acquisition Proposals. Prior to the Effective Time, RELP and
AIP each agree (i) that neither of them nor any of their Subsidiaries shall,
and each of them shall direct and use its best efforts to cause its respective
officers, General Partner, limited partners, Trust Managers, employees, agents,
affiliates and representatives (including, without limitation, any investment
banker, attorney or accountant retained by it or any of its Subsidiaries), as
applicable, not to, initiate, solicit or encourage, directly or indirectly, any
inquiries or 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, tender offer, exchange offer, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets or any equity securities (or any debt securities convertible into equity
securities) of, such party or any of its Subsidiaries, other than the
transactions contemplated by this Agreement (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal; (ii) that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing and each will take the
necessary steps to inform the individuals or entities referred to above of the
obligations undertaken in this Section 7.1; and (iii) that it will notify the
other party immediately if any such inquiries or proposals are received by, any
such information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it; provided, however, that nothing
contained in this Section 7.1 shall prohibit the Board of Directors of the
General Partner of RELP (the "Board of Directors") or the Board of Trust
Managers from (x)
<PAGE> 19
furnishing information to or entering into discussions or negotiations with,
any person or entity that makes an unsolicited bona fide Acquisition Proposal,
if, and only to the extent that, (A) the Board of Directors or Board of Trust
Managers, as applicable, determines in good faith that such action is required
for it to comply with its fiduciary duties to limited partners or shareholders,
as applicable, imposed by law as advised by counsel, (B) prior to furnishing
such information to, or entering into discussions or negotiations with, such
person or entity, such party provides written notice to the other party to this
Agreement to the effect that it is furnishing information to, or entering into
discussions with, such person or entity, and (C) subject to any confidentiality
agreement with such person or entity (which such party determined in good faith
was required to be executed in order for the Board of Directors or Board of
Trust Managers, as applicable, to comply with its fiduciary duties to limited
partners or shareholders, as applicable, imposed by law as advised by
counsel), such party keeps the other party to this Agreement informed of the
status (but not the terms) of any such discussions or negotiations; and (y) to
the extent applicable, complying with Rule 14e-2 promulgated under the Exchange
Act with regard to an Acquisition Proposal.
Nothing in this Section 7.1 shall (i) permit any party to terminate this
Agreement (except as specifically provided in Article IX hereof), (ii) permit
any party to enter into any agreement with respect to an Acquisition Proposal
during the term of this Agreement (it being agreed that during the term of this
Agreement, no party shall enter into any agreement with any person that
provides for, or in any way facilitates, an Acquisition Proposal (other than a
confidentiality agreement in customary form)), or (iii) affect any other
obligation of any party under this Agreement.
7.2. Conduct of Businesses.
(i) Prior to the Effective Time, except as may be set forth in the
RELP Disclosure Letter or the AIP Disclosure Letter or as contemplated by this
Agreement, unless the other party has consented in writing thereto, AIP and
RELP:
(a) Shall use their reasonable efforts, and shall cause each of their
respective Subsidiaries to use their reasonable efforts, to
preserve intact their business organizations and goodwill and
keep available the services of their respective officers and
employees;
(b) Shall confer on a regular basis with one or more representatives
of the other to report operational matters of materiality and,
subject to Section 7.1, any proposals to engage in material
transactions;
(c) Shall promptly notify the other of any material emergency or
other material change in the condition (financial or otherwise)
of the business, properties, assets or liabilities, or any
material governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or
the breach in any material respect of any representation,
warranty, covenant or agreement contained herein;
(d) Shall not pay quarterly dividends or make distributions payable
with respect to the AIP Common Shares and RELP Partnership
Interests, respectively; and
<PAGE> 20
(e) Shall promptly deliver to the other true and correct copies of
any report, statement or schedule filed with the SEC subsequent
to the date of this Agreement.
(ii) Prior to the Effective Time, except as may be set forth in the
RELP Disclosure Letter, unless AIP has consented (such consent not to be
unreasonably withheld or delayed) in writing thereto, RELP:
(a) Shall conduct its operations according to its usual, regular and
ordinary course in substantially the same manner as heretofore
conducted;
(b) Shall not amend the RELP Organizational Documents;
(c) Shall not (i) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights existing
on the date hereof and disclosed pursuant to this Agreement,
issue any RELP Interests, make any distribution, effect any
recapitalization or other similar transaction, (ii) grant, confer
or award any option, warrant, conversion right or other right not
existing on the date hereof to acquire any RELP Interest, (iii)
increase any compensation or enter into or amend any employment
agreement with any of its present or future officers or directors
of the General Partner, or (iv) adopt any new employee benefit
plan or amend any existing employee benefit plan in any material
respect, except for changes which are less favorable to
participants in such plans;
(d) Shall not declare, set aside or make any distribution or payment
with respect to any RELP Interest or directly or indirectly
redeem, purchase or otherwise acquire any RELP Interest, or make
any commitment for any such action;
(e) Shall not sell or otherwise dispose of (i) any RELP Properties,
or (ii) except in the ordinary course of business, any of its
other assets which are material, individually or in the
aggregate;
(f) Shall not make any loans, advances or capital contributions to,
or investments in, any other person;
(g) Shall not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business consistent with
past practice or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the most
recent consolidated financial statements (or the notes thereto)
of RELP included in the RELP Reports or incurred in the ordinary
course of business consistent with past practice;
(h) Shall not enter into any commitment which individually may result
in total payments or liability by or to it in excess of $250,000
in the case of any one commitment or in excess of $500,000 for
all commitments;
<PAGE> 21
(i) Shall not, and shall not permit any of its Subsidiaries to, enter
into any commitment with any officer, director or affiliate of
RELP or its General Partner except to the extent the same occur
in the ordinary course of business consistent with past practice
and would not have a RELP Material Adverse Effect; and
(j) Shall not enter into or terminate any lease representing annual
revenues of $100,000 or more.
(iii) Prior to the Effective Time, except as may be set forth in the
AIP Disclosure Letter, unless RELP has consented (such consent not to be
unreasonably withheld or delayed) in writing thereto, AIP:
(a) Shall, and shall cause each of its Subsidiaries to, conduct its
operations according to their usual, regular and ordinary course
in substantially the same manner as heretofore conducted;
(b) Shall not amend its Declaration of Trust or Bylaws except as
contemplated by this Agreement;
(c) Shall not (i) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights
(including AIP's existing dividend reinvestment plan) existing on
the date hereof and disclosed pursuant to this Agreement, issue
any shares of its capital stock, effect any share split, reverse
share split, share dividend, recapitalization or other similar
transaction, (ii) grant, confer or award any option, warrant,
conversion right or other right not existing on the date hereof
to acquire any shares of its capital shares (except pursuant to
any employee incentive plan approved by shareholders), (iii)
amend any employment agreement with any of its present or future
officers or Trust Managers, or (iv) adopt any new employee
benefit plan (including any share option, share benefit or share
purchase plan) except the employee incentive plan to be voted on
at its shareholder meeting for the fiscal year ended December 31,
1995;
(d) Shall not declare, set aside or pay any dividend or make any
other distribution or payment with respect to any Common Shares
or directly or indirectly redeem, purchase or otherwise acquire
any Common Shares or capital stock of any of its Subsidiaries, or
make any commitment for any such action;
(e) Except as will be set forth in the AIP Disclosure Letter, shall
not, and shall not permit any of its Subsidiaries to, sell or
otherwise dispose of (i) any AIP Properties or any of its capital
stock of or other interests in Subsidiaries or (ii) except in the
ordinary course of business, any of its other assets which are
material, individually or in the aggregate;
<PAGE> 22
(f) Shall not, and shall not permit any of its Subsidiaries to, make
any loans, advances or capital contributions to, or investments
in, any other person other than in connection with the sale of
properties;
(g) Shall not, and shall not permit any of its Subsidiaries to, pay,
discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business consistent with past practice or
in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) of AIP
included in the AIP Reports or incurred in the ordinary course of
business consistent with past practice;
(h) Shall not, and shall not permit any of its Subsidiaries to, enter
into any commitment which individually may result in total
payments or liability by or to it in excess of $500,000 in the
case of any one commitment or in excess of $500,000 for all
commitments; and
(i) Shall not, and shall not permit any of its Subsidiaries to, enter
into any commitment with any officer, Trust Manager or affiliate
of AIP or any of its Subsidiaries, except as herein or in the AIP
Disclosure Letter provided and except in the ordinary course of
business.
For purposes of this Section 7.2, any consent shall be deemed to be
unreasonably delayed if notice of consent or withholding of consent is not
received within three days of request. Further, if no response is received by
the end of business on such third day, the party receiving the request shall be
deemed to have consented to such action.
7.3 Meetings of Shareholders and Partners. Each of AIP and RELP will
take all action necessary in accordance with applicable law and its
organizational documents to convene a meeting of its shareholders or partners,
as applicable, as promptly as practicable to consider and vote upon or
otherwise to obtain the consent of its shareholders or partners, as applicable,
to (i) in the case of AIP, approve this Agreement and the transactions
contemplated hereby, and (ii) in the case of RELP, approve this Agreement and
the transactions contemplated hereby. The Board of Trust Managers and the
General Partner shall each recommend such approval and AIP and RELP shall each
take all lawful action to solicit such approval, including, without limitation,
timely mailing the Proxy Statement/Prospectus (as defined in Section 7.7);
provided, however, that such recommendation or solicitation is subject to any
action taken by, or upon authority of, the Board of Trust Managers or the
General Partner, as the case may be, in the exercise of its good faith judgment
as to its fiduciary duties to its shareholders or partners, as applicable,
imposed by law as advised by counsel. AIP and RELP shall coordinate and
cooperate with respect to the timing of such meetings and shall use their best
efforts to hold such meetings on the same day.
7.4. Filings; Other Action. Subject to the terms and conditions
herein provided, RELP and AIP shall: (a) use all reasonable efforts to
cooperate with one another in (i) determining which filings are required to be
made prior to the Effective Time with, and which consents, approvals,
<PAGE> 23
permits or authorizations are required to be obtained prior to the Effective
Time from governmental or regulatory authorities of the United States and the
several states in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and (ii) timely
making all such filings and timely seeking all such consents, approvals,
permits or authorizations; (b) use all reasonable efforts to obtain in writing
any consents required from third parties in form reasonably satisfactory to
RELP and AIP necessary to effectuate the Merger; and (c) use all reasonable
efforts to take, or cause to be taken, all other action and do, or cause to be
done, all other things necessary, proper or appropriate to consummate and make
effective the transactions contemplated by this Agreement. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purpose of this Agreement, the proper officers and directors of AIP and
the General Partner shall take all such necessary action.
7.5. Inspection of Records. From the date hereof to the Effective
Time, each of RELP and AIP shall allow all designated officers, attorneys,
accountants and other representatives of the other access at all reasonable
times to the records and files, correspondence, audits and properties, as well
as to all information relating to commitments, contracts, titles and financial
position, or otherwise pertaining to the business and affairs of RELP and AIP
and their respective Subsidiaries.
7.6. Publicity. RELP and AIP shall, subject to their respective legal
obligations (including requirements of stock exchanges and other similar
regulatory bodies), consult with each other, and use reasonable efforts to
agree upon the text of any press release before issuing any such press release
or otherwise making public statements with respect to the transactions
contemplated hereby and in making any filings with any federal or state
governmental or regulatory agency or with any national securities exchange with
respect thereto.
7.7. Registration Statement. AIP and RELP shall cooperate and
promptly prepare and AIP shall file with the SEC as soon as practicable a
Registration Statement on Form S-4 (the "Form S-4") under the Securities Act,
with respect to the AIP Common Shares issuable in the Merger, a portion of
which Registration Statement shall also serve as the joint proxy statement with
respect to the meetings of the shareholders and partners, respectively, of AIP
and RELP in connection with the Merger (the "Proxy Statement/Prospectus"). The
respective parties will cause the Proxy Statement/Prospectus and the Form S-4
to comply as to form in all material respects with the applicable provisions of
the Securities Act, the Exchange Act and the rules and regulations promulgated
thereunder. AIP shall use all reasonable efforts, and RELP will cooperate with
AIP to have the Form S-4 declared effective by the SEC as promptly as
practicable. AIP shall use its best efforts to obtain, prior to the effective
date of the Form S-4, all necessary state securities law or "Blue Sky" permits
or approvals required to carry out the transactions contemplated by this
Agreement and will pay all expenses incident thereto. AIP agrees that the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the respective meetings of shareholders and
partners, respectively, of AIP and RELP, or, in the case of the Form S-4 and
each amendment or supplement thereto, at the time it is filed or becomes
effective, will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the foregoing shall not apply to the
extent that any such untrue statement of a material fact or omission to state a
<PAGE> 24
material fact was made by AIP in reliance upon and in conformity with written
information concerning RELP furnished to AIP by RELP specifically for use in
the Proxy Statement/Prospectus. RELP agrees that the written information
provided by it specifically for inclusion in the Proxy Statement/Prospectus and
each amendment or supplement thereto, at the time of mailing thereof and at the
time of the respective meetings of shareholders and partners, respectively, of
AIP and RELP, or, in the case of written information provided by RELP
specifically for inclusion in the Form S-4 or any amendments or supplement
thereto, at the time it is filed or becomes effective, will not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. AIP will advise
RELP, promptly after it receives notice thereof, of the time when the Form S-4
has become effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension of the qualification of the AIP
Common Shares issuable in connection with the Merger for offering or sale in
any jurisdiction, or any request by the SEC for amendment of the Proxy
Statement/Prospectus or the Form S-4 or comments thereon and responses thereto
or requests by the SEC for additional information.
7.8. Listing Application. AIP shall promptly prepare and submit to
the NYSE a listing application covering the AIP Common Shares issuable in the
Merger, and shall use its reasonable efforts to obtain, prior to the Effective
Time, approval for the listing of such AIP Common Shares, subject to official
notice of issuance.
7.9. Further Action. Each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the conditions of
performances set forth herein or the waiver thereof, perform such further acts
and execute such documents as may reasonably be required to effect the Merger.
7.10. Expenses. Subject to Section 9.5, if the Merger is approved by
RELP's partners, all transaction costs of the proposed consolidation shall be
paid by AIP. If three of the four limited partnerships party to the Proxy
Statement/Prospectus (the "Other RELPS") do not approve their proposed merger
into AIP, Realco shall reimburse AIP for AIP's expenses relating to the
proposed merger up to $250,000. If RELP and the Other RELPS approve their
proposed merger into AIP, but the shareholders of AIP do not approve the
proposer merger, and if Realco voted its AIP Common Shares in favor of such
mergers, AIP will reimburse RELP and the Other RELPS for all expenses they
incurred in connection with the proposed merger. Any expenses to be reimbursed
hereunder shall include, but not be limited to, costs of fairness opinions,
property appraisals, engineering and environmental reports, title policies,
accounting fees, legal fees, printing and solicitation expenses. RELP will
bear the costs of preparing its initial fairness opinion, with later
reimbursement by AIP in the event the Merger is approved by RELP's partners.
If the limited partners of RELP fail to approve the proposed Merger, then
Realco will reimburse AIP for the RELP's expenses (to the extent paid by AIP)
as follows: the actual cost of such RELP's fairness opinion, legal fees up to
$80,000, and the actual cost or the Allocable Share (if the actual cost is not
separately determined), of RELP's accounting fees, engineering and
environmental reports, printing and solicitation expenses. Allocable Share,
for this purpose, shall be the ratio of such RELP's net book value of assets at
March 31, 1997 to the total net book value of all of the assets of RELP and the
Other RELPS at March 31, 1997.
<PAGE> 25
7.11. Indemnification. For a period of six years from and after the
Effective Time, AIP shall indemnify the partners, or agents of RELP who at any
time prior to the Effective Time were entitled to indemnification under the
Agreement of Limited Partnership of RELP existing on the date hereof to the
same extent as such partners or agents are entitled to indemnification under
such Agreement of Limited Partnership in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement).
7.12. Reorganization. From and after the date and until the Effective
Time, neither AIP nor RELP nor any of their respective Subsidiaries or other
affiliates shall (i) knowingly take any action, or knowingly fail to take any
action, that would jeopardize qualification of the Merger as a reorganization
within the meaning of Section 368(a)(1)(A) of the Code; or (ii) enter into any
contract, agreement, commitment or arrangement with respect to the foregoing.
Following the Effective Time, AIP shall use its best efforts to conduct its
business in a manner that would not jeopardize the characterization of the
Merger as a reorganization within the meaning of Section 368(a)(1)(A) of the
Code.
7.13. Survival of RELP Obligations; Assumption of RELP Liabilities by
AIP. All of the obligations of RELP that are outstanding at the Closing shall
survive the Closing and shall not be merged therein. Upon the consummation of
the Merger, such obligations shall be assumed, automatically, by AIP; provided,
however, that such assumption shall not impose upon or expose AIP to any
liability for which RELP was not liable, and provided, further, that AIP shall
be entitled to the same defenses, offsets and counterclaims to which RELP would
have been entitled, but for the Merger.
7.14. Third Party Consents. AIP and RELP each shall take all necessary
corporate and other action and will use its commercially reasonable efforts to
obtain the consents and applicable approvals from third parties that may be
required to enable it to carry out the transactions contemplated by this
Agreement.
7.15. Efforts to Fulfill Conditions. AIP and RELP each shall use
commercially reasonable efforts to insure that all conditions precedent to its
obligations hereunder are fulfilled at or prior to the Closing.
7.16. Representations, Warranties and Conditions Prior to Closing. AIP
and RELP each shall use its commercially reasonable efforts to cause its
representations and warranties contained in this Agreement to be true and
correct on and as of the Closing Date in all material respects. Prior to
Closing, AIP and RELP each shall promptly notify the other in writing (i) if
any representation or warranty contained in this Agreement is discovered to be
or becomes untrue or (ii) if AIP or RELP fails to perform or comply with any of
its covenants or agreements contained in this Agreement or it is reasonably
expected that it will be unable to perform or comply with any of its covenants
or agreements contained in this Agreement.
7.17. Cooperation of the Parties. AIP and RELP each will cooperate
with the other in supplying such information as may be reasonably requested by
the other in connection with obtaining consents or approvals to the
transactions contemplated by this Agreement.
<PAGE> 26
7.18. Lock-Ups. The General Partner shall use its best efforts prior
to the Closing to have each of its directors and officers and Realco execute a
90-day lock-up agreement in a form (reasonably acceptable to RELP) supplied to
RELP by AIP. The executed agreements will be delivered to AIP at the Closing.
AIP shall use its best efforts prior to the Closing to have each of its Trust
Managers and officers execute a 90-day lock-up agreement, in a form (reasonably
acceptable to AIP) supplied to AIP by RELP. The agreements will be delivered to
RELP at the Closing.
ARTICLE VIII. CONDITIONS
8.1. Conditions to Each Party's Obligations to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall
have been approved in the manner required by the Declaration of
Trust and Bylaws and Agreement of Limited Partnership of AIP and
RELP, respectively, and by applicable law or by applicable
regulations of any stock exchange or other regulatory body by the
holders of the AIP Common Shares and RELP Interests entitled to
vote thereon.
(b) Neither of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction which prohibits
the consummation of the transactions contemplated by this
Agreement. In the event any such order or injunction shall have
been issued, each party agrees to use its reasonable efforts to
have any such injunction lifted.
(c) The Form S-4 shall have become effective and all necessary state
securities law or "Blue Sky" permits or approvals required to
carry out the transactions contemplated by this Agreement shall
have been obtained and no stop order with respect to any of the
foregoing shall be in effect.
(d) AIP shall have obtained the approval for the listing of the AIP
Common Shares issuable in the Merger on the NYSE, subject to
official notice of issuance.
(e) All consents, authorizations, orders and approvals of (or filings
or registrations with) any governmental commission, board, other
regulatory body or third parties required in connection with the
execution, delivery and performance of this Agreement shall have
been obtained or made, except for filings in connection with the
Merger and any other documents required to be filed after the
Effective Time and except where the failure to have obtained or
made any such consent, authorization, order, approval, filing or
registration would not have a material adverse effect on the
business, results of operations or financial condition of AIP and
RELP (and their respective Subsidiaries), taken as a whole,
following the Effective Time.
<PAGE> 27
8.2 Conditions to Obligations of RELP to Effect the Merger. The
obligation of RELP to effect the Merger shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions, unless waived by
RELP:
(a) AIP shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing
Date and the representations and warranties of AIP contained in
this Agreement shall be true and correct in all material respects
as of the Closing Date as if made on the Closing Date, and RELP
shall have received a certificate of the President or an
Executive or Senior Vice President of AIP, dated the Closing
Date, certifying to such effect.
(b) RELP shall have received the opinion of Liddell, Sapp or another
recognized law firm selected by AIP and approved by RELP, dated
the Closing Date, to the effect that the Merger will be treated
for Federal income tax purposes as a reorganization within the
meaning of Section 368(a)(1)(A) of the Code, and that RELP and
AIP will each be a party to that reorganization within the
meaning of Section 368(b) of the Code. In rendering its opinion,
said counsel shall be entitled to rely as to any factual matter
upon certificates given by executive officers of RELP and AIP and
shall be entitled to assume that the covenants of AIP pursuant to
Section 7.15 shall be fully complied with.
(c) From the date of the Agreement through the Effective Time, there
shall not have occurred any change in the financial condition,
business or operations of AIP and its Subsidiaries, taken as a
whole, that would have or would be reasonably likely to have an
AIP Material Adverse Effect other than any such change that
affects both RELP and AIP in a substantially similar manner.
(d) The opinion of Houlihan addressed to RELP that the Purchase Price
is fair, from a financial point of view, to the partners of RELP
shall not have been withdrawn or materially modified.
(e) RELP shall have received the opinion of Liddell, Sapp or another
recognized law firm selected by AIP and approved by RELP, dated
the Closing Date, as to such customary matters as RELP may
reasonably request, such opinion to be reasonably satisfactory to
RELP.
8.3 Conditions to Obligation of AIP to Effect the Merger. The
obligations of AIP to effect the Merger shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions, unless waived by AIP:
(a) RELP shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing
Date and the representations and warranties of RELP contained in
this Agreement shall be true and correct in all material respects
as of the Closing Date as if made on the Closing Date and AIP
shall have received
<PAGE> 28
a certificate of the Chief Executive Officer, President or an
Executive Vice President of the General Partner dated the Closing
Date, certifying to such effect.
(b) AIP shall have received the opinion of Liddell, Sapp or another
recognized law firm selected by RELP and approved by AIP, dated
the Closing Date, to the effect that the consummation of the
Merger will not result in AIP's failure to continue to satisfy
the requirements for qualification as a REIT for federal income
tax purposes. In rendering its opinion, said counsel shall be
entitled to rely as to any factual matter upon certificates given
by executive officers of AIP and RELP and shall be entitled to
assume that the covenants of Section 7.15 shall be fully complied
with.
(c) From the date of this Agreement through the Effective Time, there
shall not have occurred any change in the financial condition,
business or operations of RELP and its Subsidiaries, taken as a
whole, that would have or would be reasonably likely to have an
RELP Material Adverse Effect, other than any such change that
affects both RELP and AIP in a substantially similar manner.
(d) Each person listed on Exhibit 8.3(d) attached hereto shall have
delivered to AIP a written agreement to the effect that such
person will not offer to sell, sell or otherwise dispose of any
shares of AIP Common Stock issued in the Merger, except, in each
case, pursuant to an effective registration statement or in
compliance with Rule 145, as amended from time to time, or in a
transaction which, in the opinion of legal counsel reasonably
satisfactory to AIP, is exempt from the registration requirements
of the Securities Act and that the certificates representing the
AIP shares issued to him or her in the Merger may bear a legend
to such effect.
(e) The opinion of Prudential addressed to the Board of Trust
Managers of AIP that the consideration to be paid by AIP pursuant
to the Merger is fair, from a financial point of view, to AIP
shall not have been withdrawn or materially modified.
(f) AIP shall have received the opinion of Liddell, Sapp or another
recognized law firm selected by RELP and approved by AIP, dated
the Closing Date, as to such customary matters as AIP may
reasonably request, such opinion to be reasonably satisfactory to
AIP.
(g) The limited partners of at least two of the Other RELPS shall
have approved the merger of such limited partnership with and
into AIP.
ARTICLE IX. TERMINATION
9.1 Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after the approval of this Agreement by the partners of RELP or the
shareholders of AIP or by the mutual written consent of AIP and RELP, with the
prior approval of their respective Board of Trust Managers and General Partner.
<PAGE> 29
9.2 Termination by Either AIP or RELP. This Agreement may be
terminated and the Merger may be abandoned by action of the General Partner of
RELP or the Board of Trust Managers of AIP if (i) the Merger shall not have
been consummated by March 31, 1998, (ii) a meeting of RELP's partners shall
have been duly convened and held and the approval of RELP's partners required
by Section 8.1(a) shall not have been obtained at such meeting or at any
adjournment thereof, (iii) a meeting of AIP's shareholders shall have been duly
convened and held and the approval of AIP's shareholders required by Section
8.1(a) shall not have been obtained at such meeting or at any adjournment
thereof, (iv) as a result of due diligence investigation by one of the parties
hereto, it is determined in good faith by such party that certain facts or
circumstances not previously known by such party constitute a Material Adverse
Effect on the business, results of operations or financial condition of the
other party, (v) a United States federal or state court of competent
jurisdiction or United States federal or state governmental, regulatory or
administrative agency or commission shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and non-
appealable, provided that the party seeking to terminate this Agreement
pursuant to this clause (v) shall have used all reasonable efforts to remove
such order, decree, ruling or injunction, or (vi) any of the conditions set
forth in Article VIII shall not have been satisfied, and provided, in the case
of a termination pursuant to clause (i) or (vi) above, that the terminating
party shall not have breached in any material respect its obligations under
this Agreement in any manner that shall have proximately contributed to the
occurrence of the failure referred to in said clause. AIP and RELP each shall
(i) deliver its Disclosure Letter to one another not later than 5:00 P.M.,
Central Time, August 11, 1997, and (ii) shall complete its due diligence
investigations not later than 5:00 P.M., Central Time, on July 31, 1997 (the
period from the date of this Agreement through July 31, 1997 being hereinafter
referred to as the "Due Diligence Period"). Until the expiration of the Due
Diligence Period, either party may terminate this Agreement without liability
or penalty due to (i) the discovery of a fact or circumstance that reasonably
could be expected to constitute a Material Adverse Effect on the business,
results of operations or financial condition of the other party, or (ii) the
party's failure to receive a written fairness opinion as described herein
within seven business days from the date of execution of this Agreement.
9.3 Termination by RELP. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the adoption and approval by the partners of RELP referred to in Section
8.1(a), by action of the General Partner, if (i) in the exercise of its good
faith judgment as to its fiduciary duties to its partners imposed by law, as
advised by counsel, the General Partner determines that such termination is
required by reason of a RELP Acquisition Proposal being made, (ii) the Board of
Trust Managers withdraws, materially modifies or changes in a manner materially
adverse to RELP its recommendations to AIP's shareholders of this Agreement or
the Merger, other than as a result of the occurrence of an event that in the
good faith judgment of the Board of Trust Managers has or is reasonably likely
to have a RELP Material Adverse Effect, (iii) the Board of Trust Managers
postpones the date scheduled for the meeting of shareholders of AIP to approve
this Agreement and the transactions contemplated hereby beyond March 31, 1998
or fails to set a date for such meeting by such date, except with the written
consent of RELP, (iv) there has been a breach by AIP of any representation or
warranty contained in this Agreement which would have or would be reasonably
likely to have an AIP Material Adverse Effect,
<PAGE> 30
which breach is not curable by March 31,1998, or (v) there has been material
breach of any of the covenants or agreements set forth in this Agreement on the
part of AIP, which breach is not curable or, if curable, is not cured within 30
days after written notice of such breach is given by RELP to AIP, or (vi) the
condition set forth in Section 8.3(g) is not satisfied..
9.4 Termination by AIP. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by the shareholders of AIP referred to in Section 8.1(a), by
action of the Board of Trust Managers, if (i) in the exercise of its good
faith judgment as to its fiduciary duties to its shareholders imposed by law,
as advised by counsel, the Board of Trust Managers determines that such
termination is required by reason of an AIP Acquisition Proposal being made,
(ii) the General Partner withdraws, materially modifies or changes in a manner
materially adverse to AIP its recommendation to RELP's partners of this
Agreement or the Merger, other than as a result of the occurrence of an event
that in the good faith judgment of the General Partner has or is reasonably
likely to have an AIP Material Adverse Effect, (iii) the General Partner
postpones the date scheduled for the meeting of partners of RELP to approve
this Agreement and the transactions contemplated hereby beyond March 31, 1998,
or fails to set a date for such meeting by such date, except with the written
consent of AIP, (iv) there has been a breach by RELP of any representation or
warranty contained in this Agreement which would have or would be reasonably
likely to have a RELP Material Adverse Effect, which breach is not curable by
March 31, 1998, or (v) there has been a material breach of any of the covenants
or agreements set forth in this Agreement on the part of RELP, which breach is
not curable or, if curable, is not cured within 30 days after written notice of
such breach is given by AIP to RELP.
9.5. Effect of Termination and Abandonment. (a) If an election to
terminate this Agreement is made pursuant to (i) Section 9.2(i) (except as a
result of a default or breach hereunder by AIP) or Section 9.2(ii), and a RELP
Acquisition Proposal relating to RELP shall have been made and, within one year
from the date of such termination, RELP consummates a RELP Acquisition Proposal
or enters into an agreement to consummate a RELP Acquisition Proposal which is
subsequently consummated, or (ii) Section 9.3(i), RELP shall pay to AIP,
provided that AIP was not in material breach of its obligations hereunder at
the time of such termination, as liquidated damages and not as a penalty or
forfeiture, an amount equal to the lesser of (m) $393,600 (the "Liquidated
Damages Amount") and (n) the sum of (1) the maximum amount that can be paid to
AIP without causing AIP to fail to meet the requirements of Sections 856(c)(2)
and (3) of the Code determined as if the payment of such amount did not
constitute income described in Sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I)
of the Code ("Qualifying Income"), as determined by AIP's certified public
accountants, plus (2) an amount equal to the Liquidated Damages Amount less the
amount payable under clause (1) above in the event AIP receives a letter from
AIP's counsel indicating that AIP has received a ruling from the IRS to the
effect that Liquidated Damages Amount payments constitute Qualifying Income. In
addition to the Liquidated Damages Amount, AIP shall be entitled to receive
from RELP (or its successor in interest) all documented out-of-pocket costs and
expenses, up to a maximum of $196,800 in connection with this Agreement and
the transactions contemplated hereby (the "AIP Expenses") incurred by AIP. The
payments to which AIP is entitled under this Section 9.5(a) shall be its sole
remedy with respect to the termination of the Agreement under the circumstances
contemplated in this Section 9.5(a).
<PAGE> 31
(b) If an election to terminate this Agreement is made pursuant to
Section 9.2(i) (as a result of the condition set forth in Section 8.3(c) not
being satisfied), RELP shall, provided that AIP was not in material breach of
its obligations hereunder at the time of such termination, pay AIP for the AIP
Expenses, up to a maximum of $196,800, although it shall not be required to pay
the Liquidated Damages Amount, which payment of the AIP Expenses shall be AIP's
sole remedy for termination of the Agreement in such circumstances.
(c) If an election to terminate this Agreement is made pursuant to
(i) Section 9.2(i) (except as a result of a default or breach hereunder by
RELP) or Section 9.2(iii), and an AIP Acquisition Proposal relating to AIP
shall have been made and, within one year from the date of such termination,
AIP consummates an AIP Acquisition Proposal or enters into an agreement to
consummate an AIP Acquisition Proposal which is subsequently consummated, or
(ii) Section 9.4(i), AIP shall pay to RELP, provided that RELP was not in
material breach of its obligations hereunder at the time of such termination,
as liquidated damages and not as a penalty or forfeiture, an amount equal to
the Liquidated Damages Amount. In addition to the Liquidated Damages Amount,
RELP shall be entitled to receive from AIP (or its successor in interest) all
documented out-of-pocket costs and expenses, up to a maximum of $196,800, in
connection with this Agreement and the transactions contemplated hereby (the
"RELP Expenses" and, together with the AIP Expenses, the "Expenses") incurred
by RELP. The payments to which RELP is entitled under this Section 9.5(c) shall
be its sole remedy with respect to the termination of the Agreement under the
circumstances contemplated in this Section 9.5(c)
(d) If an election to terminate this Agreement is made pursuant to
Section 9.2(i) (as a result of the condition set forth in Section 8.2(c) not
being satisfied), AIP shall, provided that RELP was not in material breach of
its obligations hereunder at the time of such termination, pay RELP for the
RELP Expenses, up to a maximum of $196,800, although it shall not be required
to pay the Liquidated Damages Amount, which payment of the RELP Expenses shall
be RELP's sole remedy for termination of the Agreement in such circumstances.
(e) If this Agreement is terminated pursuant to Section 9.3(iv),
Section 9.3(v), Section 9.4(iv), or Section 9.4(v), the non-terminating party
shall, provided that the terminating party was not in material breach of its
obligations hereunder at the time of such termination, pay the terminating
party all Expenses, up to a maximum of $196,800, incurred by it and the non-
terminating party shall remain liable to the terminating party for its breach.
(f) If either party terminates this Agreement during the Due
Diligence Period described in Section 9.2 above other than for a due diligence
related reason, the non-terminating party shall be entitled to receive the
Liquidated Damages Amount and the Expenses as provided in this Article IX.
(g) RELP agrees to amend this Section 9.5 at the request of AIP in
order to (x) maximize the portion of the Liquidated Damages Amount that may be
distributed to AIP hereunder without causing AIP to fail to meet the
requirements of Sections 856(c)(2) and (3) of the Code or (y) improve AIP's
chances of securing a favorable ruling described in this Section 9.5, provided
that no such amendment may result in any additional cost or expense to such
other party.
<PAGE> 32
(h) In the event of termination of this Agreement and the abandonment
of the Merger pursuant to this Article IX, all obligations of the parties
hereto shall terminate, except the obligations of the parties pursuant to this
Section 9.5 and Section 7.10 and except for the provisions of Section 10.3,
10.4, 10.5, 10.6, 10.7, 10.9, 10.10, 10.13, 10.14 and 10.16. In the event AIP
or RELP has received the Liquidated Damages Amount, such recipient shall not
assert or pursue in any manner, directly or indirectly, any claim or cause of
action against the other party hereto or any of its officers, Trust Managers,
or General Partners, as applicable, based in whole or part upon its or their
receipt, consideration, recommendation or approval of an Acquisition Proposal
or the exercise by AIP of its right to termination under Section 9.4(i) or the
exercise by RELP of its right to termination under Section 9.3(i).
Notwithstanding the foregoing, in the event AIP or RELP is required to file
suit to seek all or a portion of such Liquidated Damages Amount, and it
ultimately succeeds, it shall be entitled to all expenses, including attorney's
fees and expenses, which it has incurred in enforcing its right hereunder.
(i) If either party willfully fails to perform its duties and
obligations under this Agreement, the non-breaching party is additionally
entitled to all remedies available to it at law or in equity and to recover its
expenses from the breaching party.
9.6 Extension; Waiver. At any time prior to the Effective Time, any
party hereto, by action taken by its Board of Trust Managers or General
Partner, as applicable, may, to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE X. GENERAL PROVISIONS
10.1. Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Merger;
provided, however, that the agreements contained in Article IV, the last
sentence of Section 7.4 and Sections 7.10, 7.11, 7.12, 7.13, 7.14, 7.15 and
7.16 and this Article X shall survive the Merger.
10.2. Notices. Any notice required to be given hereunder shall be in
writing and shall be sent by facsimile transmission (confirmed by any of the
methods that follow), courier service (with proof of service), hand delivery or
certified or registered mail (return receipt requested and first-class postage
prepaid) and addressed as follows:
If to AIP:
American Industrial Properties REIT
6220 N. Beltline Road, Suite 205
Irving, Texas 75063
Attention: Charles W. Wolcott, President
Telecopy: (972) 550-6037
<PAGE> 33
If to RELP:
USAA Real Estate Company
8000 I-H 10 West, Suite 600
San Antonio, Texas 78230
Attention: Patrick Duncan, Senior Vice-President
Telecopy: (210) 498-6214
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
delivered.
10.3. Assignment; Binding Effect; Benefit. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except as provided in the
following sentence, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective heirs, successors, executors, administrators and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement. The
provisions of Article IV and Sections 7.11, 7.12, 7.13, 7.14 and 7.15
(collectively, the "Third Party Provisions") shall benefit the persons
identified therein, but the aggregate liability of AIP with respect thereto
shall not exceed the amount specified in Article IX.
10.4. Entire Agreement. This Agreement, the Exhibits, the RELP
Disclosure Letter, the AIP Disclosure Letter, the RELP Ancillary Agreements,
the AIP Ancillary Agreements and any documents delivered by the parties in
connection herewith constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
10.5. Confidentiality. (a) As used herein, "Confidential Material"
means, with respect to either party hereto (the "Providing Party"), all
information (written or oral) furnished (whether before or after the date
hereof) by the Providing Party and its directors, officers, employees,
affiliates or representatives of advisors, including counsel, lenders and
financial advisors (collectively, the "Providing Party Representatives") to the
other party hereto (the "Receiving Party") or such Receiving Party's directors,
officers, employees, affiliates or representatives of advisors, including
counsel, lenders and financial advisors or the Receiving Party's potential
sources of financing for the transactions contemplated by this Agreement
(collectively "the Receiving Party Representatives") and all analyses,
compilations, forecasts and other studies or other documents prepared by the
Providing Party or the Providing Party Representatives in connection with its
or their review of the transactions contemplated by this Agreement which
contain or reflect such information. The term "Confidential Material" does not
include, however, information which (i) at the time of disclosure
<PAGE> 34
or thereafter is generally available to and known by the public other than as a
result of a disclosure directly or indirectly by the Receiving Party or the
Receiving Party Representatives in violation of this Agreement, (ii) at the
time of disclosure was available on a nonconfidential basis from a source other
than the Providing Party or the Providing Party Representatives, providing that
such source is not and was not bound by a confidentiality agreement with the
Providing Party, (iii) was known by the Receiving Party prior to receiving the
Confidential Material from the Providing Party or has been independently
acquired or developed by the Receiving Party without violating any of its
obligations under this Agreement, or (iv) is contained in any RELP Reports or
AIP Reports or Proxy Statement/Prospectus.
(b) Subject to paragraph (c) below or except as required by law, the
Confidential Material will be kept confidential and will not, without the prior
written consent of the Providing Party, be disclosed by the Receiving Party or
its Representatives, in whole or in part and will not be used by the Receiving
Party or its Representatives, directly or indirectly, for any purpose other
than in connection with this Agreement, the Merger or the evaluating,
negotiating or advising with respect to a transaction contemplated herein.
Moreover, each Receiving Party agrees to transmit Confidential Material to its
Representatives only if and to the extent that such Representatives need to
know the Confidential Material for purposes of such transaction and are
informed by such Receiving Party of the confidential nature of the Confidential
Material and of the terms of this Section.
(c) In the event that either Receiving Party, its Representatives or
anyone to whom such Receiving Party or its Representatives supply the
Confidential Material, are requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand, any informal or formal investigation by any government or
governmental agency or authority or otherwise in connection with legal
processes) to disclose any Confidential Material, such Receiving Party agrees
(i) to immediately notify the Providing Party of the existence, terms and
circumstances surrounding such a request, (ii) to consult with the Providing
Party on the advisability of taking legally available steps to resist or narrow
such request and (iii) if disclosure of such information is required, to
furnish only that portion of the Confidential Material which, in the opinion of
such Receiving Party's counsel, such Receiving Party is legally compelled to
disclose and to cooperate with any action by the Providing Party to obtain an
appropriate protective order or otherwise reliable assurances that confidential
treatment will be accorded the Confidential Material (it being agreed that the
Providing Party shall reimburse the Receiving Party for all reasonable out-of-
pocket expenses incurred by the Receiving Party in connection with such
cooperation).
(d) In the event of the termination of this Agreement in accordance
with its terms, promptly upon request from either Providing Party, the
Receiving Party shall, except to the extent prevented by law, redeliver to the
Providing Party or destroy all tangible Confidential Material and will not
retain any copies, extracts or other reproductions thereof in whole or in part.
Any such destruction shall be certified in writing to the Providing Party by an
authorized officer of the Receiving Party supervising the same. Notwithstanding
the foregoing, each Receiving Party and one Representative designated by each
Receiving Party shall be permitted to retain one permanent file copy of each
document constituting Confidential Material.
<PAGE> 35
(e) Each party hereto further agrees that if this Agreement is
terminated in accordance with its terms, until one year from the date of
termination, (1) it will not offer to hire or hire any person currently or
formerly employed by the other party with whom such party has had contact prior
hereto other than persons whose employment shall have been terminated by such
other party prior to the date of such offer to hire or hiring and (2) neither
it nor its affiliates shall directly or indirectly, (a) (w) solicit, seek or
offer to effect or effect, (x) negotiate with or provide any information to the
Board of Trust Managers or General Partner, as applicable, of the other party,
or officer of the other party or any shareholder or partner, as applicable, of
the other party with respect to, (y) make any statement or proposal, whether
written or oral, either alone or in concert with others, to the Board of Trust
Managers or Board of Directors of the General Partner of the other party, any
director, Trust Manager or officer of the other party or any shareholder or
partner of the other party or any other person with respect to, or (z) make any
public announcement (except as required by law in respect of actions permitted
hereby) or proposal or offer whatsoever (including, but not limited to, any
"solicitation"of "proxies"as such terms are defined or used in Regulation 14A
of the Exchange Act) with respect to, (i) any form of business combination or
similar or other extraordinary transaction involving the other party or any
affiliate thereof, including, without limitation, a merger, tender or exchange
offer or liquidation of the other party's assets, (ii) any form of
restructuring, recapitalization or similar transaction with respect to the
other party or any affiliate thereto, (iii) any purchase of any securities or
assets, or rights or options to acquire any securities or assets (through
purchase, exchange, conversion or otherwise), of the other party or any
affiliate thereof, (iv) any proposal to seek representation on the Board of
Trust Managers or the Board of Directors of the General Partner, as applicable,
or otherwise to seek to control or influence the management, Board of Trust
Managers or the Board of Directors of the General Partner, as applicable, or
policies of the other party or any affiliate thereof, (v) any request or
proposal to waive, terminate or amend the provisions of this Section 10.5 or
(vi) any proposal or other statement inconsistent with the terms of this
Section 10.5 or (b) instigate, encourage, join, act in concert with or assist
(including, but not limited to, providing or assisting in any way in the
obtaining of financing for, or acting as a joint or co-bidder for the other
party with) any third party to do any of the foregoing, unless and until such
party has received the prior written invitation or approval of a majority of
the Board of Trust Managers or the General Partner, as applicable, to do any of
the foregoing; provided that without such invitation or approval, either party
may at any time, on a confidential non-public basis, submit to the Chief
Executive Officer of AIP or the General Partner, as applicable, a proposal to
(a) amend any of the provisions of this Section 10.5(e) or (b) effect a
business combination or other extraordinary transaction with the other party
providing for the acquisition of all or substantially all of the assets or the
securities of the other party, including, without limitation, a merger, tender
offer or exchange offer. Each party hereto agrees that it will not agree with
any third party to waive its rights under this Section 10.5.
10.6. Amendment. This Agreement may be amended by the parties hereto,
by action taken by the Board of Trust Managers or the Board of Directors of the
General Partner, as applicable, at any time before or after approval of this
Agreement or any other matter presented in connection with the Merger by the
shareholders of AIP and partners of RELP, but after any such approval, no
amendment shall be made which by law requires the further approval of
shareholders or partners, as applicable, without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
<PAGE> 36
10.7. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas without regard to its rules
of conflict of laws. Each of AIP and RELP hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of Texas and of the United States District Court, Northern
District of Texas (the "Texas Courts") for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any litigation relating thereto except in such courts), waives
any objection to the laying of venue of any such litigation in the Texas Courts
and agrees not to plead or claim in any Texas Court that such litigation
brought therein has been brought in an inconvenient forum.
10.8. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
10.9. Headings. Heading of the Articles and Sections of this Agreement
are for the convenience of the parties only and shall be given no substantive
or interpretive effect whatsoever.
10.10. Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and
vice versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
10.11. Waivers. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
10.12. Incorporation. The RELP Disclosure Letter and the AIP
Disclosure Letter and all Exhibits and Schedules attached hereto and thereto
and referred to herein and therein are hereby incorporated herein and made a
part hereof for all purposes as if fully set forth herein.
10.13. Severability. If any provision of this 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 Agreement would not be
materially and adversely affected thereby, such provision shall be fully
separable, and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part thereof,
and the remaining provisions of this 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
Agreement, a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as
<PAGE> 37
may be possible, and the parties hereto request the court or any arbitrator to
whom disputes relating to this Agreement are submitted to reform the otherwise
illegal, invalid or unenforceable provision in accordance with this Section
10.13.
10.14. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any Texas Court, this
being in addition to any other remedy to which they are entitled at law or in
equity.
10.15. Subsidiaries. As used in this Agreement, the word
"Subsidiary" when used with respect to any party means any corporation,
partnership, joint venture, business trust or other entity, of which such party
directly or indirectly owns or controls at least a majority of the securities
or other interests having by their terms ordinary voting power to elect a
majority of the board of directors or others performing similar functions with
respect to such corporation or other organization.
10.16. Non-Recourse. Neither the officers, Trust Managers nor
shareholders of AIP shall be personally bound or have any personal liability
hereunder. RELP shall look solely to the assets of AIP for satisfaction of any
liability of AIP with respect to this Agreement and the Ancillary Agreements to
which it is a party. RELP will not seek recourse or commence any action against
any of the shareholders of AIP or any of their personal assets, and will not
commence any action for money judgments against any of the Trust Managers or
officers of AIP or seek recourse against any of their personal assets, for the
performance or payment of any obligation of AIP hereunder or thereunder. The
partners of RELP shall not be personally bound or have any personal liability
hereunder. AIP shall look solely to the assets of RELP for satisfaction of any
liability of RELP with respect to this Agreement and the Ancillary Agreements
to which it is a party. AIP will not seek recourse or commence any action
against any of the partners of RELP or any of their personal assets, and will
not commence any action for money judgments against any of the directors or
officers of RELP or seek recourse against any of their personal assets, for the
performance or payment of any obligation of RELP hereunder or thereunder.
<PAGE> 38
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
AMERICAN INDUSTRIAL PROPERTIES REIT
/s/ CHARLES W. WOLCOTT
---------------------------------------------
Charles W. Wolcott, President and
Chief Executive Officer
USAA REAL ESTATE INCOME INVESTMENTS I,
A CALIFORNIA LIMITED PARTNERSHIP
By: USAA Investors I, Inc., Its General
Partner
/s/ T. PATRICK DUNCAN
---------------------------------------------
T. Patrick Duncan
Senior Vice President - Operations
<PAGE> 1
EXHIBIT 10.2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June
30, 1997, is entered into by and between American Industrial Properties REIT, a
Texas real estate investment trust ("AIP") , and USAA Real Estate Income
Investments II Limited Partnership, a Texas limited partnership ("RELP"). USAA
Real Estate Company, a Delaware corporation ("Realco"), is a party to this
Agreement solely for the purpose of binding itself to the provisions of Section
7.10 hereunder.
RECITALS
A. The Board of Trust Managers of AIP (the "Board of Trust
Managers") and the general partner of RELP have each determined that a business
combination between AIP and RELP is in the best interests of their shareholders
and partners, respectively, and presents an opportunity for their respective
businesses to achieve strategic and financial benefits, and accordingly have
agreed to effect a merger subject to the terms and conditions set forth herein.
B. AIP and RELP desire to make certain representations,
warranties and agreements in connection with the merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, AIP and
RELP hereby agree as follows:
ARTICLE I. THE MERGER
1.1. The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.3), RELP shall be
merged with and into AIP in accordance with this Agreement and the Plan of
Merger (the "Plan of Merger") in substantially the form attached hereto as
Exhibit A, with such completions, additions and substitutions conforming to the
terms of this Agreement as the parties shall approve, such approval to be
conclusively evidenced by their causing the Plan of Merger containing such
completions, additions or substitutions to be filed in accordance with
applicable laws; and the separate existence of RELP shall thereupon cease (the
"Merger"). AIP shall be the surviving entity in the Merger (sometimes
hereinafter referred to as the "Survivor"). The Merger shall have the effects
specified in Section 23.60 of the Texas Real Estate Investment Trust Act, as
amended (the "Texas REIT Act") and Section 2.11 of the Texas Revised Limited
Partnership Act (the "LP Act").
1.2. The Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place at the
offices of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P. ("Liddell, Sapp"),
located at 2200 Ross Avenue, Suite 900, Dallas, Texas at 10:00 a.m., local
time, within five business days after receipt of approval of the Merger by
AIP's shareholders and RELP's partners, or at such other time, date or place as
AIP and RELP may agree. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
<PAGE> 2
1.3. Effective Time. If all the conditions to the Merger set forth
in Article VIII shall have been fulfilled or waived (and this Agreement shall
not have been terminated as provided in Article IX), AIP and RELP shall cause
Articles of Merger satisfying the requirements of the Texas REIT Act and
Articles of Merger satisfying the requirements of the LP Act to be properly
executed, verified and delivered for filing in accordance with the LP Act and
the Texas REIT Act on the Closing Date. The Merger shall become effective for
accounting and all other purposes to the fullest extent permitted by law as of
the close of business on December 31, 1997 (the "Effective Time") or such other
date as may be agreed to by the parties. For state law purposes, the Merger
shall become effective upon the issuance of a certificate of merger by the
Secretary of State of the State of Texas in accordance with the LP Act or at
such later time which AIP and RELP shall have agreed upon and designated in
such filings in accordance with applicable law.
ARTICLE II. DECLARATION OF TRUST
AND BYLAWS OF THE SURVIVOR
2.1. Declaration of Trust. The Declaration of Trust of AIP in
effect immediately prior to the Effective Time shall be the Declaration of
Trust of the Survivor until duly amended in accordance with applicable law.
2.2. Bylaws. The Bylaws of AIP in effect immediately prior to the
Effective Time shall be the Bylaws of the Survivor until duly amended in
accordance with applicable law.
ARTICLE III. TRUST MANAGERS AND OFFICERS OF AIP
3.1. Trust Managers. The Trust Managers of AIP immediately prior
to the Effective Time shall be the Trust Managers of AIP as of the Effective
Time.
3.2. Officers. The officers of AIP immediately prior to the
Effective Time shall be the officers of AIP as of the Effective Time.
ARTICLE IV. RELP PARTNERSHIP INTERESTS
4.1. Conversion of the RELP Partnership Interest. (a) At the
Effective Time, each Common Share of Beneficial Interest of AIP outstanding
immediately prior to the Effective Time shall remain outstanding and shall
represent one Common Share of Beneficial Interest of AIP.
(b) At the Effective Time, the general and limited partnership
interests of RELP (each a "RELP Interest"), issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of holder thereof, be converted into the right
to receive Common Shares of Beneficial Interest, $0.10 par value per share (the
"AIP Common Shares"), of AIP. The aggregate number of AIP Common Shares to be
issued to the RELP partners in connection with the Merger shall be equal to
$10,200,000 (the "Purchase Price") divided by the Share Price (the "Total
Shares"). If RELP repays any mortgage indebtedness existing on the date hereof
during the period from the date hereof to and including the Closing Date, the
Purchase Price shall be appropriately adjusted. The term "Share Price" shall
mean $2.625. The number of AIP
<PAGE> 3
Common Shares to be received by a partner shall be equal to the Total Shares
multiplied by such partner's percentage interest in RELP plus each limited
partner's pro rata portion of the general partnership interest of the RELP's
general partner.
(c) As a result of the Merger and without any action on the part
of the holder thereof, at the Effective Time, all RELP Interests shall cease
to be outstanding and shall be canceled and retired, and each holder of a RELP
Interest shall thereafter cease to have any rights with respect to such RELP
Interest, except the right to receive, without interest, the AIP Common Shares
and cash for fractional shares of AIP Common Shares in accordance with Sections
4.1(b) and 4.2(e).
4.2. Exchange of RELP Interests. (a) As of the Effective Time,
AIP shall deposit, or shall cause to be deposited, with an exchange agent
selected by AIP, which shall be AIP's Transfer Agent or such other party
reasonably satisfactory to RELP (the "Exchange Agent"), for the benefit of the
holders of RELP Interests, for exchange in accordance with this Article IV,
certificates representing the Total Shares and the cash in lieu of fractional
shares (such cash and certificates for the Total Shares together with any
dividends or distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund") to be issued pursuant to Section 4.1 and paid pursuant
to this Section 4.2 in exchange for outstanding RELP Interests.
(b) Promptly after the Effective Time, AIP shall cause the
Exchange Agent to mail to each holder of record of a RELP Interest (x) a
certificate representing the number of whole shares of AIP Common Shares and
(y) a check representing the amount of cash in lieu of fractional shares, if
any, and unpaid dividends and distributions, if any, which such holder has the
right to receive in respect of the RELP Interest surrendered pursuant to the
provisions of this Article IV, after giving effect to any required withholding
tax. No interest will be paid or accrued on the cash in lieu of fractional
shares and unpaid dividends and distributions, if any, payable to holders of
RELP Interests. In the event of a transfer of ownership of RELP Interests
which is not registered in the transfer records of RELP, a certificate
representing the proper number of AIP Common Shares, together with a check for
the cash to be paid in lieu of fractional shares, may be issued to such a
transferee if such holder presents to the Exchange Agent, all documents
required to evidence and effect such transfer and to evidence that any
applicable transfer taxes have been paid.
(c) At and after the Effective Time, there shall be no transfers
on the transfer books of RELP of RELP Interests which were outstanding
immediately prior to the Effective Time.
(d) No fractional AIP Common Shares shall be issued pursuant
hereto. In lieu of the issuance of any fractional AIP Common Shares pursuant to
Section 4.1(b), cash adjustments will be paid to holders in respect of any
fractional AIP Common Shares that would otherwise be issuable, and the amount
of such cash adjustment shall be equal to such fractional proportion of the
Share Price.
(e) Any portion of the Exchange Fund (including the proceeds of
any investments thereof and any AIP Common Shares) that remains unclaimed by
the former partners of RELP one year after the Effective Time shall be
delivered to AIP. Any former partners of RELP who have not theretofore complied
with this Article IV shall thereafter look only to AIP for delivery of their
AIP Common
<PAGE> 4
Shares, and payment of cash in lieu of fractional shares and unpaid dividends
and distributions on the AIP Common Shares deliverable in respect of each RELP
Interest such partners hold as determined pursuant to this Agreement, in each
case, without any interest thereon.
(f) None of AIP, RELP, the Exchange Agent or any other person
shall be liable to any former holder of RELP Interests for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF RELP
RELP represents and warrants to AIP as set forth below. As
contemplated below, a "RELP Disclosure Letter" will be delivered to AIP on or
before August 11, 1997. The RELP Disclosure Letter shall provide the
information or exceptions described below and shall list all of the assets of
the RELP that will not be transferred in connection with the Merger. The RELP
Disclosure Letter shall be amended prior to Closing to cause such
representations and warranties to be materially true and correct on the Closing
Date, but RELP shall remain liable for any material breach of such
representations and warranties reflected in such amendment only as provided in
Section 9.5(d), below.
5.1. Existence; Good Standing; Authority; Compliance with Law. (a)
RELP is a limited partnership, duly formed, validly existing and in good
standing under the laws of the State of Texas. To its actual knowledge, RELP
is duly licensed or qualified to do business as a foreign limited partnership
and is in good standing under the laws of any other state of the United States
in which the character of the properties owned or leased by it therein or in
which the transaction of its business makes such qualification necessary,
except where the failure to be so qualified would not have a material adverse
effect on the business, results of operations or financial condition of RELP (a
"RELP Material Adverse Effect"). RELP has all requisite power and authority to
own, operate, lease and encumber its properties and carry on its business as
now conducted.
(b) To the RELP's actual knowledge, it is not in violation of any
order of any court, governmental authority or arbitration board or tribunal, or
any law, ordinance, governmental rule or regulation to which RELP or any of its
properties or assets is subject, where such violation would have a RELP
Material Adverse Effect. RELP has obtained all licenses, permits and other
authorizations and has taken all actions required by applicable law or
governmental regulations in connection with its business as now conducted,
where the failure to obtain any such item or to take any such action would have
a RELP Material Adverse Effect. A copy of RELP's Agreement of Limited
Partnership and Certificate of Limited Partnership (collectively, the "RELP
Organizational Documents") have been delivered or made available to AIP and its
counsel and such documents will be listed in the RELP Disclosure Letter and
were or will be true and correct when delivered or made available.
5.2. Authorization, Validity and Effect of Agreements. RELP has
the requisite power and authority to enter into the transactions contemplated
hereby and to execute and deliver this Agreement and all other documents,
agreements and instruments related to the transactions
<PAGE> 5
contemplated by this Agreement (the "RELP Ancillary Agreements"). Subject only
to the approval of this Agreement and the transactions contemplated hereby in
accordance with the Agreement of Limited Partnership of the RELP, the
consummation by RELP of this Agreement, the RELP Ancillary Agreements and the
transactions contemplated hereby have been duly authorized by all requisite
action on the part of RELP. In reliance upon the legal opinion described in
Section 8.2(e), RELP believes this Agreement constitutes, and the RELP
Ancillary Agreements (when executed and delivered pursuant hereto for value
received) will constitute, the valid and legally binding obligations of RELP,
enforceable against RELP in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity (collectively, "Equitable
Remedies").
5.3. Future Issuances. To RELP's actual knowledge, there are not
at the date of this Agreement any existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate RELP to issue, transfer or sell any RELP Interests.
After the Effective Time, AIP will have no obligation to issue, transfer or
sell any RELP Interest.
5.4. Other Interests. Except as set forth in the RELP Disclosure
Letter, RELP does not own directly or indirectly any interest or investment
(whether equity or debt) in any corporation, partnership, joint venture,
business, trust or entity (other than investments in short-term investment
securities).
5.5. No Violation. To RELP's actual knowledge, neither the
execution and delivery by RELP of this Agreement nor the consummation by RELP
of the transactions contemplated hereby in accordance with the terms hereof,
will: (i) conflict with or result in a breach of any provisions of the
Agreement of Limited Partnership of RELP; (ii) except as contemplated by the
RELP Ancillary Agreements or as will be set forth in the RELP Disclosure
Letter, violate, or conflict with, or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination or in a
right of termination or cancellation of, or accelerate the performance required
by, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties of RELP under, or result in being
declared void, voidable or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which RELP is a party, or by which RELP
or any of its properties is bound or affected, except for any of the foregoing
matters which, individually or in the aggregate, would not have a RELP Material
Adverse Effect; or (iii) other than the filings provided for in Article I, any
filings required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Securities Act or applicable state securities and "Blue
Sky" laws (collectively, the "Regulatory Filings"), require any consent,
approval or authorization of, or declaration, filing or registration with, any
domestic governmental or regulatory authority, except where the failure to
obtain any such consent, approval or authorization of, or declaration, filing
or registration with, any governmental or regulatory authority would not have
an RELP Material Adverse Effect.
5.6. SEC Documents. (a) RELP has made available or will make
available to AIP prior to July 31, 1997, each registration statement, report,
proxy statement or information statement and
<PAGE> 6
all exhibits thereto prepared by it or relating to its properties (including
registration statements covering mortgage pass-through certificates) since
January 1, 1994, each in the form (including exhibits and any amendments
thereto) filed with the SEC (collectively, the "RELP Reports"). The RELP
Reports, which were or will be filed with the SEC in a timely manner,
constitute all forms, reports and documents required to be filed by RELP under
the Securities Act of 1933, as amended (the "Securities Act"), the Exchange Act
and the rules and regulations promulgated thereunder (collectively the
"Securities Laws") for the periods stated above.
(b) To the RELP's actual knowledge, as of their respective dates,
the RELP Reports (i) complied as to form in all material respects with the
applicable requirements of the Securities Laws and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. To the
RELP's actual knowledge, each of the balance sheets of RELP included in or
incorporated by reference into the RELP Reports (including the related notes
and schedules) fairly presents the financial position of RELP as of its date
and each of the consolidated statements of income, retained earnings and cash
flows of RELP included in or incorporated by reference into the RELP Reports
(including any related notes and schedules) fairly presents the results of
operations, retained earnings and cash flows, as the case may be, of RELP for
the periods set forth therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments which would not be material in amount or
effect), in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as may be
noted therein and except, in the case of the unaudited statements, as permitted
by the Securities Laws.
(c) Except as and to the extent set forth on the balance sheet of
RELP at March 31, 1997, including all notes thereto, or as set forth in the
RELP Reports, RELP has no material liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on, or reserved against in, a balance sheet of RELP or in the
notes thereto, prepared in accordance with generally accepted accounting
principles consistently applied, except liabilities arising in the ordinary
course of business since such date which would not have a RELP Material Adverse
Effect.
5.7. Litigation. To the RELP's actual knowledge, there are (i) no
continuing orders, injunctions or decrees of any court, arbitrator or
governmental authority to which RELP is a party or by which any of its
properties or assets are bound or to which USAA Investors II, Inc. (the
"General Partner") or the General Partner's, directors, officers, or
affiliates is a party or by which any of their properties or assets are bound,
and (ii) except as will be set forth in the RELP Disclosure Letter, no actions,
suits or proceedings pending against RELP or against the General Partner or the
General Partner's directors, officers or affiliates or, to the knowledge of the
General Partner, threatened against RELP or against the General Partner or the
General Partner's directors, officers or affiliates, at law or in equity, or
before or by any federal or state commission, board, bureau, agency or
instrumentality, that in the case of clauses (i) or (ii) above are reasonably
likely, individually or in the aggregate, to have a RELP Material Adverse
Effect.
<PAGE> 7
5.8. Absence of Certain Changes. Except as disclosed in the RELP
Reports filed prior to the date hereof, since March 31, 1997, (i) RELP
conducted its business only in the ordinary course of such business (which for
purposes of this section only, shall include all acquisitions of real estate
properties and financing arrangements made in connection therewith or otherwise
will be set forth in the RELP Disclosure Letter); (ii) there has not been any
RELP Material Adverse Effect; (iii) there has not been any distribution,
setting aside or payment of any distribution with respect to any RELP Interest,
and (iv) there has not been any material change in RELP's accounting
principles, practices or methods.
5.9. Taxes. (a) Except as may be set forth in the RELP Disclosure
Letter, RELP (i) has timely filed all federal, state and foreign tax returns
including, without limitation, information returns and reports required to be
filed by it for tax periods ended prior to the date of this Agreement or
requests for extensions have been timely filed and any such request has been
granted and has not expired and all such returns are accurate and complete in
all material respects, (ii) has paid or accrued all taxes shown to be due and
payable on such returns or which have become due and payable pursuant to any
assessment, deficiency notice, 30-day letter or other notice received by it and
(iii) has properly accrued all taxes for such periods and periods subsequent to
the periods covered by such returns. RELP has not received notice that the
federal, state and local income and franchise tax returns of RELP has been or
will be examined by any taxing authority. RELP has not executed or filed with
the Internal Revenue Service (the "IRS") or any other taxing authority any
agreement now in effect extending the period for assessment or collection of
any income or other taxes.
(b) Except as may be set forth in the RELP Disclosure Letter, RELP
is not a party to any pending action or proceeding by any governmental
authority for assessment or collection of taxes, and no claim for assessment or
collection of taxes has been asserted against it. True, correct and complete
copies of all federal, state and local income or franchise tax returns filed by
RELP since January 1, 1991 and all communications relating thereto have been
delivered to AIP or made available to representatives of AIP or will be so
delivered or made available prior to July 31, 1997. RELP does not hold any
asset (i) the disposition of which could be subject to rules similar to Section
1374 of the Internal Revenue Code of 1986, as amended (the "Code") as a result
of an election under IRS Notice 88-19 or (ii) that is subject to a consent
filed pursuant to Section 341(f) of the Code and regulations thereunder. For
purposes of this Section 5.9, "taxes" includes any interest, penalty or
additional amount payable with respect to any tax.
5.10. Books and Records. The books of account and other financial
records of RELP are in all material respects true, complete and correct, have
been maintained in accordance with good business practices, and are accurately
reflected in all material respects in the financial statements included in the
RELP Reports.
5.11. Properties. (a) RELP owns fee simple title to each of the
real properties reflected on the most recent balance sheet of RELP included in
the RELP Reports or as may be identified in the RELP Disclosure Letter (the
"RELP Properties"), which are all of the real estate properties owned by it,
free and clear of liens, mortgages or deeds of trust, claims against title,
charges which are liens or security interests ("Encumbrances") except as will
be noted in the RELP Disclosure
<PAGE> 8
Letter. To RELP's actual knowledge, the RELP Properties are not subject to any
rights of way, written agreements, laws, ordinances and regulations affecting
building use or occupancy, or reservations of an interest in title
(collectively, "Property Restrictions"), except for (i) Encumbrances and
Property Restrictions that will be set forth in the RELP Disclosure Letter,
(ii) Property Restrictions imposed or promulgated by law or any governmental
body or authority with respect to real property, including zoning regulations,
provided they do not materially adversely affect the current use of the
property, (iii) Encumbrances and Property Restrictions disclosed on existing
title reports or current surveys (in either case copies of which title reports
and surveys have been or will be delivered or made available to AIP July 31,
1997), (iv) mechanics', carriers', workmen's, repairmen's liens and other
Encumbrances, Property Restrictions and other limitations of any kind, if any,
which have heretofore been bonded (and that will be listed in the RELP
Disclosure Letter) or which individually or in the aggregate do not exceed
$100,000, do not materially detract from the value of or materially interfere
with the present use of any of the RELP Properties subject thereto or affected
thereby, and do not otherwise materially impair business operations conducted
by RELP and which have arisen or been incurred only in its construction
activities or in the ordinary course of business.
(b) Valid policies of title insurance have been issued insuring
either (a) RELP's fee simple title to the RELP Properties or (b) first mortgage
liens thereon, subject only to the matters disclosed above and as may be set
forth in the RELP Disclosure Letter, and such policies are, at the date hereof,
in full force and effect and no claim has been made against any such policy. To
RELP's actual knowledge, except as will be set forth in the RELP Disclosure
Letter: (i) there is no certificate, permit or license from any governmental
authority having jurisdiction over any of the RELP Properties or any agreement,
easement or other right which is necessary to permit the lawful use and
operation of the buildings and improvements on any of the RELP Properties or
which is necessary to permit the lawful use and operation of all driveways,
roads and other means of egress and ingress to and from any of the RELP
Properties that has not been obtained and is not in full force and effect, or
of any pending threat of modification or cancellation of any of same; (ii) RELP
has not received written notice of any material violation of any federal, state
or municipal law, ordinance, order, regulation or requirement affecting any
portion of any of the RELP Properties issued by any governmental authority;
(iii) there are no structural defects relating to the RELP Properties and no
RELP Properties whose building systems are not in working order in any material
respect; and (iv) there is (A) no physical damage to any RELP Property in
excess of $100,000 for which there is no insurance in effect covering the cost
of the restoration, (B) no current renovation to any RELP Property the cost of
which exceeds $100,000 and (C) no current restoration (excluding tenant
improvements) of any RELP Property, the cost of which exceeds $100,000.
(c) Except as will be set forth in the RELP Disclosure Letter,
RELP has not received notice to the effect that and there are no (A)
condemnation or rezoning proceedings that are pending or threatened with
respect to any of the RELP Properties or (B) zoning, building or similar laws,
codes, ordinances, orders or regulations that are or will be violated by the
continued maintenance, operation or use of any buildings or other improvements
on any of the RELP Properties or by the continued maintenance, operation or use
of the parking areas. All work to be performed, payments to be made and actions
to be taken by RELP prior to the date hereof pursuant to any agreement entered
into with a governmental body or authority in connection with a site approval,
zoning
<PAGE> 9
reclassification or other similar action relating to the RELP Properties (e.g.,
Local Improvement District, Road Improvement District, Environmental
Mitigation) has been performed, paid or taken, as the case may be, and RELP is
not aware of any planned or proposed work, payments or actions that may be
required after the date hereof pursuant to such agreements, except as will be
set forth in the RELP Disclosure Letter.
5.12. Environmental Matters. To RELP's actual knowledge, RELP has
not caused (i) the unlawful presence of any hazardous substances, hazardous
materials, toxic substances or waste materials (collectively, "Hazardous
Materials") on any of the RELP Properties, or (ii) any unlawful spills,
releases, discharges or disposal of Hazardous Materials to have occurred or be
presently occurring on or from the RELP Properties as a result of any
construction on or operation and use of such properties, which presence or
occurrence would, individually or in the aggregate, have a RELP Material
Adverse Effect; and in connection with the construction on or operation and use
of the RELP Properties, RELP has not failed to comply, in any material respect,
with any applicable local, state and federal environmental laws, regulations,
ordinances and administrative and judicial orders relating to the generation,
recycling, reuse, sale, storage, handling, transport and disposal of any
Hazardous Materials.
5.13. Labor Matters. RELP is not a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor union organization. There is no unfair labor
practice or labor arbitration proceeding pending or, to the knowledge of the
General Partner, threatened against RELP relating to its business, except for
any such proceeding which would not have a RELP Material Adverse Effect. To the
knowledge of the General Partner, there are no organizational efforts with
respect to the formation of a collective bargaining unit presently being made
or threatened involving employees of RELP or any of its Subsidiaries.
5.14. No Brokers. Except the fee that is to be paid to Houlihan
Lokey Howard & Zukin ("Houlihan") by RELP as described in Section 5.15 below,
RELP has not entered into any contract, arrangement or understanding with any
person or firm which may result in the obligation of RELP or AIP to pay any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby. RELP is not aware of any claim for
payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
5.15. Opinion of Financial Advisor. RELP has retained Houlihan to
review the transaction contemplated by this Agreement and to issue an opinion
to the effect that, as of the date of such opinion, the Purchase Price is fair
to the holders of RELP Interests from a financial point of view.
5.16. Related Party Transactions. Except as set forth in the RELP
Disclosure Letter, there are no arrangements, agreements or contracts entered
into by RELP with (i) any consultant, (ii) any person who is an officer,
director or affiliate of RELP or its General Partner, any relative of any of
the foregoing or any entity of which any of the foregoing is an affiliate, or
(iii) any person who acquired RELP Interests in a private placement.
<PAGE> 10
5.17. Contracts and Commitments. The RELP Disclosure Letter will
set forth (i) all unsecured notes or other obligations of RELP which
individually may result in total payments in excess of $100,000, (ii) all
notes, debentures, bonds and other evidence of indebtedness which are secured
or collateralized by mortgages, deeds of trust or other security interests in
the RELP Properties or personal property of RELP, and (iii) each commitment
entered into by RELP which may result in total payments or liability in excess
of $100,000. Copies of the foregoing will be delivered or made available to AIP
prior to July 31, 1997, will be listed on the RELP Disclosure Letter and will
be materially true and correct when delivered or made available. RELP has not
received any notice of a default that has not been cured under any of the
documents described in clause (i) above or is in default respecting any payment
obligations thereunder beyond any applicable grace periods. All options of RELP
to purchase real property will be set forth on the RELP Disclosure Letter and
such options and RELP's rights thereunder are in full force and effect. All
joint venture agreements to which RELP is a party will be set forth on the RELP
Disclosure Letter and RELP is not in default with respect to any obligations,
which individually or in the aggregate are material, thereunder.
5.18. Development Rights. Set forth in the RELP Disclosure Letter
will be a list of all material agreements entered into by RELP relating to the
development, rehabilitation, capital improvement or construction of office
buildings, industrial facilities or other real estate properties, which
development or construction has not been substantially completed as of the date
of this Agreement. Such agreements, true and correct copies of all of which
will be delivered or made available to AIP prior to July 31, 1997, will be
listed in the RELP Disclosure Letter, have not been modified and are valid and
binding in accordance with their respective terms.
5.19. Convertible Securities. To RELP's actual knowledge, RELP has
no outstanding options, warrants or other securities exercisable for, or
convertible into, RELP Interests, the terms of which would require any anti-
dilution adjustments by reason of the consummation of the transactions
contemplated hereby.
ARTICLE VI . REPRESENTATIONS AND WARRANTIES OF AIP
AIP represents and warrants to RELP as set forth below. As
contemplated below, an "AIP Disclosure Letter" will be delivered to RELP on or
before August 11, 1997. The AIP Disclosure Letter shall provide the
information or exceptions described below. The AIP Disclosure Letter shall be
amended prior to Closing to cause such representations and warranties to be
materially true and correct on the Closing Date, but AIP shall remain liable
for any material breach of such representations and warranties reflected in
such amendment only as provided in Section 9.5(d), below.
6.1. Existence; Good Standing; Authority; Compliance with Law.
(a) AIP is a real estate investment trust duly organized and validly existing
under the laws of the State of Texas. To AIP's actual knowledge, AIP is duly
licensed or qualified to do business and is in good standing under the laws of
any other state of the United States in which the character of the properties
owned or leased by it therein or in which the transaction of its business makes
such qualification necessary, except where the failure to be so qualified would
not have a material adverse effect on the business, results
<PAGE> 11
of operations or financial condition of AIP and its subsidiaries taken as a
whole (an "AIP Material Adverse Effect"). AIP has all requisite power and
authority to own, operate, lease and encumber its properties and carry on its
business as now conducted. Each of AIP's Subsidiaries is a corporation, limited
liability company or partnership duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has the requisite power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business and
is in good standing in each jurisdiction in which the ownership of its property
or the conduct of its business requires such qualification, except for
jurisdictions in which such failure to be so qualified or to be in good
standing would not have an AIP Material Adverse Effect.
(b) To AIP's actual acknowledge, neither AIP nor any AIP
Subsidiary is in violation of any order of any court, governmental authority or
arbitration board or tribunal, or any law, ordinance, governmental rule or
regulation to which AIP or any AIP Subsidiary or any of their respective
properties or assets is subject, where such violation would have an AIP
Material Adverse Effect. AIP and its Subsidiaries have obtained all licenses,
permits and other authorizations and have taken all actions required by
applicable law or governmental regulations in connection with their business as
now conducted, where the failure to obtain any such item or to take any such
action would have an AIP Material Adverse Effect. Copies of AIP's and its
Subsidiaries' Declaration of Trust, Articles of Incorporation, Bylaws,
organizational documents and partnership and joint venture agreements have been
or will be prior to July 31, 1997, delivered or made available to RELP and such
documents will be listed in the AIP Disclosure Letter and were or will be true
and correct when delivered or made available. For the purposes of the
immediately preceding sentence, the term "Subsidiary"shall include the entities
set forth in the AIP Disclosure Letter, which are all of AIP's Subsidiaries.
6.2. Authorization, Validity and Effect of Agreements. AIP has
the requisite power and authority to enter into the transactions contemplated
hereby and to execute and deliver this Agreement and all other documents,
agreements and instruments related to the transactions contemplated by this
Agreement to which it is a party (the "AIP Ancillary Agreements"). Subject only
to the approval of the issuance of AIP Common Shares pursuant to the Merger
contemplated hereby by the holders of two-thirds of the outstanding AIP Common
Shares, present and voting thereon, the consummation by AIP of this Agreement,
the AIP Ancillary Agreements and the transactions contemplated hereby have been
duly authorized by all requisite action on the part of AIP. This Agreement
constitutes, and the AIP Ancillary Agreements (when executed and delivered
pursuant hereto for value received) will constitute, the valid and legally
binding obligations of AIP enforceable against AIP in accordance with their
respective terms, subject to Equitable Remedies.
6.3. Capitalization. On June 15, 1997, the authorized capital
stock of AIP consists of 10,000,000 Common Shares. As of the date hereof, all
10,000,000 Common Shares are outstanding. AIP has no outstanding bonds,
debentures, notes or other obligations (other than to Realco), the holders of
which have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the shareholders of AIP on any
matter. Except as set forth in the AIP Disclosure Letter, all such issued and
outstanding of AIP Common Shares are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights. Except as set forth in the
AIP Disclosure Letter, there are not at the date of this Agreement any existing
options, warrants, calls,
<PAGE> 12
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate AIP or any of its Subsidiaries to issue, transfer or
sell any shares or other equity interest of AIP or any of its Subsidiaries
except under any employee incentive plan approved by AIP's shareholders. There
are no agreements or understandings to which AIP is a party with respect to the
voting of any AIP Common Shares or which restrict the transfer of any such
shares, except in order to protect its REIT status.
6.4. Subsidiaries. Except as set forth in the AIP Disclosure
Letter, AIP owns directly or indirectly each of the outstanding shares of
capital stock or all of the partnership or other equity interests of each of
AIP's Subsidiaries free and clear of all liens, pledges, security interests,
claims or other encumbrances other than liens imposed by local law which are
not material.
6.5. Other Interests. Except as will be disclosed in the AIP
Disclosure Letter and except for interests in the AIP Subsidiaries, neither AIP
nor any AIP Subsidiary owns directly or indirectly any interest or investment
(whether equity or debt) in any corporation, partnership, joint venture,
business, trust or entity (other than investments in short-term investment
securities).
6.6. No Violation. Neither the execution and delivery by AIP of
this Agreement nor the consummation by AIP of the transactions contemplated
hereby in accordance with the terms hereof, will: (i) conflict with or result
in a breach of any provisions of AIP's Declaration of Trust; (ii) violate, or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties of AIP or its Subsidiaries under, or result in being
declared void, voidable or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which AIP or any of its Subsidiaries is
a party, or by which AIP or any of its Subsidiaries or any of their properties
is bound or affected, except for any of the foregoing matters which,
individually or in the aggregate, would not have an AIP Material Adverse
Effect; or (iii) other than the Regulatory Filings require any consent,
approval or authorization of, or declaration, filing or registration with, any
domestic governmental or regulatory authority, except where the failure to
obtain such consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority would not have an
AIP Material Adverse Effect.
6.7. SEC Documents. (a) AIP has made available or will make
available to RELP prior to July 31, 1997, the registration statements of AIP
filed with the SEC in connection with public offerings of AIP securities since
January 1, 1994 and all exhibits, amendments and supplements thereto (the "AIP
Registration Statements"), and each registration statement, report, proxy
statement or information statement and all exhibits thereto prepared by it or
relating to its properties since the effective date of the latest AIP
Registration Statement, each in the form (including exhibits and any amendments
thereto) filed with the SEC (collectively, the "AIP Reports"). The AIP Reports,
which were or will be filed with the SEC in a timely manner, constitute all
forms, reports and documents required to be filed by AIP under the Securities
Laws.
<PAGE> 13
(b) To AIP's actual knowledge, as of their respective dates, the
AIP Reports (i) complied as to form in all material respects with the
applicable requirements of the Securities Laws, and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. To AIP's
actual acknowledge, each of the consolidated balance sheets of AIP included in
or incorporated by reference into the AIP Reports (including the related notes
and schedules) fairly presents the consolidated financial position of AIP and
the AIP Subsidiaries as of its date and each of the consolidated statements of
income, retained earnings and cash flows of AIP included in or incorporated by
reference into the AIP Reports (including any related notes and schedules)
fairly presents the results of operations, retained earnings or cash flows, as
the case may be, of AIP and the AIP Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein and except, in the
case of the unaudited statements, as permitted by the Securities Laws.
(c) Except as and to the extent set forth on the consolidated
balance sheet of AIP and its Subsidiaries at March 31, 1997, including all
notes thereto, or as set forth in the AIP Reports, neither AIP nor any of the
AIP Subsidiaries has any material liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on, or reserved against in, a balance sheet of AIP or in the notes
thereto, prepared in accordance with generally accepted accounting principles
consistently applied, except liabilities arising in the ordinary course of
business since such date which would not have an AIP Material Adverse Effect.
6.8. Litigation. To AIP's actual knowledge, there are (i) no
continuing orders, injunctions or decrees of any court, arbitrator or
governmental authority to which AIP or any AIP Subsidiary is a party or by
which any of its properties or assets are bound or, to which any of its
directors, officers, or affiliates is a party or by which any of their
properties or assets are bound, and (ii) except as will be set forth in the AIP
Disclosure Letter, no actions, suits or proceedings pending against AIP or any
AIP Subsidiary or, to the knowledge of AIP, against any of its Trust Managers,
officers, or affiliates or, to the knowledge of AIP, threatened against AIP or
any AIP Subsidiary or against any of its Trust Managers, officers, or
affiliates, at law or in equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality, that in the case of
clauses (i) or (ii) above are reasonably likely, individually or in the
aggregate, to have an AIP Material Adverse Effect.
6.9. Absence of Certain Changes. Except as disclosed in the AIP
Reports filed with the SEC prior to the date hereof, (i) AIP and its
Subsidiaries have conducted their business only in the ordinary course of such
business (which, for purposes of this section only, shall include all
acquisitions of real estate properties and financing arrangements made in
connection therewith); (ii) there has not been any AIP Material Adverse Effect;
(iii) there has not been any declaration, setting aside or payment of any
dividend or other distribution with respect to the AIP Common Shares; and (iv)
there has not been any material change in AIP's accounting principles,
practices or methods.
<PAGE> 14
6.10. Taxes. (a) Except as may be set forth in the AIP Disclosure
Letter, AIP and each of its Subsidiaries (i) has timely filed all federal,
state and foreign tax returns including, without limitation, information
returns and reports required to be filed by any of them for tax periods ended
prior to the date of this Agreement or requests for extensions have been timely
filed and any such request has been granted and has not expired and all such
returns are absolute and complete in all material respects, (ii) has paid or
accrued all taxes shown to be due and payable on such returns or which have
become due and payable pursuant to any assessment, deficiency notice, 30-day
letter or other notice received by it and (iii) has properly accrued all taxes
for such periods subsequent to the periods covered by such returns. Neither AIP
nor any of its Subsidiaries has received notice that the federal, state and
local income and franchise tax returns of AIP or any such Subsidiary has been
or will be examined by any taxing authority. Neither AIP nor any of its
Subsidiaries has executed or filed with the IRS or any other taxing authority
any agreement now in effect extending the period for assessment or collection
of any income or other taxes.
(b) Except as will be disclosed in the AIP Disclosure Letter,
neither AIP nor any of its Subsidiaries is a party to any pending action or
proceeding by any governmental authority for assessment or collection of taxes,
and no claim for assessment or collection of taxes has been asserted against
it. True, correct and complete copies of all federal, state and local income or
franchise tax returns filed by AIP and each of its Subsidiaries and all
communications relating thereto have been delivered to RELP or made available
to representatives of RELP or will be so delivered or made available prior to
July 31, 1997. AIP (i) has qualified to be taxed as a REIT pursuant to Sections
856 through 859 of the Code for its taxable years ended December 31, 1985
through 1996, inclusive (ii) has operated, and intends to continue to operate,
in such a manner as to qualify to be taxed as a REIT pursuant to Sections 856
through 859 of the Code for its taxable year ended on the effective date of the
Merger, and (iii) has not taken or omitted to take any action which could
result in, and each of the executive officers of AIP, each acting in his
respective capacity as such, has no actual knowledge of, a challenge to its
status as a REIT. AIP represents that each of its Subsidiaries is a Qualified
REIT Subsidiary as defined in Section 856 (i) of the Code. Neither AIP nor any
of its Subsidiaries holds any asset (i) the disposition of which could be
subject to rules similar to Section 1374 of the Code as a result of an election
under IRS Notice 88-19 or (ii) that is subject to a consent filed pursuant to
Section 341(f) of the Code and regulations thereunder. For purposes of this
Section 6.10, "taxes" includes any interest, penalty or additional amount
payable with respect to any tax.
6.11. Books and Records. (a) The books of account and other
financial records of AIP and its Subsidiaries are in all material respects
true, complete and correct, have been maintained in accordance with good
business practices, and are accurately reflected in all material respects in
the financial statements included in the AIP Reports.
(b) The minute books and other records of AIP and its Subsidiaries
contain in all material respects accurate records of all meetings and
accurately reflect in all material respects all other corporate action of the
shareholders and Trust Managers and any committees of the Board of Trust
Managers of AIP and its Subsidiaries.
<PAGE> 15
6.12. Properties. (a) AIP and its Subsidiaries own fee simple
title to each of the real properties reflected on the most recent balance sheet
of AIP included in the AIP Reports or as may be identified in the AIP
Disclosure Letter (the "AIP Properties"), which are all of the real estate
properties owned by them, free and clear of Encumbrances. To AIP's actual
knowledge, the AIP Properties are not subject to any rights of way, written
agreements, laws, ordinances and regulations affecting building use or
occupancy, or reservations of an interest in title (collectively, "Property
Restrictions"), except for (i) Encumbrances and Property Restrictions that will
be set forth in the AIP Disclosure Letter, (ii) Property Restrictions imposed
or promulgated by law or any governmental body or authority with respect to
real property, including zoning regulations, provided they do not materially
adversely affect the current use of the property, (iii) Encumbrances and
Property Restrictions disclosed on existing title reports or surveys (in either
case copies of which title reports and surveys have been or will be delivered
or made available to RELP prior to July 31, 1997), and (iv) mechanics',
carriers', workmen's, repairmen's liens and other Encumbrances, Property
Restrictions and other limitations of any kind, if any, which have heretofore
been bonded (and that will be listed in the AIP Disclosure Letter) or which
individually or in the aggregate, do not exceed $100,000, do not materially
detract from the value of or materially interfere with the present use of any
of the AIP Properties subject thereto or affected thereby, and do not otherwise
materially impair business operations conducted by AIP and its Subsidiaries and
which have arisen or been incurred only in its construction activities or in
the ordinary course of business.
(b) Valid policies of title insurance have been issued insuring
AIP's or any of its Subsidiaries' fee simple title to the AIP Properties,
subject only to the matters disclosed above and as may be set forth in the AIP
Disclosure Letter, and such policies are, at the date hereof, in full force and
effect and no material claim has been made against any such policy. To AIP's
actual knowledge, except as will be set forth in the AIP Disclosure Letter, (i)
there is no certificate, permit or license from any governmental authority
having jurisdiction over any of the AIP Properties or any agreement, easement
or other right which is necessary to permit the lawful use and operation of the
buildings and improvements on any of the AIP Properties or which is necessary
to permit the lawful use and operation of all driveways, roads and other means
of egress and ingress to and from any of the AIP Properties that has not been
obtained and is not in full force and effect, or of any pending threat of
modification or cancellation of any of same; (ii) neither AIP nor its
Subsidiaries has received written notice of any material violation of any
federal, state or municipal law, ordinance, order, regulation or requirement
affecting any portion of any of the AIP Properties issued by any governmental
authority; (iii) there are no structural defects relating to the AIP Properties
and no AIP Properties whose building systems are not in working order in any
material respect; and (iv) there is (A) no physical damage to any AIP Property
in excess of $100,000 for which there is no insurance in effect covering the
cost of the restoration, (B) no current renovation to any AIP Property the cost
of which exceeds $100,000 and (C) no current restoration (excluding tenant
improvements) of any AIP Property the cost of which exceeds $100,000.
(c) Except as will be set forth in the AIP Disclosure Letter, AIP
or its Subsidiaries have received no notice to the effect that and there are no
(A) condemnation or rezoning proceedings that are pending or threatened with
respect to any of the AIP Properties or (B) any zoning, building or similar
laws, codes, ordinances, orders or regulations that are or will be violated by
the continued maintenance, operation or use of any buildings or other
improvements on any of the AIP Properties
<PAGE> 16
or by the continued maintenance, operation or use of the parking areas in any
material respect. All work to be performed, payments to be made and actions to
be taken by AIP or its Subsidiaries prior to the date hereof pursuant to any
agreement entered into with a governmental body or authority in connection with
a site approval, zoning reclassification or other similar action relating to
the AIP Properties (e.g., Local Improvement District, Road Improvement
District, Environmental Mitigation) has been performed, paid or taken, as the
case may be, and AIP is not aware of any planned or proposed work, payments or
actions that may be required after the date hereof pursuant to such agreements,
except as will be set forth in the AIP Disclosure Letter.
6.13. Environmental Matters. To the actual knowledge of AIP, none
of AIP, any of its Subsidiaries or, any other person has caused or permitted
(i) the unlawful presence of any Hazardous Materials on any of the AIP
Properties, or (ii) any unlawful spills, releases, discharges or disposal of
Hazardous Materials to have occurred or be presently occurring on or from the
AIP Properties as a result of any construction on or operation and use of such
properties, which presence or occurrence would, individually or in the
aggregate, have an AIP Material Adverse Effect; and in connection with the
construction on or operation and use of the AIP Properties, AIP and its
Subsidiaries have not failed to comply, in any material respect, with any
applicable local, state and federal environmental laws, regulations, ordinances
and administrative and judicial orders relating to the generation, recycling,
reuse, sale, storage, handling, transport and disposal of any Hazardous
Materials.
6.14. Labor Matters. Neither AIP nor any of its Subsidiaries is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor union organization.
There is no unfair labor practice or labor arbitration proceeding pending or,
to the knowledge of the executive officers of AIP, threatened against AIP or
its Subsidiaries relating to their business, except for any such proceeding
which would not have an AIP Material Adverse Effect. To the knowledge of AIP,
there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of AIP or any of its Subsidiaries.
6.15. No Brokers. Except for the fee payable to Prudential
Securities Incorporated ("Prudential") as described in Section 6.16 below, AIP
has not entered into any contract, arrangement or understanding with any
person or firm which may result in the obligation of AIP or RELP to pay any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby. AIP is not aware of any claim for
payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
6.16. Opinion of Financial Advisor. AIP has retained Prudential to
review the transaction contemplated by this Agreement and to issue an opinion
as to the fairness to AIP, from a financial point of view, of the consideration
to be paid by AIP pursuant to the Merger.
6.17. RELP Share Ownership. Except as may be set forth in the AIP
Disclosure Letter, neither AIP nor any of its Subsidiaries owns any RELP
Interests or other securities convertible into RELP interests.
<PAGE> 17
6.18. AIP Common Shares. The issuance and delivery by AIP of AIP
Common Shares in connection with the Merger and this Agreement have been duly
and validly authorized by all necessary action on the part of AIP except for
the approval of its shareholders contemplated by this Agreement. The AIP Common
Shares to be issued in connection with the Merger and this Agreement, when
issued in accordance with the terms of this Agreement, will be validly issued,
fully paid and nonassessable, except that shareholders may be subject to
further assessment with respect to certain claims for tort, contract, taxes,
statutory liability and otherwise in some jurisdictions to the extent such
claims are not satisfied by AIP.
6.19. Convertible Securities. AIP has no outstanding options,
warrants or other securities exercisable for, or convertible into, shares of
AIP Common Shares, the terms of which would require any anti-dilution
adjustments by reason of the consummation of the transactions contemplated
hereby, except the preemptive rights held by certain clients of Morgan Stanley
Asset Management, Inc. and held by MS Real Estate Special Situations, Inc. and
the convertible debt securities held by Realco.
6.20. Related Party Transactions. Set forth in the AIP Disclosure
Letter will be a list of all arrangements, agreements and contracts entered
into by AIP or any of its Subsidiaries with (i) any person who is an officer,
Trust Manager or affiliate of AIP or any of its Subsidiaries, any relative of
any of the foregoing or any entity of which any of the foregoing is an
affiliate or (ii) any person who acquired AIP Common Shares in a private
placement. The copies of such documents, all of which have been or will be
delivered or made available to RELP prior to July 31, 1997, are or will be
true, complete and correct when delivered or made available.
6.21. Contracts and Commitments. The AIP Disclosure Letter will set
forth (i) all unsecured notes or other obligations of AIP and AIP Subsidiaries
which individually may result in total payments in excess of $100,000, (ii)
notes, debentures, bonds and other evidence of indebtedness which are secured
or collateralized by mortgages, deeds of trust or other security interests in
the AIP Properties or personal property of AIP and its Subsidiaries, and (iii)
each commitment entered into by AIP or any of its Subsidiaries which
individually may result in total payments or liability in excess of $100,000.
Copies of the foregoing have been or will be delivered or made available to
RELP prior to July 31, 1997, will be listed on the AIP Disclosure Letter and
are or will be materially true and correct when delivered or made available.
None of AIP or any of its Subsidiaries has received any notice of a default
that has not been cured under any of the documents described in clause (i) or
(ii) above or is in default respecting any payment obligations thereunder
beyond any applicable grace periods. All options of AIP or any of its
Subsidiaries to purchase real property will be set forth on the AIP Disclosure
Letter and such options and AIP's or its Subsidiaries' rights thereunder are in
full force and effect. All joint venture agreements to which AIP or any of its
Subsidiaries is a party will be set forth on the AIP Disclosure Letter and AIP
or its Subsidiaries are not in default with respect to any obligations, which
individually or in the aggregate are material, thereunder.
6.22. Development Rights. Set forth in the AIP Disclosure Letter
will be a list of all material agreements entered into by AIP or any of its
Subsidiaries relating to the development, rehabilitation, capital improvement
or construction of office buildings, industrial facilities or other
<PAGE> 18
real estate properties which development or construction has not been
substantially completed as of the date of this Agreement. Such agreements,
true, complete and correct copies of all of which have been or will be
delivered or made available to RELP prior to July 31, 1997, will be listed in
the AIP Disclosure Letter.
6.23. Certain Payments Resulting From Transactions. The execution
of, and performance of the transactions contemplated by, this Agreement will
not (either alone or upon the occurrence of any additional or subsequent
events) (i) constitute an event under any AIP Benefit Plan, policy, practice,
agreement or other arrangement or any trust or loan (the "Employee
Arrangements") that will or may result in any payment (whether of severance pay
or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any employee, director or consultant of AIP or any of its Subsidiaries
unless such rights have been waived by any such person, or (ii) result in the
triggering or imposition of any restrictions or limitations on the right of AIP
or RELP to amend or terminate any Employee Arrangement and receive the full
amount of any excess assets remaining or resulting from such amendment or
termination, subject to applicable taxes. No payment or benefit which will be
required to be made pursuant to the terms of any agreement, commitment or AIP
Benefit Plan, as a result of the transactions contemplated by this Agreement,
to any officer, director or employee of AIP or any of its Subsidiaries, will be
characterized as an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code.
ARTICLE VII. COVENANTS
7.1. Acquisition Proposals. Prior to the Effective Time, RELP and
AIP each agree (i) that neither of them nor any of their Subsidiaries shall,
and each of them shall direct and use its best efforts to cause its respective
officers, General Partner, limited partners, Trust Managers, employees, agents,
affiliates and representatives (including, without limitation, any investment
banker, attorney or accountant retained by it or any of its Subsidiaries), as
applicable, not to, initiate, solicit or encourage, directly or indirectly, any
inquiries or 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, tender offer, exchange offer, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets or any equity securities (or any debt securities convertible into equity
securities) of, such party or any of its Subsidiaries, other than the
transactions contemplated by this Agreement (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal; (ii) that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing and each will take the
necessary steps to inform the individuals or entities referred to above of the
obligations undertaken in this Section 7.1; and (iii) that it will notify the
other party immediately if any such inquiries or proposals are received by, any
such information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it; provided, however, that nothing
contained in this Section 7.1 shall prohibit the Board of Directors of the
General Partner of RELP (the "Board of Directors") or the Board of Trust
Managers from (x)
<PAGE> 19
furnishing information to or entering into discussions or negotiations with,
any person or entity that makes an unsolicited bona fide Acquisition Proposal,
if, and only to the extent that, (A) the Board of Directors or Board of Trust
Managers, as applicable, determines in good faith that such action is required
for it to comply with its fiduciary duties to limited partners or shareholders,
as applicable, imposed by law as advised by counsel, (B) prior to furnishing
such information to, or entering into discussions or negotiations with, such
person or entity, such party provides written notice to the other party to this
Agreement to the effect that it is furnishing information to, or entering into
discussions with, such person or entity, and (C) subject to any confidentiality
agreement with such person or entity (which such party determined in good faith
was required to be executed in order for the Board of Directors or Board of
Trust Managers, as applicable, to comply with its fiduciary duties to limited
partners or shareholders, as applicable, imposed by law as advised by
counsel), such party keeps the other party to this Agreement informed of the
status (but not the terms) of any such discussions or negotiations; and (y) to
the extent applicable, complying with Rule 14e-2 promulgated under the Exchange
Act with regard to an Acquisition Proposal.
Nothing in this Section 7.1 shall (i) permit any party to terminate
this Agreement (except as specifically provided in Article IX hereof), (ii)
permit any party to enter into any agreement with respect to an Acquisition
Proposal during the term of this Agreement (it being agreed that during the
term of this Agreement, no party shall enter into any agreement with any person
that provides for, or in any way facilitates, an Acquisition Proposal (other
than a confidentiality agreement in customary form)), or (iii) affect any other
obligation of any party under this Agreement.
7.2. Conduct of Businesses.
(i) Prior to the Effective Time, except as may be set forth in
the RELP Disclosure Letter or the AIP Disclosure Letter or as contemplated by
this Agreement, unless the other party has consented in writing thereto, AIP
and RELP:
(a) Shall use their reasonable efforts, and shall cause each of
their respective Subsidiaries to use their reasonable efforts,
to preserve intact their business organizations and goodwill
and keep available the services of their respective officers
and employees;
(b) Shall confer on a regular basis with one or more
representatives of the other to report operational matters of
materiality and, subject to Section 7.1, any proposals to
engage in material transactions;
(c) Shall promptly notify the other of any material emergency or
other material change in the condition (financial or
otherwise) of the business, properties, assets or
liabilities, or any material governmental complaints,
investigations or hearings (or communications indicating that
the same may be contemplated), or the breach in any material
respect of any representation, warranty, covenant or agreement
contained herein;
(d) Shall not pay quarterly dividends or make distributions
payable with respect to the AIP Common Shares and RELP
Partnership Interests, respectively; and
<PAGE> 20
(e) Shall promptly deliver to the other true and correct copies of
any report, statement or schedule filed with the SEC
subsequent to the date of this Agreement.
(ii) Prior to the Effective Time, except as may be set forth in the
RELP Disclosure Letter, unless AIP has consented (such consent not to be
unreasonably withheld or delayed) in writing thereto, RELP:
(a) Shall conduct its operations according to its usual, regular
and ordinary course in substantially the same manner as
heretofore conducted;
(b) Shall not amend the RELP Organizational Documents;
(c) Shall not (i) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights
existing on the date hereof and disclosed pursuant to this
Agreement, issue any RELP Interests, make any distribution,
effect any recapitalization or other similar transaction, (ii)
grant, confer or award any option, warrant, conversion right
or other right not existing on the date hereof to acquire any
RELP Interest, (iii) increase any compensation or enter into
or amend any employment agreement with any of its present or
future officers or directors of the General Partner, or (iv)
adopt any new employee benefit plan or amend any existing
employee benefit plan in any material respect, except for
changes which are less favorable to participants in such
plans;
(d) Shall not declare, set aside or make any distribution or
payment with respect to any RELP Interest or directly or
indirectly redeem, purchase or otherwise acquire any RELP
Interest, or make any commitment for any such action;
(e) Shall not sell or otherwise dispose of (i) any RELP
Properties, or (ii) except in the ordinary course of business,
any of its other assets which are material, individually or in
the aggregate;
(f) Shall not make any loans, advances or capital contributions
to, or investments in, any other person;
(g) Shall not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business consistent
with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated
by, the most recent consolidated financial statements (or the
notes thereto) of RELP included in the RELP Reports or
incurred in the ordinary course of business consistent with
past practice;
<PAGE> 21
(h) Shall not enter into any commitment which individually may
result in total payments or liability by or to it in excess of
$250,000 in the case of any one commitment or in excess of
$500,000 for all commitments;
(i) Shall not, and shall not permit any of its Subsidiaries to,
enter into any commitment with any officer, director or
affiliate of RELP or its General Partner except to the extent
the same occur in the ordinary course of business consistent
with past practice and would not have a RELP Material Adverse
Effect; and
(j) Shall not enter into or terminate any lease representing
annual revenues of $100,000 or more.
(iii) Prior to the Effective Time, except as may be set forth in the
AIP Disclosure Letter, unless RELP has consented (such consent not to be
unreasonably withheld or delayed) in writing thereto, AIP:
(a) Shall, and shall cause each of its Subsidiaries to, conduct
its operations according to their usual, regular and ordinary
course in substantially the same manner as heretofore
conducted;
(b) Shall not amend its Declaration of Trust or Bylaws except as
contemplated by this Agreement;
(c) Shall not (i) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights
(including AIP's existing dividend reinvestment plan) existing
on the date hereof and disclosed pursuant to this Agreement,
issue any shares of its capital stock, effect any share split,
reverse share split, share dividend, recapitalization or other
similar transaction, (ii) grant, confer or award any option,
warrant, conversion right or other right not existing on the
date hereof to acquire any shares of its capital shares
(except pursuant to any employee incentive plan approved by
shareholders), (iii) amend any employment agreement with any
of its present or future officers or Trust Managers, or (iv)
adopt any new employee benefit plan (including any share
option, share benefit or share purchase plan) except the
employee incentive plan to be voted on at its shareholder
meeting for the fiscal year ended December 31, 1995;
(d) Shall not declare, set aside or pay any dividend or make any
other distribution or payment with respect to any Common
Shares or directly or indirectly redeem, purchase or otherwise
acquire any Common Shares or capital stock of any of its
Subsidiaries, or make any commitment for any such action;
(e) Except as will be set forth in the AIP Disclosure Letter,
shall not, and shall not permit any of its Subsidiaries to,
sell or otherwise dispose of (i) any AIP Properties or any of
its capital stock of or other interests in Subsidiaries or
(ii) except in the ordinary course of business, any of its
other assets which are material, individually or in the
aggregate;
<PAGE> 22
(f) Shall not, and shall not permit any of its Subsidiaries to,
make any loans, advances or capital contributions to, or
investments in, any other person other than in connection with
the sale of properties;
(g) Shall not, and shall not permit any of its Subsidiaries to,
pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business consistent
with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated
by, the most recent consolidated financial statements (or the
notes thereto) of AIP included in the AIP Reports or incurred
in the ordinary course of business consistent with past
practice;
(h) Shall not, and shall not permit any of its Subsidiaries to,
enter into any commitment which individually may result in
total payments or liability by or to it in excess of $500,000
in the case of any one commitment or in excess of $500,000 for
all commitments; and
(i) Shall not, and shall not permit any of its Subsidiaries to,
enter into any commitment with any officer, Trust Manager or
affiliate of AIP or any of its Subsidiaries, except as herein
or in the AIP Disclosure Letter provided and except in the
ordinary course of business.
For purposes of this Section 7.2, any consent shall be deemed to be
unreasonably delayed if notice of consent or withholding of consent is not
received within three days of request. Further, if no response is received by
the end of business on such third day, the party receiving the request shall be
deemed to have consented to such action.
7.3 Meetings of Shareholders and Partners. Each of AIP and RELP
will take all action necessary in accordance with applicable law and its
organizational documents to convene a meeting of its shareholders or partners,
as applicable, as promptly as practicable to consider and vote upon or
otherwise to obtain the consent of its shareholders or partners, as applicable,
to (i) in the case of AIP, approve this Agreement and the transactions
contemplated hereby, and (ii) in the case of RELP, approve this Agreement and
the transactions contemplated hereby. The Board of Trust Managers and the
General Partner shall each recommend such approval and AIP and RELP shall each
take all lawful action to solicit such approval, including, without limitation,
timely mailing the Proxy Statement/Prospectus (as defined in Section 7.7);
provided, however, that such recommendation or solicitation is subject to any
action taken by, or upon authority of, the Board of Trust Managers or the
General Partner, as the case may be, in the exercise of its good faith judgment
as to its fiduciary duties to its shareholders or partners, as applicable,
imposed by law as advised by counsel. AIP and RELP shall coordinate and
cooperate with respect to the timing of such meetings and shall use their best
efforts to hold such meetings on the same day.
7.4. Filings; Other Action. Subject to the terms and conditions
herein provided, RELP and AIP shall: (a) use all reasonable efforts to
cooperate with one another in (i) determining which filings are required to be
made prior to the Effective Time with, and which consents, approvals,
<PAGE> 23
permits or authorizations are required to be obtained prior to the Effective
Time from governmental or regulatory authorities of the United States and the
several states in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and (ii) timely
making all such filings and timely seeking all such consents, approvals,
permits or authorizations; (b) use all reasonable efforts to obtain in writing
any consents required from third parties in form reasonably satisfactory to
RELP and AIP necessary to effectuate the Merger; and (c) use all reasonable
efforts to take, or cause to be taken, all other action and do, or cause to be
done, all other things necessary, proper or appropriate to consummate and make
effective the transactions contemplated by this Agreement. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purpose of this Agreement, the proper officers and directors of AIP and
the General Partner shall take all such necessary action.
7.5. Inspection of Records. From the date hereof to the Effective
Time, each of RELP and AIP shall allow all designated officers, attorneys,
accountants and other representatives of the other access at all reasonable
times to the records and files, correspondence, audits and properties, as well
as to all information relating to commitments, contracts, titles and financial
position, or otherwise pertaining to the business and affairs of RELP and AIP
and their respective Subsidiaries.
7.6. Publicity. RELP and AIP shall, subject to their respective
legal obligations (including requirements of stock exchanges and other similar
regulatory bodies), consult with each other, and use reasonable efforts to
agree upon the text of any press release before issuing any such press release
or otherwise making public statements with respect to the transactions
contemplated hereby and in making any filings with any federal or state
governmental or regulatory agency or with any national securities exchange with
respect thereto.
7.7. Registration Statement. AIP and RELP shall cooperate and
promptly prepare and AIP shall file with the SEC as soon as practicable a
Registration Statement on Form S-4 (the "Form S-4") under the Securities Act,
with respect to the AIP Common Shares issuable in the Merger, a portion of
which Registration Statement shall also serve as the joint proxy statement with
respect to the meetings of the shareholders and partners, respectively, of AIP
and RELP in connection with the Merger (the "Proxy Statement/Prospectus"). The
respective parties will cause the Proxy Statement/Prospectus and the Form S-4
to comply as to form in all material respects with the applicable provisions of
the Securities Act, the Exchange Act and the rules and regulations promulgated
thereunder. AIP shall use all reasonable efforts, and RELP will cooperate with
AIP to have the Form S-4 declared effective by the SEC as promptly as
practicable. AIP shall use its best efforts to obtain, prior to the effective
date of the Form S-4, all necessary state securities law or "Blue Sky" permits
or approvals required to carry out the transactions contemplated by this
Agreement and will pay all expenses incident thereto. AIP agrees that the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the respective meetings of shareholders and
partners, respectively, of AIP and RELP, or, in the case of the Form S-4 and
each amendment or supplement thereto, at the time it is filed or becomes
effective, will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the foregoing shall not apply to the
extent that any such untrue statement of a material fact or omission to state a
<PAGE> 24
material fact was made by AIP in reliance upon and in conformity with written
information concerning RELP furnished to AIP by RELP specifically for use in
the Proxy Statement/Prospectus. RELP agrees that the written information
provided by it specifically for inclusion in the Proxy Statement/Prospectus and
each amendment or supplement thereto, at the time of mailing thereof and at the
time of the respective meetings of shareholders and partners, respectively, of
AIP and RELP, or, in the case of written information provided by RELP
specifically for inclusion in the Form S-4 or any amendments or supplement
thereto, at the time it is filed or becomes effective, will not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. AIP will advise
RELP, promptly after it receives notice thereof, of the time when the Form S-4
has become effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension of the qualification of the AIP
Common Shares issuable in connection with the Merger for offering or sale in
any jurisdiction, or any request by the SEC for amendment of the Proxy
Statement/Prospectus or the Form S-4 or comments thereon and responses thereto
or requests by the SEC for additional information.
7.8. Listing Application. AIP shall promptly prepare and submit to
the NYSE a listing application covering the AIP Common Shares issuable in the
Merger, and shall use its reasonable efforts to obtain, prior to the Effective
Time, approval for the listing of such AIP Common Shares, subject to official
notice of issuance.
7.9. Further Action. Each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the conditions of
performances set forth herein or the waiver thereof, perform such further acts
and execute such documents as may reasonably be required to effect the Merger.
7.10. Expenses. Subject to Section 9.5, if the Merger is approved
by RELP's partners, all transaction costs of the proposed consolidation shall
be paid by AIP. If three of the four limited partnerships party to the Proxy
Statement/Prospectus (the "Other RELPS") do not approve their proposed merger
into AIP, Realco shall reimburse AIP for AIP's expenses relating to the
proposed merger up to $250,000. If RELP and the Other RELPS approve their
proposed merger into AIP, but the shareholders of AIP do not approve the
proposer merger, and if Realco voted its AIP Common Shares in favor of such
mergers, AIP will reimburse RELP and the Other RELPS for all expenses they
incurred in connection with the proposed merger. Any expenses to be reimbursed
hereunder shall include, but not be limited to, costs of fairness opinions,
property appraisals, engineering and environmental reports, title policies,
accounting fees, legal fees, printing and solicitation expenses. RELP will
bear the costs of preparing its initial fairness opinion, with later
reimbursement by AIP in the event the Merger is approved by RELP's partners.
If the limited partners of RELP fail to approve the proposed Merger, then
Realco will reimburse AIP for the RELP's expenses (to the extent paid by AIP)
as follows: the actual cost of such RELP's fairness opinion, legal fees up to
$80,000, and the actual cost or the Allocable Share (if the actual cost is not
separately determined), of RELP's accounting fees, engineering and
environmental reports, printing and solicitation expenses. Allocable Share,
for this purpose, shall be the ratio of such RELP's net book value of assets at
March 31, 1997 to the total net book value of all of the assets of RELP and the
Other RELPS at March 31, 1997.
<PAGE> 25
7.11. Indemnification. For a period of six years from and after the
Effective Time, AIP shall indemnify the partners, or agents of RELP who at any
time prior to the Effective Time were entitled to indemnification under the
Agreement of Limited Partnership of RELP existing on the date hereof to the
same extent as such partners or agents are entitled to indemnification under
such Agreement of Limited Partnership in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement).
7.12. Reorganization. From and after the date and until the
Effective Time, neither AIP nor RELP nor any of their respective Subsidiaries
or other affiliates shall (i) knowingly take any action, or knowingly fail to
take any action, that would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code; or (ii)
enter into any contract, agreement, commitment or arrangement with respect to
the foregoing. Following the Effective Time, AIP shall use its best efforts to
conduct its business in a manner that would not jeopardize the characterization
of the Merger as a reorganization within the meaning of Section 368(a)(1)(A) of
the Code.
7.13. Survival of RELP Obligations; Assumption of RELP Liabilities
by AIP. All of the obligations of RELP that are outstanding at the Closing
shall survive the Closing and shall not be merged therein. Upon the
consummation of the Merger, such obligations shall be assumed, automatically,
by AIP; provided, however, that such assumption shall not impose upon or expose
AIP to any liability for which RELP was not liable, and provided, further, that
AIP shall be entitled to the same defenses, offsets and counterclaims to which
RELP would have been entitled, but for the Merger.
7.14. Third Party Consents. AIP and RELP each shall take all
necessary corporate and other action and will use its commercially reasonable
efforts to obtain the consents and applicable approvals from third parties that
may be required to enable it to carry out the transactions contemplated by this
Agreement.
7.15. Efforts to Fulfill Conditions. AIP and RELP each shall use
commercially reasonable efforts to insure that all conditions precedent to its
obligations hereunder are fulfilled at or prior to the Closing.
7.16. Representations, Warranties and Conditions Prior to Closing.
AIP and RELP each shall use its commercially reasonable efforts to cause its
representations and warranties contained in this Agreement to be true and
correct on and as of the Closing Date in all material respects. Prior to
Closing, AIP and RELP each shall promptly notify the other in writing (i) if
any representation or warranty contained in this Agreement is discovered to be
or becomes untrue or (ii) if AIP or RELP fails to perform or comply with any of
its covenants or agreements contained in this Agreement or it is reasonably
expected that it will be unable to perform or comply with any of its covenants
or agreements contained in this Agreement.
7.17. Cooperation of the Parties. AIP and RELP each will cooperate
with the other in supplying such information as may be reasonably requested by
the other in connection with obtaining consents or approvals to the
transactions contemplated by this Agreement.
<PAGE> 26
7.18. Lock-Ups. The General Partner shall use its best efforts
prior to the Closing to have each of its directors and officers and Realco
execute a 90-day lock-up agreement in a form (reasonably acceptable to RELP)
supplied to RELP by AIP. The executed agreements will be delivered to AIP at
the Closing. AIP shall use its best efforts prior to the Closing to have each
of its Trust Managers and officers execute a 90-day lock-up agreement, in a
form (reasonably acceptable to AIP) supplied to AIP by RELP. The agreements
will be delivered to RELP at the Closing.
ARTICLE VIII. CONDITIONS
8.1. Conditions to Each Party's Obligations to Effect the Merger.
The respective obligation of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall
have been approved in the manner required by the Declaration
of Trust and Bylaws and Agreement of Limited Partnership of
AIP and RELP, respectively, and by applicable law or by
applicable regulations of any stock exchange or other
regulatory body by the holders of the AIP Common Shares and
RELP Interests entitled to vote thereon.
(b) Neither of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction which
prohibits the consummation of the transactions contemplated by
this Agreement. In the event any such order or injunction
shall have been issued, each party agrees to use its
reasonable efforts to have any such injunction lifted.
(c) The Form S-4 shall have become effective and all necessary
state securities law or "Blue Sky" permits or approvals
required to carry out the transactions contemplated by this
Agreement shall have been obtained and no stop order with
respect to any of the foregoing shall be in effect.
(d) AIP shall have obtained the approval for the listing of the
AIP Common Shares issuable in the Merger on the NYSE, subject
to official notice of issuance.
(e) All consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental commission,
board, other regulatory body or third parties required in
connection with the execution, delivery and performance of
this Agreement shall have been obtained or made, except for
filings in connection with the Merger and any other documents
required to be filed after the Effective Time and except where
the failure to have obtained or made any such consent,
authorization, order, approval, filing or registration would
not have a material adverse effect on the business, results of
operations or financial condition of AIP and RELP (and their
respective Subsidiaries), taken as a whole, following the
Effective Time.
<PAGE> 27
8.2 Conditions to Obligations of RELP to Effect the Merger. The
obligation of RELP to effect the Merger shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions, unless waived by
RELP:
(a) AIP shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing
Date and the representations and warranties of AIP contained
in this Agreement shall be true and correct in all material
respects as of the Closing Date as if made on the Closing
Date, and RELP shall have received a certificate of the
President or an Executive or Senior Vice President of AIP,
dated the Closing Date, certifying to such effect.
(b) RELP shall have received the opinion of Liddell, Sapp or
another recognized law firm selected by AIP and approved by
RELP, dated the Closing Date, to the effect that the Merger
will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a)(1)(A) of
the Code, and that RELP and AIP will each be a party to that
reorganization within the meaning of Section 368(b) of the
Code. In rendering its opinion, said counsel shall be entitled
to rely as to any factual matter upon certificates given by
executive officers of RELP and AIP and shall be entitled to
assume that the covenants of AIP pursuant to Section 7.15
shall be fully complied with.
(c) From the date of the Agreement through the Effective Time,
there shall not have occurred any change in the financial
condition, business or operations of AIP and its Subsidiaries,
taken as a whole, that would have or would be reasonably
likely to have an AIP Material Adverse Effect other than any
such change that affects both RELP and AIP in a substantially
similar manner.
(d) The opinion of Houlihan addressed to RELP that the Purchase
Price is fair, from a financial point of view, to the partners
of RELP shall not have been withdrawn or materially modified.
(e) RELP shall have received the opinion of Liddell, Sapp or
another recognized law firm selected by AIP and approved by
RELP, dated the Closing Date, as to such customary matters as
RELP may reasonably request, such opinion to be reasonably
satisfactory to RELP.
8.3 Conditions to Obligation of AIP to Effect the Merger. The
obligations of AIP to effect the Merger shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions, unless waived by AIP:
(a) RELP shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing
Date and the representations and warranties of RELP contained
in this Agreement shall be true and correct in all material
respects as of the Closing Date as if made on the Closing Date
and AIP shall have received
<PAGE> 28
a certificate of the Chief Executive Officer, President or an
Executive Vice President of the General Partner dated the
Closing Date, certifying to such effect.
(b) AIP shall have received the opinion of Liddell, Sapp or
another recognized law firm selected by RELP and approved by
AIP, dated the Closing Date, to the effect that the
consummation of the Merger will not result in AIP's failure to
continue to satisfy the requirements for qualification as a
REIT for federal income tax purposes. In rendering its
opinion, said counsel shall be entitled to rely as to any
factual matter upon certificates given by executive officers
of AIP and RELP and shall be entitled to assume that the
covenants of Section 7.15 shall be fully complied with.
(c) From the date of this Agreement through the Effective Time,
there shall not have occurred any change in the financial
condition, business or operations of RELP and its
Subsidiaries, taken as a whole, that would have or would be
reasonably likely to have an RELP Material Adverse Effect,
other than any such change that affects both RELP and AIP in a
substantially similar manner.
(d) Each person listed on Exhibit 8.3(d) attached hereto shall
have delivered to AIP a written agreement to the effect that
such person will not offer to sell, sell or otherwise dispose
of any shares of AIP Common Stock issued in the Merger,
except, in each case, pursuant to an effective registration
statement or in compliance with Rule 145, as amended from time
to time, or in a transaction which, in the opinion of legal
counsel reasonably satisfactory to AIP, is exempt from the
registration requirements of the Securities Act and that the
certificates representing the AIP shares issued to him or her
in the Merger may bear a legend to such effect.
(e) The opinion of Prudential addressed to the Board of Trust
Managers of AIP that the consideration to be paid by AIP
pursuant to the Merger is fair, from a financial point of
view, to AIP shall not have been withdrawn or materially
modified.
(f) AIP shall have received the opinion of Liddell, Sapp or
another recognized law firm selected by RELP and approved by
AIP, dated the Closing Date, as to such customary matters as
AIP may reasonably request, such opinion to be reasonably
satisfactory to AIP.
(g) The limited partners of at least two of the Other RELPS shall
have approved the merger of such limited partnership with and
into AIP.
ARTICLE IX. TERMINATION
9.1 Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval of this Agreement by the partners of RELP or
the shareholders of AIP or by the mutual written consent of AIP and RELP, with
the prior approval of their respective Board of Trust Managers and General
Partner.
<PAGE> 29
9.2 Termination by Either AIP or RELP. This Agreement may be
terminated and the Merger may be abandoned by action of the General Partner of
RELP or the Board of Trust Managers of AIP if (i) the Merger shall not have
been consummated by March 31, 1998, (ii) a meeting of RELP's partners shall
have been duly convened and held and the approval of RELP's partners required
by Section 8.1(a) shall not have been obtained at such meeting or at any
adjournment thereof, (iii) a meeting of AIP's shareholders shall have been duly
convened and held and the approval of AIP's shareholders required by Section
8.1(a) shall not have been obtained at such meeting or at any adjournment
thereof, (iv) as a result of due diligence investigation by one of the parties
hereto, it is determined in good faith by such party that certain facts or
circumstances not previously known by such party constitute a Material Adverse
Effect on the business, results of operations or financial condition of the
other party, (v) a United States federal or state court of competent
jurisdiction or United States federal or state governmental, regulatory or
administrative agency or commission shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and
non-appealable, provided that the party seeking to terminate this Agreement
pursuant to this clause (v) shall have used all reasonable efforts to remove
such order, decree, ruling or injunction, or (vi) any of the conditions set
forth in Article VIII shall not have been satisfied, and provided, in the case
of a termination pursuant to clause (i) or (vi) above, that the terminating
party shall not have breached in any material respect its obligations under
this Agreement in any manner that shall have proximately contributed to the
occurrence of the failure referred to in said clause. AIP and RELP each shall
(i) deliver its Disclosure Letter to one another not later than 5:00 P.M.,
Central Time, August 11, 1997, and (ii) shall complete its due diligence
investigations not later than 5:00 P.M., Central Time, on July 31, 1997 (the
period from the date of this Agreement through July 31, 1997 being hereinafter
referred to as the "Due Diligence Period"). Until the expiration of the Due
Diligence Period, either party may terminate this Agreement without liability
or penalty due to (i) the discovery of a fact or circumstance that reasonably
could be expected to constitute a Material Adverse Effect on the business,
results of operations or financial condition of the other party, or (ii) the
party's failure to receive a written fairness opinion as described herein
within seven business days from the date of execution of this Agreement.
9.3 Termination by RELP. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the adoption and approval by the partners of RELP referred to in Section
8.1(a), by action of the General Partner, if (i) in the exercise of its good
faith judgment as to its fiduciary duties to its partners imposed by law, as
advised by counsel, the General Partner determines that such termination is
required by reason of a RELP Acquisition Proposal being made, (ii) the Board of
Trust Managers withdraws, materially modifies or changes in a manner materially
adverse to RELP its recommendations to AIP's shareholders of this Agreement or
the Merger, other than as a result of the occurrence of an event that in the
good faith judgment of the Board of Trust Managers has or is reasonably likely
to have a RELP Material Adverse Effect, (iii) the Board of Trust Managers
postpones the date scheduled for the meeting of shareholders of AIP to approve
this Agreement and the transactions contemplated hereby beyond March 31, 1998
or fails to set a date for such meeting by such date, except with the written
consent of RELP, (iv) there has been a breach by AIP of any representation or
warranty contained in this Agreement which would have or would be reasonably
likely to have an AIP Material Adverse Effect,
<PAGE> 30
which breach is not curable by March 31,1998, or (v) there has been material
breach of any of the covenants or agreements set forth in this Agreement on the
part of AIP, which breach is not curable or, if curable, is not cured within 30
days after written notice of such breach is given by RELP to AIP, or (vi) the
condition set forth in Section 8.3(g) is not satisfied..
9.4 Termination by AIP. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by the shareholders of AIP referred to in Section 8.1(a), by
action of the Board of Trust Managers, if (i) in the exercise of its good
faith judgment as to its fiduciary duties to its shareholders imposed by law,
as advised by counsel, the Board of Trust Managers determines that such
termination is required by reason of an AIP Acquisition Proposal being made,
(ii) the General Partner withdraws, materially modifies or changes in a manner
materially adverse to AIP its recommendation to RELP's partners of this
Agreement or the Merger, other than as a result of the occurrence of an event
that in the good faith judgment of the General Partner has or is reasonably
likely to have an AIP Material Adverse Effect, (iii) the General Partner
postpones the date scheduled for the meeting of partners of RELP to approve
this Agreement and the transactions contemplated hereby beyond March 31, 1998,
or fails to set a date for such meeting by such date, except with the written
consent of AIP, (iv) there has been a breach by RELP of any representation or
warranty contained in this Agreement which would have or would be reasonably
likely to have a RELP Material Adverse Effect, which breach is not curable by
March 31, 1998, or (v) there has been a material breach of any of the covenants
or agreements set forth in this Agreement on the part of RELP, which breach is
not curable or, if curable, is not cured within 30 days after written notice of
such breach is given by AIP to RELP.
9.5. Effect of Termination and Abandonment. (a) If an election to
terminate this Agreement is made pursuant to (i) Section 9.2(i) (except as a
result of a default or breach hereunder by AIP) or Section 9.2(ii), and a RELP
Acquisition Proposal relating to RELP shall have been made and, within one year
from the date of such termination, RELP consummates a RELP Acquisition Proposal
or enters into an agreement to consummate a RELP Acquisition Proposal which is
subsequently consummated, or (ii) Section 9.3(i), RELP shall pay to AIP,
provided that AIP was not in material breach of its obligations hereunder at
the time of such termination, as liquidated damages and not as a penalty or
forfeiture, an amount equal to the lesser of (m) $352,200 (the "Liquidated
Damages Amount") and (n) the sum of (1) the maximum amount that can be paid to
AIP without causing AIP to fail to meet the requirements of Sections 856(c)(2)
and (3) of the Code determined as if the payment of such amount did not
constitute income described in Sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I)
of the Code ("Qualifying Income"), as determined by AIP's certified public
accountants, plus (2) an amount equal to the Liquidated Damages Amount less the
amount payable under clause (1) above in the event AIP receives a letter from
AIP's counsel indicating that AIP has received a ruling from the IRS to the
effect that Liquidated Damages Amount payments constitute Qualifying Income. In
addition to the Liquidated Damages Amount, AIP shall be entitled to receive
from RELP (or its successor in interest) all documented out-of-pocket costs and
expenses, up to a maximum of $176,100 in connection with this Agreement and the
transactions contemplated hereby (the "AIP Expenses") incurred by AIP. The
payments to which AIP is entitled under this Section 9.5(a) shall be its sole
remedy with respect to the termination of the Agreement under the circumstances
contemplated in this Section 9.5(a).
<PAGE> 31
(b) If an election to terminate this Agreement is made pursuant to
Section 9.2(i) (as a result of the condition set forth in Section 8.3(c) not
being satisfied), RELP shall, provided that AIP was not in material breach of
its obligations hereunder at the time of such termination, pay AIP for the AIP
Expenses, up to a maximum of $176,100, although it shall not be required to pay
the Liquidated Damages Amount, which payment of the AIP Expenses shall be AIP's
sole remedy for termination of the Agreement in such circumstances.
(c) If an election to terminate this Agreement is made pursuant to
(i) Section 9.2(i) (except as a result of a default or breach hereunder by
RELP) or Section 9.2(iii), and an AIP Acquisition Proposal relating to AIP
shall have been made and, within one year from the date of such termination,
AIP consummates an AIP Acquisition Proposal or enters into an agreement to
consummate an AIP Acquisition Proposal which is subsequently consummated, or
(ii) Section 9.4(i), AIP shall pay to RELP, provided that RELP was not in
material breach of its obligations hereunder at the time of such termination,
as liquidated damages and not as a penalty or forfeiture, an amount equal to
the Liquidated Damages Amount. In addition to the Liquidated Damages Amount,
RELP shall be entitled to receive from AIP (or its successor in interest) all
documented out-of-pocket costs and expenses, up to a maximum of $176,100, in
connection with this Agreement and the transactions contemplated hereby (the
"RELP Expenses" and, together with the AIP Expenses, the "Expenses") incurred
by RELP. The payments to which RELP is entitled under this Section 9.5(c) shall
be its sole remedy with respect to the termination of the Agreement under the
circumstances contemplated in this Section 9.5(c)
(d) If an election to terminate this Agreement is made pursuant to
Section 9.2(i) (as a result of the condition set forth in Section 8.2(c) not
being satisfied), AIP shall, provided that RELP was not in material breach of
its obligations hereunder at the time of such termination, pay RELP for the
RELP Expenses, up to a maximum of $176,100, although it shall not be required
to pay the Liquidated Damages Amount, which payment of the RELP Expenses shall
be RELP's sole remedy for termination of the Agreement in such circumstances.
(e) If this Agreement is terminated pursuant to Section 9.3(iv),
Section 9.3(v), Section 9.4(iv), or Section 9.4(v), the non-terminating party
shall, provided that the terminating party was not in material breach of its
obligations hereunder at the time of such termination, pay the terminating
party all Expenses, up to a maximum of $176,100, incurred by it and the
non-terminating party shall remain liable to the terminating party for its
breach.
(f) If either party terminates this Agreement during the Due
Diligence Period described in Section 9.2 above other than for a due diligence
related reason, the non-terminating party shall be entitled to receive the
Liquidated Damages Amount and the Expenses as provided in this Article IX.
(g) RELP agrees to amend this Section 9.5 at the request of AIP in
order to (x) maximize the portion of the Liquidated Damages Amount that may be
distributed to AIP hereunder without causing AIP to fail to meet the
requirements of Sections 856(c)(2) and (3) of the Code or (y) improve AIP's
chances of securing a favorable ruling described in this Section 9.5, provided
that no such amendment may result in any additional cost or expense to such
other party.
<PAGE> 32
(h) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article IX, all obligations of the
parties hereto shall terminate, except the obligations of the parties pursuant
to this Section 9.5 and Section 7.10 and except for the provisions of Section
10.3, 10.4, 10.5, 10.6, 10.7, 10.9, 10.10, 10.13, 10.14 and 10.16. In the event
AIP or RELP has received the Liquidated Damages Amount, such recipient shall
not assert or pursue in any manner, directly or indirectly, any claim or cause
of action against the other party hereto or any of its officers, Trust
Managers, or General Partners, as applicable, based in whole or part upon its
or their receipt, consideration, recommendation or approval of an Acquisition
Proposal or the exercise by AIP of its right to termination under Section
9.4(i) or the exercise by RELP of its right to termination under Section
9.3(i). Notwithstanding the foregoing, in the event AIP or RELP is required to
file suit to seek all or a portion of such Liquidated Damages Amount, and it
ultimately succeeds, it shall be entitled to all expenses, including attorney's
fees and expenses, which it has incurred in enforcing its right hereunder.
(i) If either party willfully fails to perform its duties and
obligations under this Agreement, the non- breaching party is additionally
entitled to all remedies available to it at law or in equity and to recover its
expenses from the breaching party.
9.6 Extension; Waiver. At any time prior to the Effective Time,
any party hereto, by action taken by its Board of Trust Managers or General
Partner, as applicable, may, to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE X. GENERAL PROVISIONS
10.1. Nonsurvival of Representations, Warranties and Agreements.
All representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Merger;
provided, however, that the agreements contained in Article IV, the last
sentence of Section 7.4 and Sections 7.10, 7.11, 7.12, 7.13, 7.14, 7.15 and
7.16 and this Article X shall survive the Merger.
10.2. Notices. Any notice required to be given hereunder shall be
in writing and shall be sent by facsimile transmission (confirmed by any of the
methods that follow), courier service (with proof of service), hand delivery or
certified or registered mail (return receipt requested and first-class postage
prepaid) and addressed as follows:
If to AIP:
American Industrial Properties REIT
6220 N. Beltline Road, Suite 205
Irving, Texas 75063
Attention: Charles W. Wolcott, President
<PAGE> 33
Telecopy: (972) 550-6037
If to RELP:
USAA Real Estate Company
8000 I-H 10 West, Suite 600
San Antonio, Texas 78230
Attention: Patrick Duncan, Senior Vice-President
Telecopy: (210) 498-6214
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
delivered.
10.3. Assignment; Binding Effect; Benefit. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, except as
provided in the following sentence, nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto or
their respective heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement. The provisions of Article IV and Sections 7.11, 7.12, 7.13, 7.14 and
7.15 (collectively, the "Third Party Provisions") shall benefit the persons
identified therein, but the aggregate liability of AIP with respect thereto
shall not exceed the amount specified in Article IX.
10.4. Entire Agreement. This Agreement, the Exhibits, the RELP
Disclosure Letter, the AIP Disclosure Letter, the RELP Ancillary Agreements,
the AIP Ancillary Agreements and any documents delivered by the parties in
connection herewith constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
10.5. Confidentiality. (a) As used herein, "Confidential Material"
means, with respect to either party hereto (the "Providing Party"), all
information (written or oral) furnished (whether before or after the date
hereof) by the Providing Party and its directors, officers, employees,
affiliates or representatives of advisors, including counsel, lenders and
financial advisors (collectively, the "Providing Party Representatives") to the
other party hereto (the "Receiving Party") or such Receiving Party's directors,
officers, employees, affiliates or representatives of advisors, including
counsel, lenders and financial advisors or the Receiving Party's potential
sources of financing for the transactions contemplated by this Agreement
(collectively "the Receiving Party Representatives") and all analyses,
compilations, forecasts and other studies or other documents prepared by the
Providing Party or the Providing Party Representatives in connection with its
or their review of the transactions contemplated by this Agreement which
contain or reflect such information. The term "Confidential Material" does not
include, however, information which (i) at the time
<PAGE> 34
of disclosure or thereafter is generally available to and known by the public
other than as a result of a disclosure directly or indirectly by the Receiving
Party or the Receiving Party Representatives in violation of this Agreement,
(ii) at the time of disclosure was available on a nonconfidential basis from a
source other than the Providing Party or the Providing Party Representatives,
providing that such source is not and was not bound by a confidentiality
agreement with the Providing Party, (iii) was known by the Receiving Party
prior to receiving the Confidential Material from the Providing Party or has
been independently acquired or developed by the Receiving Party without
violating any of its obligations under this Agreement, or (iv) is contained in
any RELP Reports or AIP Reports or Proxy Statement/Prospectus.
(b) Subject to paragraph (c) below or except as required by law,
the Confidential Material will be kept confidential and will not, without the
prior written consent of the Providing Party, be disclosed by the Receiving
Party or its Representatives, in whole or in part and will not be used by the
Receiving Party or its Representatives, directly or indirectly, for any purpose
other than in connection with this Agreement, the Merger or the evaluating,
negotiating or advising with respect to a transaction contemplated herein.
Moreover, each Receiving Party agrees to transmit Confidential Material to its
Representatives only if and to the extent that such Representatives need to
know the Confidential Material for purposes of such transaction and are
informed by such Receiving Party of the confidential nature of the Confidential
Material and of the terms of this Section.
(c) In the event that either Receiving Party, its Representatives
or anyone to whom such Receiving Party or its Representatives supply the
Confidential Material, are requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand, any informal or formal investigation by any government or
governmental agency or authority or otherwise in connection with legal
processes) to disclose any Confidential Material, such Receiving Party agrees
(i) to immediately notify the Providing Party of the existence, terms and
circumstances surrounding such a request, (ii) to consult with the Providing
Party on the advisability of taking legally available steps to resist or narrow
such request and (iii) if disclosure of such information is required, to
furnish only that portion of the Confidential Material which, in the opinion of
such Receiving Party's counsel, such Receiving Party is legally compelled to
disclose and to cooperate with any action by the Providing Party to obtain an
appropriate protective order or otherwise reliable assurances that confidential
treatment will be accorded the Confidential Material (it being agreed that the
Providing Party shall reimburse the Receiving Party for all reasonable
out-of-pocket expenses incurred by the Receiving Party in connection with such
cooperation).
(d) In the event of the termination of this Agreement in
accordance with its terms, promptly upon request from either Providing Party,
the Receiving Party shall, except to the extent prevented by law, redeliver to
the Providing Party or destroy all tangible Confidential Material and will not
retain any copies, extracts or other reproductions thereof in whole or in part.
Any such destruction shall be certified in writing to the Providing Party by an
authorized officer of the Receiving Party supervising the same. Notwithstanding
the foregoing, each Receiving Party and one Representative designated by each
Receiving Party shall be permitted to retain one permanent file copy of each
document constituting Confidential Material.
<PAGE> 35
(e) Each party hereto further agrees that if this Agreement is
terminated in accordance with its terms, until one year from the date of
termination, (1) it will not offer to hire or hire any person currently or
formerly employed by the other party with whom such party has had contact prior
hereto other than persons whose employment shall have been terminated by such
other party prior to the date of such offer to hire or hiring and (2) neither
it nor its affiliates shall directly or indirectly, (a) (w) solicit, seek or
offer to effect or effect, (x) negotiate with or provide any information to the
Board of Trust Managers or General Partner, as applicable, of the other party,
or officer of the other party or any shareholder or partner, as applicable, of
the other party with respect to, (y) make any statement or proposal, whether
written or oral, either alone or in concert with others, to the Board of Trust
Managers or Board of Directors of the General Partner of the other party, any
director, Trust Manager or officer of the other party or any shareholder or
partner of the other party or any other person with respect to, or (z) make any
public announcement (except as required by law in respect of actions permitted
hereby) or proposal or offer whatsoever (including, but not limited to, any
"solicitation"of "proxies"as such terms are defined or used in Regulation 14A
of the Exchange Act) with respect to, (i) any form of business combination or
similar or other extraordinary transaction involving the other party or any
affiliate thereof, including, without limitation, a merger, tender or exchange
offer or liquidation of the other party's assets, (ii) any form of
restructuring, recapitalization or similar transaction with respect to the
other party or any affiliate thereto, (iii) any purchase of any securities or
assets, or rights or options to acquire any securities or assets (through
purchase, exchange, conversion or otherwise), of the other party or any
affiliate thereof, (iv) any proposal to seek representation on the Board of
Trust Managers or the Board of Directors of the General Partner, as
applicable, or otherwise to seek to control or influence the management, Board
of Trust Managers or the Board of Directors of the General Partner, as
applicable, or policies of the other party or any affiliate thereof, (v) any
request or proposal to waive, terminate or amend the provisions of this Section
10.5 or (vi) any proposal or other statement inconsistent with the terms of
this Section 10.5 or (b) instigate, encourage, join, act in concert with or
assist (including, but not limited to, providing or assisting in any way in the
obtaining of financing for, or acting as a joint or co-bidder for the other
party with) any third party to do any of the foregoing, unless and until such
party has received the prior written invitation or approval of a majority of
the Board of Trust Managers or the General Partner, as applicable, to do any of
the foregoing; provided that without such invitation or approval, either party
may at any time, on a confidential non-public basis, submit to the Chief
Executive Officer of AIP or the General Partner, as applicable, a proposal to
(a) amend any of the provisions of this Section 10.5(e) or (b) effect a
business combination or other extraordinary transaction with the other party
providing for the acquisition of all or substantially all of the assets or the
securities of the other party, including, without limitation, a merger, tender
offer or exchange offer. Each party hereto agrees that it will not agree with
any third party to waive its rights under this Section 10.5.
10.6. Amendment. This Agreement may be amended by the parties
hereto, by action taken by the Board of Trust Managers or the Board of
Directors of the General Partner, as applicable, at any time before or after
approval of this Agreement or any other matter presented in connection with the
Merger by the shareholders of AIP and partners of RELP, but after any such
approval, no amendment shall be made which by law requires the further approval
of shareholders or partners, as applicable, without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
<PAGE> 36
10.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without regard to
its rules of conflict of laws. Each of AIP and RELP hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of Texas and of the United States District Court, Northern
District of Texas (the "Texas Courts") for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any litigation relating thereto except in such courts), waives
any objection to the laying of venue of any such litigation in the Texas Courts
and agrees not to plead or claim in any Texas Court that such litigation
brought therein has been brought in an inconvenient forum.
10.8. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
10.9. Headings. Heading of the Articles and Sections of this
Agreement are for the convenience of the parties only and shall be given no
substantive or interpretive effect whatsoever.
10.10. Interpretation. In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa.
10.11. Waivers. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
10.12. Incorporation. The RELP Disclosure Letter and the AIP
Disclosure Letter and all Exhibits and Schedules attached hereto and thereto
and referred to herein and therein are hereby incorporated herein and made a
part hereof for all purposes as if fully set forth herein.
10.13. Severability. If any provision of this 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 Agreement would not be
materially and adversely affected thereby, such provision shall be fully
separable, and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part thereof,
and the remaining provisions of this 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
Agreement, a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as
<PAGE> 37
may be possible, and the parties hereto request the court or any arbitrator to
whom disputes relating to this Agreement are submitted to reform the otherwise
illegal, invalid or unenforceable provision in accordance with this Section
10.13.
10.14. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any Texas Court, this
being in addition to any other remedy to which they are entitled at law or in
equity.
10.15. Subsidiaries. As used in this Agreement, the word
"Subsidiary" when used with respect to any party means any corporation,
partnership, joint venture, business trust or other entity, of which such party
directly or indirectly owns or controls at least a majority of the securities
or other interests having by their terms ordinary voting power to elect a
majority of the board of directors or others performing similar functions with
respect to such corporation or other organization.
10.16. Non-Recourse. Neither the officers, Trust Managers nor
shareholders of AIP shall be personally bound or have any personal liability
hereunder. RELP shall look solely to the assets of AIP for satisfaction of any
liability of AIP with respect to this Agreement and the Ancillary Agreements to
which it is a party. RELP will not seek recourse or commence any action against
any of the shareholders of AIP or any of their personal assets, and will not
commence any action for money judgments against any of the Trust Managers or
officers of AIP or seek recourse against any of their personal assets, for the
performance or payment of any obligation of AIP hereunder or thereunder. The
partners of RELP shall not be personally bound or have any personal liability
hereunder. AIP shall look solely to the assets of RELP for satisfaction of any
liability of RELP with respect to this Agreement and the Ancillary Agreements
to which it is a party. AIP will not seek recourse or commence any action
against any of the partners of RELP or any of their personal assets, and will
not commence any action for money judgments against any of the directors or
officers of RELP or seek recourse against any of their personal assets, for the
performance or payment of any obligation of RELP hereunder or thereunder.
<PAGE> 38
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year first
written above.
AMERICAN INDUSTRIAL PROPERTIES REIT
/s/ CHARLES W. WOLCOTT
------------------------------------------
Charles W. Wolcott, President and
Chief Executive Officer
USAA REAL ESTATE INCOME INVESTMENTS II
LIMITED PARTNERSHIP
By: USAA INVESTORS II, INC.,
Its General Partner
/s/ T. PATRICK DUNCAN
----------------------------------
T. Patrick Duncan
Senior Vice President - Operations
<PAGE> 1
EXHIBIT 10.3
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June
30, 1997, is entered into by and between American Industrial Properties REIT, a
Texas real estate investment trust ("AIP") , and USAA Income Properties III
Limited Partnership, a Delaware limited partnership ("RELP"). USAA Real Estate
Company, a Delaware corporation ("Realco"), is a party to this Agreement solely
for the purpose of binding itself to the provisions of Section 7.10 hereunder.
RECITALS
A. The Board of Trust Managers of AIP (the "Board of Trust
Managers") and the general partner of RELP have each determined that a business
combination between AIP and RELP is in the best interests of their shareholders
and partners, respectively, and presents an opportunity for their respective
businesses to achieve strategic and financial benefits, and accordingly have
agreed to effect a merger subject to the terms and conditions set forth herein.
B. AIP and RELP desire to make certain representations, warranties
and agreements in connection with the merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, AIP and
RELP hereby agree as follows:
ARTICLE I. THE MERGER
1.1. The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.3), RELP shall be
merged with and into AIP in accordance with this Agreement and the Plan of
Merger (the "Plan of Merger") in substantially the form attached hereto as
Exhibit A, with such completions, additions and substitutions conforming to the
terms of this Agreement as the parties shall approve, such approval to be
conclusively evidenced by their causing the Plan of Merger containing such
completions, additions or substitutions to be filed in accordance with
applicable laws; and the separate existence of RELP shall thereupon cease (the
"Merger"). AIP shall be the surviving entity in the Merger (sometimes
hereinafter referred to as the "Survivor"). The Merger shall have the effects
specified in Section 23.60 of the Texas Real Estate Investment Trust Act, as
amended (the "Texas REIT Act") and Section 17-211 of the Delaware Revised
Uniform Limited Partnership Act (the "LP Act").
1.2. The Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place at the
offices of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P. ("Liddell, Sapp"),
located at 2200 Ross Avenue, Suite 900, Dallas, Texas at 10:00 a.m., local
time, within five business days after receipt of approval of the Merger by
AIP's shareholders and RELP's partners, or at such other time, date or place as
AIP and RELP may agree. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
<PAGE> 2
1.3. Effective Time. If all the conditions to the Merger set forth in
Article VIII shall have been fulfilled or waived (and this Agreement shall not
have been terminated as provided in Article IX), AIP and RELP shall cause
Articles of Merger satisfying the requirements of the Texas REIT Act and
Articles of Merger satisfying the requirements of the LP Act to be properly
executed, verified and delivered for filing in accordance with the LP Act and
the Texas REIT Act on the Closing Date. The Merger shall become effective for
accounting and all other purposes to the fullest extent permitted by law as of
the close of business on December 31, 1997 (the "Effective Time") or such other
date as may be agreed to by the parties. For state law purposes, the Merger
shall become effective upon the issuance of a certificate of merger by the
Secretary of State of the State of Delaware in accordance with the LP Act or at
such later time which AIP and RELP shall have agreed upon and designated in
such filings in accordance with applicable law.
ARTICLE II. DECLARATION OF TRUST
AND BYLAWS OF THE SURVIVOR
2.1. Declaration of Trust. The Declaration of Trust of AIP in effect
immediately prior to the Effective Time shall be the Declaration of Trust of
the Survivor until duly amended in accordance with applicable law.
2.2. Bylaws. The Bylaws of AIP in effect immediately prior to the
Effective Time shall be the Bylaws of the Survivor until duly amended in
accordance with applicable law.
ARTICLE III. TRUST MANAGERS AND OFFICERS OF AIP
3.1. Trust Managers. The Trust Managers of AIP immediately prior to
the Effective Time shall be the Trust Managers of AIP as of the Effective Time.
3.2. Officers. The officers of AIP immediately prior to the
Effective Time shall be the officers of AIP as of the Effective Time.
ARTICLE IV. RELP PARTNERSHIP INTERESTS
4.1. Conversion of the RELP Partnership Interest. (a) At the
Effective Time, each Common Share of Beneficial Interest of AIP outstanding
immediately prior to the Effective Time shall remain outstanding and shall
represent one Common Share of Beneficial Interest of AIP.
(b) At the Effective Time, the general and limited partnership
interests of RELP (each a "RELP Interest"), issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of holder thereof, be converted into the right
to receive Common Shares of Beneficial Interest, $0.10 par value per share (the
"AIP Common Shares"), of AIP. The aggregate number of AIP Common Shares to be
issued to the RELP partners in connection with the Merger shall be equal to
$24,300,000 (the "Purchase Price") divided by the Share Price (the "Total
Shares"). If RELP repays any mortgage indebtedness existing on the date hereof
during the period from the date hereof to and including the Closing Date, the
Purchase Price shall be appropriately adjusted. The term "Share Price" shall
mean $2.625. The number of AIP
<PAGE> 3
Common Shares to be received by a partner shall be equal to the Total Shares
multiplied by such partner's percentage interest in RELP plus each limited
partner's pro rata portion of the general partnership interest of the RELP's
general partner.
(c) As a result of the Merger and without any action on the part of
the holder thereof, at the Effective Time, all RELP Interests shall cease to
be outstanding and shall be canceled and retired, and each holder of a RELP
Interest shall thereafter cease to have any rights with respect to such RELP
Interest, except the right to receive, without interest, the AIP Common Shares
and cash for fractional shares of AIP Common Shares in accordance with Sections
4.1(b) and 4.2(e).
4.2. Exchange of RELP Interests. (a) As of the Effective Time, AIP
shall deposit, or shall cause to be deposited, with an exchange agent selected
by AIP, which shall be AIP's Transfer Agent or such other party reasonably
satisfactory to RELP (the "Exchange Agent"), for the benefit of the holders of
RELP Interests, for exchange in accordance with this Article IV, certificates
representing the Total Shares and the cash in lieu of fractional shares (such
cash and certificates for the Total Shares together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund") to be issued pursuant to Section 4.1 and paid pursuant to this
Section 4.2 in exchange for outstanding RELP Interests.
(b) Promptly after the Effective Time, AIP shall cause the Exchange
Agent to mail to each holder of record of a RELP Interest (x) a certificate
representing the number of whole shares of AIP Common Shares and (y) a check
representing the amount of cash in lieu of fractional shares, if any, and
unpaid dividends and distributions, if any, which such holder has the right to
receive in respect of the RELP Interest surrendered pursuant to the provisions
of this Article IV, after giving effect to any required withholding tax. No
interest will be paid or accrued on the cash in lieu of fractional shares and
unpaid dividends and distributions, if any, payable to holders of RELP
Interests. In the event of a transfer of ownership of RELP Interests which is
not registered in the transfer records of RELP, a certificate representing the
proper number of AIP Common Shares, together with a check for the cash to be
paid in lieu of fractional shares, may be issued to such a transferee if such
holder presents to the Exchange Agent, all documents required to evidence and
effect such transfer and to evidence that any applicable transfer taxes have
been paid.
(c) At and after the Effective Time, there shall be no transfers on
the transfer books of RELP of RELP Interests which were outstanding immediately
prior to the Effective Time.
(d) No fractional AIP Common Shares shall be issued pursuant hereto.
In lieu of the issuance of any fractional AIP Common Shares pursuant to Section
4.1(b), cash adjustments will be paid to holders in respect of any fractional
AIP Common Shares that would otherwise be issuable, and the amount of such cash
adjustment shall be equal to such fractional proportion of the Share Price.
(e) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any AIP Common Shares) that remains unclaimed by the
former partners of RELP one year after the Effective Time shall be delivered to
AIP. Any former partners of RELP who have not theretofore complied with this
Article IV shall thereafter look only to AIP for delivery of their AIP Common
<PAGE> 4
Shares, and payment of cash in lieu of fractional shares and unpaid dividends
and distributions on the AIP Common Shares deliverable in respect of each RELP
Interest such partners hold as determined pursuant to this Agreement, in each
case, without any interest thereon.
(f) None of AIP, RELP, the Exchange Agent or any other person shall
be liable to any former holder of RELP Interests for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF RELP
RELP represents and warrants to AIP as set forth below. As contemplated
below, a "RELP Disclosure Letter" will be delivered to AIP on or before August
11, 1997. The RELP Disclosure Letter shall provide the information or
exceptions described below and shall list all of the assets of the RELP that
will not be transferred in connection with the Merger. The RELP Disclosure
Letter shall be amended prior to Closing to cause such representations and
warranties to be materially true and correct on the Closing Date, but RELP
shall remain liable for any material breach of such representations and
warranties reflected in such amendment only as provided in Section 9.5(d),
below.
5.1. Existence; Good Standing; Authority; Compliance with Law. (a)
RELP is a limited partnership, duly formed, validly existing and in good
standing under the laws of the State of Delaware. To its actual knowledge,
RELP is duly licensed or qualified to do business as a foreign limited
partnership and is in good standing under the laws of any other state of the
United States in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified would not have a
material adverse effect on the business, results of operations or financial
condition of RELP (a "RELP Material Adverse Effect"). RELP has all requisite
power and authority to own, operate, lease and encumber its properties and
carry on its business as now conducted.
(b) To the RELP's actual knowledge, it is not in violation of any
order of any court, governmental authority or arbitration board or tribunal, or
any law, ordinance, governmental rule or regulation to which RELP or any of its
properties or assets is subject, where such violation would have a RELP
Material Adverse Effect. RELP has obtained all licenses, permits and other
authorizations and has taken all actions required by applicable law or
governmental regulations in connection with its business as now conducted,
where the failure to obtain any such item or to take any such action would have
a RELP Material Adverse Effect. A copy of RELP's Agreement of Limited
Partnership and Certificate of Limited Partnership (collectively, the "RELP
Organizational Documents") have been delivered or made available to AIP and its
counsel and such documents will be listed in the RELP Disclosure Letter and
were or will be true and correct when delivered or made available.
5.2. Authorization, Validity and Effect of Agreements. RELP has the
requisite power and authority to enter into the transactions contemplated
hereby and to execute and deliver this Agreement and all other documents,
agreements and instruments related to the transactions
<PAGE> 5
contemplated by this Agreement (the "RELP Ancillary Agreements"). Subject only
to the approval of this Agreement and the transactions contemplated hereby in
accordance with the Agreement of Limited Partnership of the RELP, the
consummation by RELP of this Agreement, the RELP Ancillary Agreements and the
transactions contemplated hereby have been duly authorized by all requisite
action on the part of RELP. In reliance upon the legal opinion described in
Section 8.2(e), RELP believes this Agreement constitutes, and the RELP
Ancillary Agreements (when executed and delivered pursuant hereto for value
received) will constitute, the valid and legally binding obligations of RELP,
enforceable against RELP in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity (collectively, "Equitable
Remedies").
5.3. Future Issuances. To RELP's actual knowledge, there are not at
the date of this Agreement any existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate RELP to issue, transfer or sell any RELP Interests.
After the Effective Time, AIP will have no obligation to issue, transfer or
sell any RELP Interest.
5.4. Other Interests. Except as set forth in the RELP Disclosure
Letter, RELP does not own directly or indirectly any interest or investment
(whether equity or debt) in any corporation, partnership, joint venture,
business, trust or entity (other than investments in short-term investment
securities).
5.5. No Violation. To RELP's actual knowledge, neither the execution
and delivery by RELP of this Agreement nor the consummation by RELP of the
transactions contemplated hereby in accordance with the terms hereof, will: (i)
conflict with or result in a breach of any provisions of the Agreement of
Limited Partnership of RELP; (ii) except as contemplated by the RELP Ancillary
Agreements or as will be set forth in the RELP Disclosure Letter, violate, or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties of RELP under, or result in being declared void,
voidable or without further binding effect, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust or any
license, franchise, permit, lease, contract, agreement or other instrument,
commitment or obligation to which RELP is a party, or by which RELP or any of
its properties is bound or affected, except for any of the foregoing matters
which, individually or in the aggregate, would not have a RELP Material Adverse
Effect; or (iii) other than the filings provided for in Article I, any filings
required under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Securities Act or applicable state securities and "Blue Sky" laws
(collectively, the "Regulatory Filings"), require any consent, approval or
authorization of, or declaration, filing or registration with, any domestic
governmental or regulatory authority, except where the failure to obtain any
such consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority would not have an
RELP Material Adverse Effect.
5.6. SEC Documents. (a) RELP has made available or will make
available to AIP prior to July 31, 1997, each registration statement, report,
proxy statement or information statement and
<PAGE> 6
all exhibits thereto prepared by it or relating to its properties (including
registration statements covering mortgage pass-through certificates) since
January 1, 1994, each in the form (including exhibits and any amendments
thereto) filed with the SEC (collectively, the "RELP Reports"). The RELP
Reports, which were or will be filed with the SEC in a timely manner,
constitute all forms, reports and documents required to be filed by RELP under
the Securities Act of 1933, as amended (the "Securities Act"), the Exchange Act
and the rules and regulations promulgated thereunder (collectively the
"Securities Laws") for the periods stated above.
(b) To the RELP's actual knowledge, as of their respective dates, the
RELP Reports (i) complied as to form in all material respects with the
applicable requirements of the Securities Laws and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. To the
RELP's actual knowledge, each of the balance sheets of RELP included in or
incorporated by reference into the RELP Reports (including the related notes
and schedules) fairly presents the financial position of RELP as of its date
and each of the consolidated statements of income, retained earnings and cash
flows of RELP included in or incorporated by reference into the RELP Reports
(including any related notes and schedules) fairly presents the results of
operations, retained earnings and cash flows, as the case may be, of RELP for
the periods set forth therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments which would not be material in amount or
effect), in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as may be
noted therein and except, in the case of the unaudited statements, as permitted
by the Securities Laws.
(c) Except as and to the extent set forth on the balance sheet of
RELP at March 31, 1997, including all notes thereto, or as set forth in the
RELP Reports, RELP has no material liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on, or reserved against in, a balance sheet of RELP or in the
notes thereto, prepared in accordance with generally accepted accounting
principles consistently applied, except liabilities arising in the ordinary
course of business since such date which would not have a RELP Material Adverse
Effect.
5.7. Litigation. To the RELP's actual knowledge, there are (i) no
continuing orders, injunctions or decrees of any court, arbitrator or
governmental authority to which RELP is a party or by which any of its
properties or assets are bound or to which USAA Properties III, Inc. (the
"General Partner") or the General Partner's, directors, officers, or
affiliates is a party or by which any of their properties or assets are bound,
and (ii) except as will be set forth in the RELP Disclosure Letter, no actions,
suits or proceedings pending against RELP or against the General Partner or the
General Partner's directors, officers or affiliates or, to the knowledge of the
General Partner, threatened against RELP or against the General Partner or the
General Partner's directors, officers or affiliates, at law or in equity, or
before or by any federal or state commission, board, bureau, agency or
instrumentality, that in the case of clauses (i) or (ii) above are reasonably
likely, individually or in the aggregate, to have a RELP Material Adverse
Effect.
<PAGE> 7
5.8. Absence of Certain Changes. Except as disclosed in the RELP
Reports filed prior to the date hereof, since March 31, 1997, (i) RELP
conducted its business only in the ordinary course of such business (which for
purposes of this section only, shall include all acquisitions of real estate
properties and financing arrangements made in connection therewith or otherwise
will be set forth in the RELP Disclosure Letter); (ii) there has not been any
RELP Material Adverse Effect; (iii) there has not been any distribution,
setting aside or payment of any distribution with respect to any RELP Interest,
and (iv) there has not been any material change in RELP's accounting
principles, practices or methods.
5.9. Taxes. (a) Except as may be set forth in the RELP Disclosure
Letter, RELP (i) has timely filed all federal, state and foreign tax returns
including, without limitation, information returns and reports required to be
filed by it for tax periods ended prior to the date of this Agreement or
requests for extensions have been timely filed and any such request has been
granted and has not expired and all such returns are accurate and complete in
all material respects, (ii) has paid or accrued all taxes shown to be due and
payable on such returns or which have become due and payable pursuant to any
assessment, deficiency notice, 30-day letter or other notice received by it and
(iii) has properly accrued all taxes for such periods and periods subsequent to
the periods covered by such returns. RELP has not received notice that the
federal, state and local income and franchise tax returns of RELP has been or
will be examined by any taxing authority. RELP has not executed or filed with
the Internal Revenue Service (the "IRS") or any other taxing authority any
agreement now in effect extending the period for assessment or collection of
any income or other taxes.
(b) Except as may be set forth in the RELP Disclosure Letter, RELP is
not a party to any pending action or proceeding by any governmental authority
for assessment or collection of taxes, and no claim for assessment or
collection of taxes has been asserted against it. True, correct and complete
copies of all federal, state and local income or franchise tax returns filed by
RELP since January 1, 1991 and all communications relating thereto have been
delivered to AIP or made available to representatives of AIP or will be so
delivered or made available prior to July 31, 1997. RELP does not hold any
asset (i) the disposition of which could be subject to rules similar to Section
1374 of the Internal Revenue Code of 1986, as amended (the "Code") as a result
of an election under IRS Notice 88-19 or (ii) that is subject to a consent
filed pursuant to Section 341(f) of the Code and regulations thereunder. For
purposes of this Section 5.9, "taxes" includes any interest, penalty or
additional amount payable with respect to any tax.
5.10. Books and Records. The books of account and other financial
records of RELP are in all material respects true, complete and correct, have
been maintained in accordance with good business practices, and are accurately
reflected in all material respects in the financial statements included in the
RELP Reports.
5.11. Properties. (a) RELP owns fee simple title to each of the real
properties reflected on the most recent balance sheet of RELP included in the
RELP Reports or as may be identified in the RELP Disclosure Letter (the "RELP
Properties"), which are all of the real estate properties owned by it, free
and clear of liens, mortgages or deeds of trust, claims against title, charges
which are liens or security interests ("Encumbrances") except as will be noted
in the RELP Disclosure
<PAGE> 8
Letter. To RELP's actual knowledge, the RELP Properties are not subject to any
rights of way, written agreements, laws, ordinances and regulations affecting
building use or occupancy, or reservations of an interest in title
(collectively, "Property Restrictions"), except for (i) Encumbrances and
Property Restrictions that will be set forth in the RELP Disclosure Letter,
(ii) Property Restrictions imposed or promulgated by law or any governmental
body or authority with respect to real property, including zoning regulations,
provided they do not materially adversely affect the current use of the
property, (iii) Encumbrances and Property Restrictions disclosed on existing
title reports or current surveys (in either case copies of which title reports
and surveys have been or will be delivered or made available to AIP July 31,
1997), (iv) mechanics', carriers', workmen's, repairmen's liens and other
Encumbrances, Property Restrictions and other limitations of any kind, if any,
which have heretofore been bonded (and that will be listed in the RELP
Disclosure Letter) or which individually or in the aggregate do not exceed
$100,000, do not materially detract from the value of or materially interfere
with the present use of any of the RELP Properties subject thereto or affected
thereby, and do not otherwise materially impair business operations conducted
by RELP and which have arisen or been incurred only in its construction
activities or in the ordinary course of business.
(b) Valid policies of title insurance have been issued insuring
either (a) RELP's fee simple title to the RELP Properties or (b) first mortgage
liens thereon, subject only to the matters disclosed above and as may be set
forth in the RELP Disclosure Letter, and such policies are, at the date hereof,
in full force and effect and no claim has been made against any such policy. To
RELP's actual knowledge, except as will be set forth in the RELP Disclosure
Letter: (i) there is no certificate, permit or license from any governmental
authority having jurisdiction over any of the RELP Properties or any agreement,
easement or other right which is necessary to permit the lawful use and
operation of the buildings and improvements on any of the RELP Properties or
which is necessary to permit the lawful use and operation of all driveways,
roads and other means of egress and ingress to and from any of the RELP
Properties that has not been obtained and is not in full force and effect, or
of any pending threat of modification or cancellation of any of same; (ii) RELP
has not received written notice of any material violation of any federal, state
or municipal law, ordinance, order, regulation or requirement affecting any
portion of any of the RELP Properties issued by any governmental authority;
(iii) there are no structural defects relating to the RELP Properties and no
RELP Properties whose building systems are not in working order in any material
respect; and (iv) there is (A) no physical damage to any RELP Property in
excess of $100,000 for which there is no insurance in effect covering the cost
of the restoration, (B) no current renovation to any RELP Property the cost of
which exceeds $100,000 and (C) no current restoration (excluding tenant
improvements) of any RELP Property, the cost of which exceeds $100,000.
(c) Except as will be set forth in the RELP Disclosure Letter, RELP
has not received notice to the effect that and there are no (A) condemnation or
rezoning proceedings that are pending or threatened with respect to any of the
RELP Properties or (B) zoning, building or similar laws, codes, ordinances,
orders or regulations that are or will be violated by the continued
maintenance, operation or use of any buildings or other improvements on any of
the RELP Properties or by the continued maintenance, operation or use of the
parking areas. All work to be performed, payments to be made and actions to be
taken by RELP prior to the date hereof pursuant to any agreement entered into
with a governmental body or authority in connection with a site approval,
zoning
<PAGE> 9
reclassification or other similar action relating to the RELP Properties (e.g.,
Local Improvement District, Road Improvement District, Environmental
Mitigation) has been performed, paid or taken, as the case may be, and RELP is
not aware of any planned or proposed work, payments or actions that may be
required after the date hereof pursuant to such agreements, except as will be
set forth in the RELP Disclosure Letter.
5.12. Environmental Matters. To RELP's actual knowledge, RELP has not
caused (i) the unlawful presence of any hazardous substances, hazardous
materials, toxic substances or waste materials (collectively, "Hazardous
Materials") on any of the RELP Properties, or (ii) any unlawful spills,
releases, discharges or disposal of Hazardous Materials to have occurred or be
presently occurring on or from the RELP Properties as a result of any
construction on or operation and use of such properties, which presence or
occurrence would, individually or in the aggregate, have a RELP Material
Adverse Effect; and in connection with the construction on or operation and use
of the RELP Properties, RELP has not failed to comply, in any material respect,
with any applicable local, state and federal environmental laws, regulations,
ordinances and administrative and judicial orders relating to the generation,
recycling, reuse, sale, storage, handling, transport and disposal of any
Hazardous Materials.
5.13. Labor Matters. RELP is not a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor union organization. There is no unfair labor
practice or labor arbitration proceeding pending or, to the knowledge of the
General Partner, threatened against RELP relating to its business, except for
any such proceeding which would not have a RELP Material Adverse Effect. To the
knowledge of the General Partner, there are no organizational efforts with
respect to the formation of a collective bargaining unit presently being made
or threatened involving employees of RELP or any of its Subsidiaries.
5.14. No Brokers. Except the fee that is to be paid to Houlihan Lokey
Howard & Zukin ("Houlihan") by RELP as described in Section 5.15 below, RELP
has not entered into any contract, arrangement or understanding with any person
or firm which may result in the obligation of RELP or AIP to pay any finder's
fees, brokerage or agent's commissions or other like payments in connection
with the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby. RELP is not aware of any claim for payment of
any finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
5.15. Opinion of Financial Advisor. RELP has retained Houlihan to
review the transaction contemplated by this Agreement and to issue an opinion
to the effect that, as of the date of such opinion, the Purchase Price is fair
to the holders of RELP Interests from a financial point of view.
5.16. Related Party Transactions. Except as set forth in the RELP
Disclosure Letter, there are no arrangements, agreements or contracts entered
into by RELP with (i) any consultant, (ii) any person who is an officer,
director or affiliate of RELP or its General Partner, any relative of any of
the foregoing or any entity of which any of the foregoing is an affiliate, or
(iii) any person who acquired RELP Interests in a private placement.
<PAGE> 10
5.17. Contracts and Commitments. The RELP Disclosure Letter will set
forth (i) all unsecured notes or other obligations of RELP which individually
may result in total payments in excess of $100,000, (ii) all notes, debentures,
bonds and other evidence of indebtedness which are secured or collateralized by
mortgages, deeds of trust or other security interests in the RELP Properties or
personal property of RELP, and (iii) each commitment entered into by RELP
which may result in total payments or liability in excess of $100,000. Copies
of the foregoing will be delivered or made available to AIP prior to July 31,
1997, will be listed on the RELP Disclosure Letter and will be materially true
and correct when delivered or made available. RELP has not received any notice
of a default that has not been cured under any of the documents described in
clause (i) above or is in default respecting any payment obligations thereunder
beyond any applicable grace periods. All options of RELP to purchase real
property will be set forth on the RELP Disclosure Letter and such options and
RELP's rights thereunder are in full force and effect. All joint venture
agreements to which RELP is a party will be set forth on the RELP Disclosure
Letter and RELP is not in default with respect to any obligations, which
individually or in the aggregate are material, thereunder.
5.18. Development Rights. Set forth in the RELP Disclosure Letter
will be a list of all material agreements entered into by RELP relating to the
development, rehabilitation, capital improvement or construction of office
buildings, industrial facilities or other real estate properties, which
development or construction has not been substantially completed as of the date
of this Agreement. Such agreements, true and correct copies of all of which
will be delivered or made available to AIP prior to July 31, 1997, will be
listed in the RELP Disclosure Letter, have not been modified and are valid and
binding in accordance with their respective terms.
5.19. Convertible Securities. To RELP's actual knowledge, RELP has no
outstanding options, warrants or other securities exercisable for, or
convertible into, RELP Interests, the terms of which would require any anti-
dilution adjustments by reason of the consummation of the transactions
contemplated hereby.
ARTICLE VI . REPRESENTATIONS AND WARRANTIES OF AIP
AIP represents and warrants to RELP as set forth below. As contemplated
below, an "AIP Disclosure Letter" will be delivered to RELP on or before August
11, 1997. The AIP Disclosure Letter shall provide the information or
exceptions described below. The AIP Disclosure Letter shall be amended prior to
Closing to cause such representations and warranties to be materially true and
correct on the Closing Date, but AIP shall remain liable for any material
breach of such representations and warranties reflected in such amendment only
as provided in Section 9.5(d), below.
6.1. Existence; Good Standing; Authority; Compliance with Law. (a)
AIP is a real estate investment trust duly organized and validly existing
under the laws of the State of Texas. To AIP's actual knowledge, AIP is duly
licensed or qualified to do business and is in good standing under the laws of
any other state of the United States in which the character of the properties
owned or leased by it therein or in which the transaction of its business makes
such qualification necessary, except where the failure to be so qualified would
not have a material adverse effect on the business, results
<PAGE> 11
of operations or financial condition of AIP and its subsidiaries taken as a
whole (an "AIP Material Adverse Effect"). AIP has all requisite power and
authority to own, operate, lease and encumber its properties and carry on its
business as now conducted. Each of AIP's Subsidiaries is a corporation, limited
liability company or partnership duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has the requisite power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business and
is in good standing in each jurisdiction in which the ownership of its property
or the conduct of its business requires such qualification, except for
jurisdictions in which such failure to be so qualified or to be in good
standing would not have an AIP Material Adverse Effect.
(b) To AIP's actual acknowledge, neither AIP nor any AIP Subsidiary
is in violation of any order of any court, governmental authority or
arbitration board or tribunal, or any law, ordinance, governmental rule or
regulation to which AIP or any AIP Subsidiary or any of their respective
properties or assets is subject, where such violation would have an AIP
Material Adverse Effect. AIP and its Subsidiaries have obtained all licenses,
permits and other authorizations and have taken all actions required by
applicable law or governmental regulations in connection with their business as
now conducted, where the failure to obtain any such item or to take any such
action would have an AIP Material Adverse Effect. Copies of AIP's and its
Subsidiaries' Declaration of Trust, Articles of Incorporation, Bylaws,
organizational documents and partnership and joint venture agreements have been
or will be prior to July 31, 1997, delivered or made available to RELP and such
documents will be listed in the AIP Disclosure Letter and were or will be true
and correct when delivered or made available. For the purposes of the
immediately preceding sentence, the term "Subsidiary"shall include the entities
set forth in AIP's Disclosure Letter, which are all of AIP's Subsidiaries.
6.2. Authorization, Validity and Effect of Agreements. AIP has the
requisite power and authority to enter into the transactions contemplated
hereby and to execute and deliver this Agreement and all other documents,
agreements and instruments related to the transactions contemplated by this
Agreement to which it is a party (the "AIP Ancillary Agreements"). Subject only
to the approval of the issuance of AIP Common Shares pursuant to the Merger
contemplated hereby by the holders of two-thirds of the outstanding AIP Common
Shares, present and voting thereon, the consummation by AIP of this Agreement,
the AIP Ancillary Agreements and the transactions contemplated hereby have been
duly authorized by all requisite action on the part of AIP. This Agreement
constitutes, and the AIP Ancillary Agreements (when executed and delivered
pursuant hereto for value received) will constitute, the valid and legally
binding obligations of AIP enforceable against AIP in accordance with their
respective terms, subject to Equitable Remedies.
6.3. Capitalization. On June 15, 1997, the authorized capital stock
of AIP consists of 10,000,000 Common Shares. As of the date hereof, all
10,000,000 Common Shares are outstanding. AIP has no outstanding bonds,
debentures, notes or other obligations (other than to Realco), the holders of
which have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the shareholders of AIP on any
matter. Except as set forth in the AIP Disclosure Letter, all such issued and
outstanding of AIP Common Shares are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights. Except as set forth in the
AIP Disclosure Letter, there are not at the date of this Agreement any existing
options, warrants, calls,
<PAGE> 12
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate AIP or any of its Subsidiaries to issue, transfer or
sell any shares or other equity interest of AIP or any of its Subsidiaries
except under any employee incentive plan approved by AIP's shareholders. There
are no agreements or understandings to which AIP is a party with respect to the
voting of any AIP Common Shares or which restrict the transfer of any such
shares, except in order to protect its REIT status.
6.4. Subsidiaries. Except as set forth in the AIP Disclosure Letter,
AIP owns directly or indirectly each of the outstanding shares of capital stock
or all of the partnership or other equity interests of each of AIP's
Subsidiaries free and clear of all liens, pledges, security interests, claims
or other encumbrances other than liens imposed by local law which are not
material.
6.5. Other Interests. Except as will be disclosed in the AIP
Disclosure Letter and except for interests in the AIP Subsidiaries, neither AIP
nor any AIP Subsidiary owns directly or indirectly any interest or investment
(whether equity or debt) in any corporation, partnership, joint venture,
business, trust or entity (other than investments in short-term investment
securities).
6.6. No Violation. Neither the execution and delivery by AIP of this
Agreement nor the consummation by AIP of the transactions contemplated hereby
in accordance with the terms hereof, will: (i) conflict with or result in a
breach of any provisions of AIP's Declaration of Trust; (ii) violate, or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties of AIP or its Subsidiaries under, or result in being
declared void, voidable or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which AIP or any of its Subsidiaries is
a party, or by which AIP or any of its Subsidiaries or any of their properties
is bound or affected, except for any of the foregoing matters which,
individually or in the aggregate, would not have an AIP Material Adverse
Effect; or (iii) other than the Regulatory Filings require any consent,
approval or authorization of, or declaration, filing or registration with, any
domestic governmental or regulatory authority, except where the failure to
obtain such consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority would not have an
AIP Material Adverse Effect.
6.7. SEC Documents. (a) AIP has made available or will make
available to RELP prior to July 31, 1997, the registration statements of AIP
filed with the SEC in connection with public offerings of AIP securities since
January 1, 1994 and all exhibits, amendments and supplements thereto (the "AIP
Registration Statements"), and each registration statement, report, proxy
statement or information statement and all exhibits thereto prepared by it or
relating to its properties since the effective date of the latest AIP
Registration Statement, each in the form (including exhibits and any amendments
thereto) filed with the SEC (collectively, the "AIP Reports"). The AIP Reports,
which were or will be filed with the SEC in a timely manner, constitute all
forms, reports and documents required to be filed by AIP under the Securities
Laws.
<PAGE> 13
(b) To AIP's actual knowledge, as of their respective dates, the AIP
Reports (i) complied as to form in all material respects with the applicable
requirements of the Securities Laws, and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. To AIP's
actual acknowledge, each of the consolidated balance sheets of AIP included in
or incorporated by reference into the AIP Reports (including the related notes
and schedules) fairly presents the consolidated financial position of AIP and
the AIP Subsidiaries as of its date and each of the consolidated statements of
income, retained earnings and cash flows of AIP included in or incorporated by
reference into the AIP Reports (including any related notes and schedules)
fairly presents the results of operations, retained earnings or cash flows, as
the case may be, of AIP and the AIP Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein and except, in the
case of the unaudited statements, as permitted by the Securities Laws.
(c) Except as and to the extent set forth on the consolidated balance
sheet of AIP and its Subsidiaries at March 31, 1997, including all notes
thereto, or as set forth in the AIP Reports, neither AIP nor any of the AIP
Subsidiaries has any material liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on, or reserved against in, a balance sheet of AIP or in the notes
thereto, prepared in accordance with generally accepted accounting principles
consistently applied, except liabilities arising in the ordinary course of
business since such date which would not have an AIP Material Adverse Effect.
6.8. Litigation. To AIP's actual knowledge, there are (i) no
continuing orders, injunctions or decrees of any court, arbitrator or
governmental authority to which AIP or any AIP Subsidiary is a party or by
which any of its properties or assets are bound or, to which any of its
directors, officers, or affiliates is a party or by which any of their
properties or assets are bound, and (ii) except as will be set forth in the AIP
Disclosure Letter, no actions, suits or proceedings pending against AIP or any
AIP Subsidiary or, to the knowledge of AIP, against any of its Trust Managers,
officers, or affiliates or, to the knowledge of AIP, threatened against AIP or
any AIP Subsidiary or against any of its Trust Managers, officers, or
affiliates, at law or in equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality, that in the case of
clauses (i) or (ii) above are reasonably likely, individually or in the
aggregate, to have an AIP Material Adverse Effect.
6.9. Absence of Certain Changes. Except as disclosed in the AIP
Reports filed with the SEC prior to the date hereof, (i) AIP and its
Subsidiaries have conducted their business only in the ordinary course of such
business (which, for purposes of this section only, shall include all
acquisitions of real estate properties and financing arrangements made in
connection therewith); (ii) there has not been any AIP Material Adverse Effect;
(iii) there has not been any declaration, setting aside or payment of any
dividend or other distribution with respect to the AIP Common Shares; and (iv)
there has not been any material change in AIP's accounting principles,
practices or methods.
<PAGE> 14
6.10. Taxes. (a) Except as may be set forth in the AIP Disclosure
Letter, AIP and each of its Subsidiaries (i) has timely filed all federal,
state and foreign tax returns including, without limitation, information
returns and reports required to be filed by any of them for tax periods ended
prior to the date of this Agreement or requests for extensions have been timely
filed and any such request has been granted and has not expired and all such
returns are absolute and complete in all material respects, (ii) has paid or
accrued all taxes shown to be due and payable on such returns or which have
become due and payable pursuant to any assessment, deficiency notice, 30-day
letter or other notice received by it and (iii) has properly accrued all taxes
for such periods subsequent to the periods covered by such returns. Neither AIP
nor any of its Subsidiaries has received notice that the federal, state and
local income and franchise tax returns of AIP or any such Subsidiary has been
or will be examined by any taxing authority. Neither AIP nor any of its
Subsidiaries has executed or filed with the IRS or any other taxing authority
any agreement now in effect extending the period for assessment or collection
of any income or other taxes.
(b) Except as will be disclosed in the AIP Disclosure Letter, neither
AIP nor any of its Subsidiaries is a party to any pending action or proceeding
by any governmental authority for assessment or collection of taxes, and no
claim for assessment or collection of taxes has been asserted against it. True,
correct and complete copies of all federal, state and local income or franchise
tax returns filed by AIP and each of its Subsidiaries and all communications
relating thereto have been delivered to RELP or made available to
representatives of RELP or will be so delivered or made available prior to July
31, 1997. AIP (i) has qualified to be taxed as a REIT pursuant to Sections 856
through 859 of the Code for its taxable years ended December 31, 1985 through
1996, inclusive (ii) has operated, and intends to continue to operate, in such
a manner as to qualify to be taxed as a REIT pursuant to Sections 856 through
859 of the Code for its taxable year ended on the effective date of the Merger,
and (iii) has not taken or omitted to take any action which could result in,
and each of the executive officers of AIP, each acting in his respective
capacity as such, has no actual knowledge of, a challenge to its status as a
REIT. AIP represents that each of its Subsidiaries is a Qualified REIT
Subsidiary as defined in Section 856 (i) of the Code. Neither AIP nor any of
its Subsidiaries holds any asset (i) the disposition of which could be subject
to rules similar to Section 1374 of the Code as a result of an election under
IRS Notice 88-19 or (ii) that is subject to a consent filed pursuant to Section
341(f) of the Code and regulations thereunder. For purposes of this Section
6.10, "taxes" includes any interest, penalty or additional amount payable with
respect to any tax.
6.11. Books and Records. (a) The books of account and other financial
records of AIP and its Subsidiaries are in all material respects true, complete
and correct, have been maintained in accordance with good business practices,
and are accurately reflected in all material respects in the financial
statements included in the AIP Reports.
(b) The minute books and other records of AIP and its Subsidiaries
contain in all material respects accurate records of all meetings and
accurately reflect in all material respects all other corporate action of the
shareholders and Trust Managers and any committees of the Board of Trust
Managers of AIP and its Subsidiaries.
<PAGE> 15
6.12. Properties. (a) AIP and its Subsidiaries own fee simple title
to each of the real properties reflected on the most recent balance sheet of
AIP included in the AIP Reports or as may be identified in the AIP Disclosure
Letter (the "AIP Properties"), which are all of the real estate properties
owned by them, free and clear of Encumbrances. To AIP's actual knowledge, the
AIP Properties are not subject to any rights of way, written agreements, laws,
ordinances and regulations affecting building use or occupancy, or reservations
of an interest in title (collectively, "Property Restrictions"), except for (i)
Encumbrances and Property Restrictions that will be set forth in the AIP
Disclosure Letter, (ii) Property Restrictions imposed or promulgated by law or
any governmental body or authority with respect to real property, including
zoning regulations, provided they do not materially adversely affect the
current use of the property, (iii) Encumbrances and Property Restrictions
disclosed on existing title reports or surveys (in either case copies of which
title reports and surveys have been or will be delivered or made available to
RELP prior to July 31, 1997), and (iv) mechanics', carriers', workmen's,
repairmen's liens and other Encumbrances, Property Restrictions and other
limitations of any kind, if any, which have heretofore been bonded (and that
will be listed in the AIP Disclosure Letter) or which individually or in the
aggregate, do not exceed $100,000, do not materially detract from the value of
or materially interfere with the present use of any of the AIP Properties
subject thereto or affected thereby, and do not otherwise materially impair
business operations conducted by AIP and its Subsidiaries and which have arisen
or been incurred only in its construction activities or in the ordinary course
of business.
(b) Valid policies of title insurance have been issued insuring AIP's
or any of its Subsidiaries' fee simple title to the AIP Properties, subject
only to the matters disclosed above and as may be set forth in the AIP
Disclosure Letter, and such policies are, at the date hereof, in full force and
effect and no material claim has been made against any such policy. To AIP's
actual knowledge, except as will be set forth in the AIP Disclosure Letter, (i)
there is no certificate, permit or license from any governmental authority
having jurisdiction over any of the AIP Properties or any agreement, easement
or other right which is necessary to permit the lawful use and operation of the
buildings and improvements on any of the AIP Properties or which is necessary
to permit the lawful use and operation of all driveways, roads and other means
of egress and ingress to and from any of the AIP Properties that has not been
obtained and is not in full force and effect, or of any pending threat of
modification or cancellation of any of same; (ii) neither AIP nor its
Subsidiaries has received written notice of any material violation of any
federal, state or municipal law, ordinance, order, regulation or requirement
affecting any portion of any of the AIP Properties issued by any governmental
authority; (iii) there are no structural defects relating to the AIP Properties
and no AIP Properties whose building systems are not in working order in any
material respect; and (iv) there is (A) no physical damage to any AIP Property
in excess of $100,000 for which there is no insurance in effect covering the
cost of the restoration, (B) no current renovation to any AIP Property the cost
of which exceeds $100,000 and (C) no current restoration (excluding tenant
improvements) of any AIP Property the cost of which exceeds $100,000.
(c) Except as will be set forth in the AIP Disclosure Letter, AIP or
its Subsidiaries have received no notice to the effect that and there are no
(A) condemnation or rezoning proceedings that are pending or threatened with
respect to any of the AIP Properties or (B) any zoning, building or similar
laws, codes, ordinances, orders or regulations that are or will be violated by
the continued maintenance, operation or use of any buildings or other
improvements on any of the AIP Properties
<PAGE> 16
or by the continued maintenance, operation or use of the parking areas in any
material respect. All work to be performed, payments to be made and actions to
be taken by AIP or its Subsidiaries prior to the date hereof pursuant to any
agreement entered into with a governmental body or authority in connection with
a site approval, zoning reclassification or other similar action relating to
the AIP Properties (e.g., Local Improvement District, Road Improvement
District, Environmental Mitigation) has been performed, paid or taken, as the
case may be, and AIP is not aware of any planned or proposed work, payments or
actions that may be required after the date hereof pursuant to such agreements,
except as will be set forth in the AIP Disclosure Letter.
6.13. Environmental Matters. To the actual knowledge of AIP, none of
AIP, any of its Subsidiaries or, any other person has caused or permitted (i)
the unlawful presence of any Hazardous Materials on any of the AIP Properties,
or (ii) any unlawful spills, releases, discharges or disposal of Hazardous
Materials to have occurred or be presently occurring on or from the AIP
Properties as a result of any construction on or operation and use of such
properties, which presence or occurrence would, individually or in the
aggregate, have an AIP Material Adverse Effect; and in connection with the
construction on or operation and use of the AIP Properties, AIP and its
Subsidiaries have not failed to comply, in any material respect, with any
applicable local, state and federal environmental laws, regulations, ordinances
and administrative and judicial orders relating to the generation, recycling,
reuse, sale, storage, handling, transport and disposal of any Hazardous
Materials.
6.14. Labor Matters. Neither AIP nor any of its Subsidiaries is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor union organization.
There is no unfair labor practice or labor arbitration proceeding pending or,
to the knowledge of the executive officers of AIP, threatened against AIP or
its Subsidiaries relating to their business, except for any such proceeding
which would not have an AIP Material Adverse Effect. To the knowledge of AIP,
there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of AIP or any of its Subsidiaries.
6.15. No Brokers. Except for the fee payable to Prudential Securities
Incorporated ("Prudential") as described in Section 6.16 below, AIP has not
entered into any contract, arrangement or understanding with any person or
firm which may result in the obligation of AIP or RELP to pay any finder's
fees, brokerage or agent's commissions or other like payments in connection
with the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby. AIP is not aware of any claim for payment of
any finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
6.16. Opinion of Financial Advisor. AIP has retained Prudential to
review the transaction contemplated by this Agreement and to issue an opinion
as to the fairness to AIP, from a financial point of view, of the consideration
to be paid by AIP pursuant to the Merger.
6.17. RELP Share Ownership. Except as may be set forth in the AIP
Disclosure Letter, neither AIP nor any of its Subsidiaries owns any RELP
Interests or other securities convertible into RELP interests.
<PAGE> 17
6.18. AIP Common Shares. The issuance and delivery by AIP of AIP
Common Shares in connection with the Merger and this Agreement have been duly
and validly authorized by all necessary action on the part of AIP except for
the approval of its shareholders contemplated by this Agreement. The AIP Common
Shares to be issued in connection with the Merger and this Agreement, when
issued in accordance with the terms of this Agreement, will be validly issued,
fully paid and nonassessable, except that shareholders may be subject to
further assessment with respect to certain claims for tort, contract, taxes,
statutory liability and otherwise in some jurisdictions to the extent such
claims are not satisfied by AIP.
6.19. Convertible Securities. AIP has no outstanding options, warrants
or other securities exercisable for, or convertible into, shares of AIP Common
Shares, the terms of which would require any anti-dilution adjustments by
reason of the consummation of the transactions contemplated hereby, except the
preemptive rights held by certain clients of Morgan Stanley Asset Management,
Inc. and held by MS Real Estate Special Situations, Inc. and the convertible
debt securities held by Realco.
6.20. Related Party Transactions. Set forth in the AIP Disclosure
Letter will be a list of all arrangements, agreements and contracts entered
into by AIP or any of its Subsidiaries with (i) any person who is an officer,
Trust Manager or affiliate of AIP or any of its Subsidiaries, any relative of
any of the foregoing or any entity of which any of the foregoing is an
affiliate or (ii) any person who acquired AIP Common Shares in a private
placement. The copies of such documents, all of which have been or will be
delivered or made available to RELP prior to July 31, 1997, are or will be
true, complete and correct when delivered or made available.
6.21. Contracts and Commitments. The AIP Disclosure Letter will set
forth (i) all unsecured notes or other obligations of AIP and AIP Subsidiaries
which individually may result in total payments in excess of $100,000, (ii)
notes, debentures, bonds and other evidence of indebtedness which are secured
or collateralized by mortgages, deeds of trust or other security interests in
the AIP Properties or personal property of AIP and its Subsidiaries, and (iii)
each commitment entered into by AIP or any of its Subsidiaries which
individually may result in total payments or liability in excess of $100,000.
Copies of the foregoing have been or will be delivered or made available to
RELP prior to July 31, 1997, will be listed on the AIP Disclosure Letter and
are or will be materially true and correct when delivered or made available.
None of AIP or any of its Subsidiaries has received any notice of a default
that has not been cured under any of the documents described in clause (i) or
(ii) above or is in default respecting any payment obligations thereunder
beyond any applicable grace periods. All options of AIP or any of its
Subsidiaries to purchase real property will be set forth on the AIP Disclosure
Letter and such options and AIP's or its Subsidiaries' rights thereunder are in
full force and effect. All joint venture agreements to which AIP or any of its
Subsidiaries is a party will be set forth on the AIP Disclosure Letter and AIP
or its Subsidiaries are not in default with respect to any obligations, which
individually or in the aggregate are material, thereunder.
6.22. Development Rights. Set forth in the AIP Disclosure Letter will
be a list of all material agreements entered into by AIP or any of its
Subsidiaries relating to the development, rehabilitation, capital improvement
or construction of office buildings, industrial facilities or other
<PAGE> 18
real estate properties which development or construction has not been
substantially completed as of the date of this Agreement. Such agreements,
true, complete and correct copies of all of which have been or will be
delivered or made available to RELP prior to July 31, 1997, will be listed in
the AIP Disclosure Letter.
6.23. Certain Payments Resulting From Transactions. The execution of,
and performance of the transactions contemplated by, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
(i) constitute an event under any AIP Benefit Plan, policy, practice, agreement
or other arrangement or any trust or loan (the "Employee Arrangements") that
will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any employee, director
or consultant of AIP or any of its Subsidiaries unless such rights have been
waived by any such person, or (ii) result in the triggering or imposition of
any restrictions or limitations on the right of AIP or RELP to amend or
terminate any Employee Arrangement and receive the full amount of any excess
assets remaining or resulting from such amendment or termination, subject to
applicable taxes. No payment or benefit which will be required to be made
pursuant to the terms of any agreement, commitment or AIP Benefit Plan, as a
result of the transactions contemplated by this Agreement, to any officer,
director or employee of AIP or any of its Subsidiaries, will be characterized
as an "excess parachute payment" within the meaning of Section 280G(b)(1) of
the Code.
ARTICLE VII. COVENANTS
7.1. Acquisition Proposals. Prior to the Effective Time, RELP and
AIP each agree (i) that neither of them nor any of their Subsidiaries shall,
and each of them shall direct and use its best efforts to cause its respective
officers, General Partner, limited partners, Trust Managers, employees, agents,
affiliates and representatives (including, without limitation, any investment
banker, attorney or accountant retained by it or any of its Subsidiaries), as
applicable, not to, initiate, solicit or encourage, directly or indirectly, any
inquiries or 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, tender offer, exchange offer, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets or any equity securities (or any debt securities convertible into equity
securities) of, such party or any of its Subsidiaries, other than the
transactions contemplated by this Agreement (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal; (ii) that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing and each will take the
necessary steps to inform the individuals or entities referred to above of the
obligations undertaken in this Section 7.1; and (iii) that it will notify the
other party immediately if any such inquiries or proposals are received by, any
such information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it; provided, however, that nothing
contained in this Section 7.1 shall prohibit the Board of Directors of the
General Partner of RELP (the "Board of Directors") or the Board of Trust
Managers from (x)
<PAGE> 19
furnishing information to or entering into discussions or negotiations with,
any person or entity that makes an unsolicited bona fide Acquisition Proposal,
if, and only to the extent that, (A) the Board of Directors or Board of Trust
Managers, as applicable, determines in good faith that such action is required
for it to comply with its fiduciary duties to limited partners or shareholders,
as applicable, imposed by law as advised by counsel, (B) prior to furnishing
such information to, or entering into discussions or negotiations with, such
person or entity, such party provides written notice to the other party to this
Agreement to the effect that it is furnishing information to, or entering into
discussions with, such person or entity, and (C) subject to any confidentiality
agreement with such person or entity (which such party determined in good faith
was required to be executed in order for the Board of Directors or Board of
Trust Managers, as applicable, to comply with its fiduciary duties to limited
partners or shareholders, as applicable, imposed by law as advised by
counsel), such party keeps the other party to this Agreement informed of the
status (but not the terms) of any such discussions or negotiations; and (y) to
the extent applicable, complying with Rule 14e-2 promulgated under the Exchange
Act with regard to an Acquisition Proposal.
Nothing in this Section 7.1 shall (i) permit any party to terminate this
Agreement (except as specifically provided in Article IX hereof), (ii) permit
any party to enter into any agreement with respect to an Acquisition Proposal
during the term of this Agreement (it being agreed that during the term of this
Agreement, no party shall enter into any agreement with any person that
provides for, or in any way facilitates, an Acquisition Proposal (other than a
confidentiality agreement in customary form)), or (iii) affect any other
obligation of any party under this Agreement.
7.2. Conduct of Businesses.
(i) Prior to the Effective Time, except as may be set forth in the
RELP Disclosure Letter or the AIP Disclosure Letter or as contemplated by this
Agreement, unless the other party has consented in writing thereto, AIP and
RELP:
(a) Shall use their reasonable efforts, and shall cause each of their
respective Subsidiaries to use their reasonable efforts, to
preserve intact their business organizations and goodwill and
keep available the services of their respective officers and
employees;
(b) Shall confer on a regular basis with one or more representatives
of the other to report operational matters of materiality and,
subject to Section 7.1, any proposals to engage in material
transactions;
(c) Shall promptly notify the other of any material emergency or
other material change in the condition (financial or otherwise)
of the business, properties, assets or liabilities, or any
material governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or
the breach in any material respect of any representation,
warranty, covenant or agreement contained herein;
(d) Shall not pay quarterly dividends or make distributions payable
with respect to the AIP Common Shares and RELP Partnership
Interests, respectively; and
<PAGE> 20
(e) Shall promptly deliver to the other true and correct copies of
any report, statement or schedule filed with the SEC subsequent
to the date of this Agreement.
(ii) Prior to the Effective Time, except as may be set forth in the
RELP Disclosure Letter, unless AIP has consented (such consent not to be
unreasonably withheld or delayed) in writing thereto, RELP:
(a) Shall conduct its operations according to its usual, regular and
ordinary course in substantially the same manner as heretofore
conducted;
(b) Shall not amend the RELP Organizational Documents;
(c) Shall not (i) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights existing
on the date hereof and disclosed pursuant to this Agreement,
issue any RELP Interests, make any distribution, effect any
recapitalization or other similar transaction, (ii) grant, confer
or award any option, warrant, conversion right or other right not
existing on the date hereof to acquire any RELP Interest, (iii)
increase any compensation or enter into or amend any employment
agreement with any of its present or future officers or directors
of the General Partner, or (iv) adopt any new employee benefit
plan or amend any existing employee benefit plan in any material
respect, except for changes which are less favorable to
participants in such plans;
(d) Shall not declare, set aside or make any distribution or payment
with respect to any RELP Interest or directly or indirectly
redeem, purchase or otherwise acquire any RELP Interest, or make
any commitment for any such action;
(e) Shall not sell or otherwise dispose of (i) any RELP Properties,
or (ii) except in the ordinary course of business, any of its
other assets which are material, individually or in the
aggregate;
(f) Shall not make any loans, advances or capital contributions to,
or investments in, any other person;
(g) Shall not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business consistent with
past practice or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the most
recent consolidated financial statements (or the notes thereto)
of RELP included in the RELP Reports or incurred in the ordinary
course of business consistent with past practice;
(h) Shall not enter into any commitment which individually may result
in total payments or liability by or to it in excess of $250,000
in the case of any one commitment or in excess of $500,000 for
all commitments;
<PAGE> 21
(i) Shall not, and shall not permit any of its Subsidiaries to, enter
into any commitment with any officer, director or affiliate of
RELP or its General Partner except to the extent the same occur
in the ordinary course of business consistent with past practice
and would not have a RELP Material Adverse Effect; and
(j) Shall not enter into or terminate any lease representing annual
revenues of $100,000 or more.
(iii) Prior to the Effective Time, except as may be set forth in the
AIP Disclosure Letter, unless RELP has consented (such consent not to be
unreasonably withheld or delayed) in writing thereto, AIP:
(a) Shall, and shall cause each of its Subsidiaries to, conduct its
operations according to their usual, regular and ordinary course
in substantially the same manner as heretofore conducted;
(b) Shall not amend its Declaration of Trust or Bylaws except as
contemplated by this Agreement;
(c) Shall not (i) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights
(including AIP's existing dividend reinvestment plan) existing on
the date hereof and disclosed pursuant to this Agreement, issue
any shares of its capital stock, effect any share split, reverse
share split, share dividend, recapitalization or other similar
transaction, (ii) grant, confer or award any option, warrant,
conversion right or other right not existing on the date hereof
to acquire any shares of its capital shares (except pursuant to
any employee incentive plan approved by shareholders), (iii)
amend any employment agreement with any of its present or future
officers or Trust Managers, or (iv) adopt any new employee
benefit plan (including any share option, share benefit or share
purchase plan) except the employee incentive plan to be voted on
at its shareholder meeting for the fiscal year ended December 31,
1995;
(d) Shall not declare, set aside or pay any dividend or make any
other distribution or payment with respect to any Common Shares
or directly or indirectly redeem, purchase or otherwise acquire
any Common Shares or capital stock of any of its Subsidiaries, or
make any commitment for any such action;
(e) Except as will be set forth in the AIP Disclosure Letter, shall
not, and shall not permit any of its Subsidiaries to, sell or
otherwise dispose of (i) any AIP Properties or any of its capital
stock of or other interests in Subsidiaries or (ii) except in the
ordinary course of business, any of its other assets which are
material, individually or in the aggregate;
<PAGE> 22
(f) Shall not, and shall not permit any of its Subsidiaries to, make
any loans, advances or capital contributions to, or investments
in, any other person other than in connection with the sale of
properties;
(g) Shall not, and shall not permit any of its Subsidiaries to, pay,
discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business consistent with past practice or
in accordance with their terms, of liabilities reflected or
reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) of AIP
included in the AIP Reports or incurred in the ordinary course of
business consistent with past practice;
(h) Shall not, and shall not permit any of its Subsidiaries to, enter
into any commitment which individually may result in total
payments or liability by or to it in excess of $500,000 in the
case of any one commitment or in excess of $500,000 for all
commitments; and
(i) Shall not, and shall not permit any of its Subsidiaries to, enter
into any commitment with any officer, Trust Manager or affiliate
of AIP or any of its Subsidiaries, except as herein or in the AIP
Disclosure Letter provided and except in the ordinary course of
business.
For purposes of this Section 7.2, any consent shall be deemed to be
unreasonably delayed if notice of consent or withholding of consent is not
received within three days of request. Further, if no response is received by
the end of business on such third day, the party receiving the request shall be
deemed to have consented to such action.
7.3 Meetings of Shareholders and Partners. Each of AIP and RELP will
take all action necessary in accordance with applicable law and its
organizational documents to convene a meeting of its shareholders or partners,
as applicable, as promptly as practicable to consider and vote upon or
otherwise to obtain the consent of its shareholders or partners, as applicable,
to (i) in the case of AIP, approve this Agreement and the transactions
contemplated hereby, and (ii) in the case of RELP, approve this Agreement and
the transactions contemplated hereby. The Board of Trust Managers and the
General Partner shall each recommend such approval and AIP and RELP shall each
take all lawful action to solicit such approval, including, without limitation,
timely mailing the Proxy Statement/Prospectus (as defined in Section 7.7);
provided, however, that such recommendation or solicitation is subject to any
action taken by, or upon authority of, the Board of Trust Managers or the
General Partner, as the case may be, in the exercise of its good faith judgment
as to its fiduciary duties to its shareholders or partners, as applicable,
imposed by law as advised by counsel. AIP and RELP shall coordinate and
cooperate with respect to the timing of such meetings and shall use their best
efforts to hold such meetings on the same day.
7.4. Filings; Other Action. Subject to the terms and conditions
herein provided, RELP and AIP shall: (a) use all reasonable efforts to
cooperate with one another in (i) determining which filings are required to be
made prior to the Effective Time with, and which consents, approvals,
<PAGE> 23
permits or authorizations are required to be obtained prior to the Effective
Time from governmental or regulatory authorities of the United States and the
several states in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and (ii) timely
making all such filings and timely seeking all such consents, approvals,
permits or authorizations; (b) use all reasonable efforts to obtain in writing
any consents required from third parties in form reasonably satisfactory to
RELP and AIP necessary to effectuate the Merger; and (c) use all reasonable
efforts to take, or cause to be taken, all other action and do, or cause to be
done, all other things necessary, proper or appropriate to consummate and make
effective the transactions contemplated by this Agreement. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purpose of this Agreement, the proper officers and directors of AIP and
the General Partner shall take all such necessary action.
7.5. Inspection of Records. From the date hereof to the Effective
Time, each of RELP and AIP shall allow all designated officers, attorneys,
accountants and other representatives of the other access at all reasonable
times to the records and files, correspondence, audits and properties, as well
as to all information relating to commitments, contracts, titles and financial
position, or otherwise pertaining to the business and affairs of RELP and AIP
and their respective Subsidiaries.
7.6. Publicity. RELP and AIP shall, subject to their respective legal
obligations (including requirements of stock exchanges and other similar
regulatory bodies), consult with each other, and use reasonable efforts to
agree upon the text of any press release before issuing any such press release
or otherwise making public statements with respect to the transactions
contemplated hereby and in making any filings with any federal or state
governmental or regulatory agency or with any national securities exchange with
respect thereto.
7.7. Registration Statement. AIP and RELP shall cooperate and
promptly prepare and AIP shall file with the SEC as soon as practicable a
Registration Statement on Form S-4 (the "Form S-4") under the Securities Act,
with respect to the AIP Common Shares issuable in the Merger, a portion of
which Registration Statement shall also serve as the joint proxy statement with
respect to the meetings of the shareholders and partners, respectively, of AIP
and RELP in connection with the Merger (the "Proxy Statement/Prospectus"). The
respective parties will cause the Proxy Statement/Prospectus and the Form S-4
to comply as to form in all material respects with the applicable provisions of
the Securities Act, the Exchange Act and the rules and regulations promulgated
thereunder. AIP shall use all reasonable efforts, and RELP will cooperate with
AIP to have the Form S-4 declared effective by the SEC as promptly as
practicable. AIP shall use its best efforts to obtain, prior to the effective
date of the Form S-4, all necessary state securities law or "Blue Sky" permits
or approvals required to carry out the transactions contemplated by this
Agreement and will pay all expenses incident thereto. AIP agrees that the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the respective meetings of shareholders and
partners, respectively, of AIP and RELP, or, in the case of the Form S-4 and
each amendment or supplement thereto, at the time it is filed or becomes
effective, will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the foregoing shall not apply to the
extent that any such untrue statement of a material fact or omission to state a
<PAGE> 24
material fact was made by AIP in reliance upon and in conformity with written
information concerning RELP furnished to AIP by RELP specifically for use in
the Proxy Statement/Prospectus. RELP agrees that the written information
provided by it specifically for inclusion in the Proxy Statement/Prospectus and
each amendment or supplement thereto, at the time of mailing thereof and at the
time of the respective meetings of shareholders and partners, respectively, of
AIP and RELP, or, in the case of written information provided by RELP
specifically for inclusion in the Form S-4 or any amendments or supplement
thereto, at the time it is filed or becomes effective, will not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. AIP will advise
RELP, promptly after it receives notice thereof, of the time when the Form S-4
has become effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension of the qualification of the AIP
Common Shares issuable in connection with the Merger for offering or sale in
any jurisdiction, or any request by the SEC for amendment of the Proxy
Statement/Prospectus or the Form S-4 or comments thereon and responses thereto
or requests by the SEC for additional information.
7.8. Listing Application. AIP shall promptly prepare and submit to
the NYSE a listing application covering the AIP Common Shares issuable in the
Merger, and shall use its reasonable efforts to obtain, prior to the Effective
Time, approval for the listing of such AIP Common Shares, subject to official
notice of issuance.
7.9. Further Action. Each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the conditions of
performances set forth herein or the waiver thereof, perform such further acts
and execute such documents as may reasonably be required to effect the Merger.
7.10. Expenses. Subject to Section 9.5, if the Merger is approved by
RELP's partners, all transaction costs of the proposed consolidation shall be
paid by AIP. If three of the four limited partnerships party to the Proxy
Statement/Prospectus (the "Other RELPS") do not approve their proposed merger
into AIP, Realco shall reimburse AIP for AIP's expenses relating to the
proposed merger up to $250,000. If RELP and the Other RELPS approve their
proposed merger into AIP, but the shareholders of AIP do not approve the
proposer merger, and if Realco voted its AIP Common Shares in favor of such
mergers, AIP will reimburse RELP and the Other RELPS for all expenses they
incurred in connection with the proposed merger. Any expenses to be reimbursed
hereunder shall include, but not be limited to, costs of fairness opinions,
property appraisals, engineering and environmental reports, title policies,
accounting fees, legal fees, printing and solicitation expenses. RELP will
bear the costs of preparing its initial fairness opinion, with later
reimbursement by AIP in the event the Merger is approved by RELP's partners.
If the limited partners of RELP fail to approve the proposed Merger, then
Realco will reimburse AIP for the RELP's expenses (to the extent paid by AIP)
as follows: the actual cost of such RELP's fairness opinion, legal fees up to
$80,000, and the actual cost or the Allocable Share (if the actual cost is not
separately determined), of RELP's accounting fees, engineering and
environmental reports, printing and solicitation expenses. Allocable Share,
for this purpose, shall be the ratio of such RELP's net book value of assets at
March 31, 1997 to the total net book value of all of the assets of RELP and the
Other RELPS at March 31, 1997.
<PAGE> 25
7.11. Indemnification. For a period of six years from and after the
Effective Time, AIP shall indemnify the partners, or agents of RELP who at any
time prior to the Effective Time were entitled to indemnification under the
Agreement of Limited Partnership of RELP existing on the date hereof to the
same extent as such partners or agents are entitled to indemnification under
such Agreement of Limited Partnership in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement).
7.12. Reorganization. From and after the date and until the Effective
Time, neither AIP nor RELP nor any of their respective Subsidiaries or other
affiliates shall (i) knowingly take any action, or knowingly fail to take any
action, that would jeopardize qualification of the Merger as a reorganization
within the meaning of Section 368(a)(1)(A) of the Code; or (ii) enter into any
contract, agreement, commitment or arrangement with respect to the foregoing.
Following the Effective Time, AIP shall use its best efforts to conduct its
business in a manner that would not jeopardize the characterization of the
Merger as a reorganization within the meaning of Section 368(a)(1)(A) of the
Code.
7.13. Survival of RELP Obligations; Assumption of RELP Liabilities by
AIP. All of the obligations of RELP that are outstanding at the Closing shall
survive the Closing and shall not be merged therein. Upon the consummation of
the Merger, such obligations shall be assumed, automatically, by AIP; provided,
however, that such assumption shall not impose upon or expose AIP to any
liability for which RELP was not liable, and provided, further, that AIP shall
be entitled to the same defenses, offsets and counterclaims to which RELP would
have been entitled, but for the Merger.
7.14. Third Party Consents. AIP and RELP each shall take all necessary
corporate and other action and will use its commercially reasonable efforts to
obtain the consents and applicable approvals from third parties that may be
required to enable it to carry out the transactions contemplated by this
Agreement.
7.15. Efforts to Fulfill Conditions. AIP and RELP each shall use
commercially reasonable efforts to insure that all conditions precedent to its
obligations hereunder are fulfilled at or prior to the Closing.
7.16. Representations, Warranties and Conditions Prior to Closing. AIP
and RELP each shall use its commercially reasonable efforts to cause its
representations and warranties contained in this Agreement to be true and
correct on and as of the Closing Date in all material respects. Prior to
Closing, AIP and RELP each shall promptly notify the other in writing (i) if
any representation or warranty contained in this Agreement is discovered to be
or becomes untrue or (ii) if AIP or RELP fails to perform or comply with any of
its covenants or agreements contained in this Agreement or it is reasonably
expected that it will be unable to perform or comply with any of its covenants
or agreements contained in this Agreement.
7.17. Cooperation of the Parties. AIP and RELP each will cooperate
with the other in supplying such information as may be reasonably requested by
the other in connection with obtaining consents or approvals to the
transactions contemplated by this Agreement.
<PAGE> 26
7.18. Lock-Ups. The General Partner shall use its best efforts prior
to the Closing to have each of its directors and officers and Realco execute a
90-day lock-up agreement in a form (reasonably acceptable to RELP) supplied to
RELP by AIP. The executed agreements will be delivered to AIP at the Closing.
AIP shall use its best efforts prior to the Closing to have each of its Trust
Managers and officers execute a 90-day lock-up agreement, in a form (reasonably
acceptable to AIP) supplied to AIP by RELP. The agreements will be delivered to
RELP at the Closing.
ARTICLE VIII. CONDITIONS
8.1. Conditions to Each Party's Obligations to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall
have been approved in the manner required by the Declaration of
Trust and Bylaws and Agreement of Limited Partnership of AIP and
RELP, respectively, and by applicable law or by applicable
regulations of any stock exchange or other regulatory body by the
holders of the AIP Common Shares and RELP Interests entitled to
vote thereon.
(b) Neither of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction which prohibits
the consummation of the transactions contemplated by this
Agreement. In the event any such order or injunction shall have
been issued, each party agrees to use its reasonable efforts to
have any such injunction lifted.
(c) The Form S-4 shall have become effective and all necessary state
securities law or "Blue Sky" permits or approvals required to
carry out the transactions contemplated by this Agreement shall
have been obtained and no stop order with respect to any of the
foregoing shall be in effect.
(d) AIP shall have obtained the approval for the listing of the AIP
Common Shares issuable in the Merger on the NYSE, subject to
official notice of issuance.
(e) All consents, authorizations, orders and approvals of (or filings
or registrations with) any governmental commission, board, other
regulatory body or third parties required in connection with the
execution, delivery and performance of this Agreement shall have
been obtained or made, except for filings in connection with the
Merger and any other documents required to be filed after the
Effective Time and except where the failure to have obtained or
made any such consent, authorization, order, approval, filing or
registration would not have a material adverse effect on the
business, results of operations or financial condition of AIP and
RELP (and their respective Subsidiaries), taken as a whole,
following the Effective Time.
<PAGE> 27
8.2 Conditions to Obligations of RELP to Effect the Merger. The
obligation of RELP to effect the Merger shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions, unless waived by
RELP:
(a) AIP shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing
Date and the representations and warranties of AIP contained in
this Agreement shall be true and correct in all material respects
as of the Closing Date as if made on the Closing Date, and RELP
shall have received a certificate of the President or an
Executive or Senior Vice President of AIP, dated the Closing
Date, certifying to such effect.
(b) RELP shall have received the opinion of Liddell, Sapp or another
recognized law firm selected by AIP and approved by RELP, dated
the Closing Date, to the effect that the Merger will be treated
for Federal income tax purposes as a reorganization within the
meaning of Section 368(a)(1)(A) of the Code, and that RELP and
AIP will each be a party to that reorganization within the
meaning of Section 368(b) of the Code. In rendering its opinion,
said counsel shall be entitled to rely as to any factual matter
upon certificates given by executive officers of RELP and AIP and
shall be entitled to assume that the covenants of AIP pursuant to
Section 7.15 shall be fully complied with.
(c) From the date of the Agreement through the Effective Time, there
shall not have occurred any change in the financial condition,
business or operations of AIP and its Subsidiaries, taken as a
whole, that would have or would be reasonably likely to have an
AIP Material Adverse Effect other than any such change that
affects both RELP and AIP in a substantially similar manner.
(d) The opinion of Houlihan addressed to RELP that the Purchase Price
is fair, from a financial point of view, to the partners of RELP
shall not have been withdrawn or materially modified.
(e) RELP shall have received the opinion of Liddell, Sapp or another
recognized law firm selected by AIP and approved by RELP, dated
the Closing Date, as to such customary matters as RELP may
reasonably request, such opinion to be reasonably satisfactory to
RELP.
8.3 Conditions to Obligation of AIP to Effect the Merger. The
obligations of AIP to effect the Merger shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions, unless waived by AIP:
(a) RELP shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing
Date and the representations and warranties of RELP contained in
this Agreement shall be true and correct in all material respects
as of the Closing Date as if made on the Closing Date and AIP
shall have received
<PAGE> 28
a certificate of the Chief Executive Officer, President or an
Executive Vice President of the General Partner dated the Closing
Date, certifying to such effect.
(b) AIP shall have received the opinion of Liddell, Sapp or another
recognized law firm selected by RELP and approved by AIP, dated
the Closing Date, to the effect that the consummation of the
Merger will not result in AIP's failure to continue to satisfy
the requirements for qualification as a REIT for federal income
tax purposes. In rendering its opinion, said counsel shall be
entitled to rely as to any factual matter upon certificates given
by executive officers of AIP and RELP and shall be entitled to
assume that the covenants of Section 7.15 shall be fully complied
with.
(c) From the date of this Agreement through the Effective Time, there
shall not have occurred any change in the financial condition,
business or operations of RELP and its Subsidiaries, taken as a
whole, that would have or would be reasonably likely to have an
RELP Material Adverse Effect, other than any such change that
affects both RELP and AIP in a substantially similar manner.
(d) Each person listed on Exhibit 8.3(d) attached hereto shall have
delivered to AIP a written agreement to the effect that such
person will not offer to sell, sell or otherwise dispose of any
shares of AIP Common Stock issued in the Merger, except, in each
case, pursuant to an effective registration statement or in
compliance with Rule 145, as amended from time to time, or in a
transaction which, in the opinion of legal counsel reasonably
satisfactory to AIP, is exempt from the registration requirements
of the Securities Act and that the certificates representing the
AIP shares issued to him or her in the Merger may bear a legend
to such effect.
(e) The opinion of Prudential addressed to the Board of Trust
Managers of AIP that the consideration to be paid by AIP pursuant
to the Merger is fair, from a financial point of view, to AIP
shall not have been withdrawn or materially modified.
(f) AIP shall have received the opinion of Liddell, Sapp or another
recognized law firm selected by RELP and approved by AIP, dated
the Closing Date, as to such customary matters as AIP may
reasonably request, such opinion to be reasonably satisfactory to
AIP.
(g) The limited partners of at least two of the Other RELPS shall
have approved the merger of such limited partnership with and
into AIP.
ARTICLE IX. TERMINATION
9.1 Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after the approval of this Agreement by the partners of RELP or the
shareholders of AIP or by the mutual written consent of AIP and RELP, with the
prior approval of their respective Board of Trust Managers and General Partner.
<PAGE> 29
9.2 Termination by Either AIP or RELP. This Agreement may be
terminated and the Merger may be abandoned by action of the General Partner of
RELP or the Board of Trust Managers of AIP if (i) the Merger shall not have
been consummated by March 31, 1998, (ii) a meeting of RELP's partners shall
have been duly convened and held and the approval of RELP's partners required
by Section 8.1(a) shall not have been obtained at such meeting or at any
adjournment thereof, (iii) a meeting of AIP's shareholders shall have been duly
convened and held and the approval of AIP's shareholders required by Section
8.1(a) shall not have been obtained at such meeting or at any adjournment
thereof, (iv) as a result of due diligence investigation by one of the parties
hereto, it is determined in good faith by such party that certain facts or
circumstances not previously known by such party constitute a Material Adverse
Effect on the business, results of operations or financial condition of the
other party, (v) a United States federal or state court of competent
jurisdiction or United States federal or state governmental, regulatory or
administrative agency or commission shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and non-
appealable, provided that the party seeking to terminate this Agreement
pursuant to this clause (v) shall have used all reasonable efforts to remove
such order, decree, ruling or injunction, or (vi) any of the conditions set
forth in Article VIII shall not have been satisfied, and provided, in the case
of a termination pursuant to clause (i) or (vi) above, that the terminating
party shall not have breached in any material respect its obligations under
this Agreement in any manner that shall have proximately contributed to the
occurrence of the failure referred to in said clause. AIP and RELP each shall
(i) deliver its Disclosure Letter to one another not later than 5:00 P.M.,
Central Time, August 11, 1997, and (ii) shall complete its due diligence
investigations not later than 5:00 P.M., Central Time, on July 31, 1997 (the
period from the date of this Agreement through July 31, 1997 being hereinafter
referred to as the "Due Diligence Period"). Until the expiration of the Due
Diligence Period, either party may terminate this Agreement without liability
or penalty due to (i) the discovery of a fact or circumstance that reasonably
could be expected to constitute a Material Adverse Effect on the business,
results of operations or financial condition of the other party, or (ii) the
party's failure to receive a written fairness opinion as described herein
within seven business days from the date of execution of this Agreement.
9.3 Termination by RELP. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the adoption and approval by the partners of RELP referred to in Section
8.1(a), by action of the General Partner, if (i) in the exercise of its good
faith judgment as to its fiduciary duties to its partners imposed by law, as
advised by counsel, the General Partner determines that such termination is
required by reason of a RELP Acquisition Proposal being made, (ii) the Board of
Trust Managers withdraws, materially modifies or changes in a manner materially
adverse to RELP its recommendations to AIP's shareholders of this Agreement or
the Merger, other than as a result of the occurrence of an event that in the
good faith judgment of the Board of Trust Managers has or is reasonably likely
to have a RELP Material Adverse Effect, (iii) the Board of Trust Managers
postpones the date scheduled for the meeting of shareholders of AIP to approve
this Agreement and the transactions contemplated hereby beyond March 31, 1998
or fails to set a date for such meeting by such date, except with the written
consent of RELP, (iv) there has been a breach by AIP of any representation or
warranty contained in this Agreement which would have or would be reasonably
likely to have an AIP Material Adverse Effect,
<PAGE> 30
which breach is not curable by March 31,1998, or (v) there has been material
breach of any of the covenants or agreements set forth in this Agreement on the
part of AIP, which breach is not curable or, if curable, is not cured within 30
days after written notice of such breach is given by RELP to AIP, or (vi) the
condition set forth in Section 8.3(g) is not satisfied.
9.4 Termination by AIP. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by the shareholders of AIP referred to in Section 8.1(a), by
action of the Board of Trust Managers, if (i) in the exercise of its good
faith judgment as to its fiduciary duties to its shareholders imposed by law,
as advised by counsel, the Board of Trust Managers determines that such
termination is required by reason of an AIP Acquisition Proposal being made,
(ii) the General Partner withdraws, materially modifies or changes in a manner
materially adverse to AIP its recommendation to RELP's partners of this
Agreement or the Merger, other than as a result of the occurrence of an event
that in the good faith judgment of the General Partner has or is reasonably
likely to have an AIP Material Adverse Effect, (iii) the General Partner
postpones the date scheduled for the meeting of partners of RELP to approve
this Agreement and the transactions contemplated hereby beyond March 31, 1998,
or fails to set a date for such meeting by such date, except with the written
consent of AIP, (iv) there has been a breach by RELP of any representation or
warranty contained in this Agreement which would have or would be reasonably
likely to have a RELP Material Adverse Effect, which breach is not curable by
March 31, 1998, or (v) there has been a material breach of any of the covenants
or agreements set forth in this Agreement on the part of RELP, which breach is
not curable or, if curable, is not cured within 30 days after written notice of
such breach is given by AIP to RELP.
9.5. Effect of Termination and Abandonment. (a) If an election to
terminate this Agreement is made pursuant to (i) Section 9.2(i) (except as a
result of a default or breach hereunder by AIP) or Section 9.2(ii), and a RELP
Acquisition Proposal relating to RELP shall have been made and, within one year
from the date of such termination, RELP consummates a RELP Acquisition Proposal
or enters into an agreement to consummate a RELP Acquisition Proposal which is
subsequently consummated, or (ii) Section 9.3(i), RELP shall pay to AIP,
provided that AIP was not in material breach of its obligations hereunder at
the time of such termination, as liquidated damages and not as a penalty or
forfeiture, an amount equal to the lesser of (m) $839,200 (the "Liquidated
Damages Amount") and (n) the sum of (1) the maximum amount that can be paid to
AIP without causing AIP to fail to meet the requirements of Sections 856(c)(2)
and (3) of the Code determined as if the payment of such amount did not
constitute income described in Sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I)
of the Code ("Qualifying Income"), as determined by AIP's certified public
accountants, plus (2) an amount equal to the Liquidated Damages Amount less the
amount payable under clause (1) above in the event AIP receives a letter from
AIP's counsel indicating that AIP has received a ruling from the IRS to the
effect that Liquidated Damages Amount payments constitute Qualifying Income. In
addition to the Liquidated Damages Amount, AIP shall be entitled to receive
from RELP (or its successor in interest) all documented out-of-pocket costs and
expenses, up to a maximum of $419,600 in connection with this Agreement and the
transactions contemplated hereby (the "AIP Expenses") incurred by AIP. The
payments to which AIP is entitled under this Section 9.5(a) shall be its sole
remedy with respect to the termination of the Agreement under the circumstances
contemplated in this Section 9.5(a).
<PAGE> 31
(b) If an election to terminate this Agreement is made pursuant to
Section 9.2(i) (as a result of the condition set forth in Section 8.3(c) not
being satisfied), RELP shall, provided that AIP was not in material breach of
its obligations hereunder at the time of such termination, pay AIP for the AIP
Expenses, up to a maximum of $419,600, although it shall not be required to pay
the Liquidated Damages Amount, which payment of the AIP Expenses shall be AIP's
sole remedy for termination of the Agreement in such circumstances.
(c) If an election to terminate this Agreement is made pursuant to
(i) Section 9.2(i) (except as a result of a default or breach hereunder by
RELP) or Section 9.2(iii), and an AIP Acquisition Proposal relating to AIP
shall have been made and, within one year from the date of such termination,
AIP consummates an AIP Acquisition Proposal or enters into an agreement to
consummate an AIP Acquisition Proposal which is subsequently consummated, or
(ii) Section 9.4(i), AIP shall pay to RELP, provided that RELP was not in
material breach of its obligations hereunder at the time of such termination,
as liquidated damages and not as a penalty or forfeiture, an amount equal to
the Liquidated Damages Amount. In addition to the Liquidated Damages Amount,
RELP shall be entitled to receive from AIP (or its successor in interest) all
documented out-of-pocket costs and expenses, up to a maximum of $419,600, in
connection with this Agreement and the transactions contemplated hereby (the
"RELP Expenses" and, together with the AIP Expenses, the "Expenses") incurred
by RELP. The payments to which RELP is entitled under this Section 9.5(c) shall
be its sole remedy with respect to the termination of the Agreement under the
circumstances contemplated in this Section 9.5(c)
(d) If an election to terminate this Agreement is made pursuant to
Section 9.2(i) (as a result of the condition set forth in Section 8.2(c) not
being satisfied), AIP shall, provided that RELP was not in material breach of
its obligations hereunder at the time of such termination, pay RELP for the
RELP Expenses, up to a maximum of $419,600, although it shall not be required
to pay the Liquidated Damages Amount, which payment of the RELP Expenses shall
be RELP's sole remedy for termination of the Agreement in such circumstances.
(e) If this Agreement is terminated pursuant to Section 9.3(iv),
Section 9.3(v), Section 9.4(iv), or Section 9.4(v), the non-terminating party
shall, provided that the terminating party was not in material breach of its
obligations hereunder at the time of such termination, pay the terminating
party all Expenses, up to a maximum of $419,600, incurred by it and the non-
terminating party shall remain liable to the terminating party for its breach.
(f) If either party terminates this Agreement during the Due
Diligence Period described in Section 9.2 above other than for a due diligence
related reason, the non-terminating party shall be entitled to receive the
Liquidated Damages Amount and the Expenses as provided in this Article IX.
(g) RELP agrees to amend this Section 9.5 at the request of AIP in
order to (x) maximize the portion of the Liquidated Damages Amount that may be
distributed to AIP hereunder without causing AIP to fail to meet the
requirements of Sections 856(c)(2) and (3) of the Code or (y) improve AIP's
chances of securing a favorable ruling described in this Section 9.5, provided
that no such amendment may result in any additional cost or expense to such
other party.
<PAGE> 32
(h) In the event of termination of this Agreement and the abandonment
of the Merger pursuant to this Article IX, all obligations of the parties
hereto shall terminate, except the obligations of the parties pursuant to this
Section 9.5 and Section 7.10 and except for the provisions of Section 10.3,
10.4, 10.5, 10.6, 10.7, 10.9, 10.10, 10.13, 10.14 and 10.16. In the event AIP
or RELP has received the Liquidated Damages Amount, such recipient shall not
assert or pursue in any manner, directly or indirectly, any claim or cause of
action against the other party hereto or any of its officers, Trust Managers,
or General Partners, as applicable, based in whole or part upon its or their
receipt, consideration, recommendation or approval of an Acquisition Proposal
or the exercise by AIP of its right to termination under Section 9.4(i) or the
exercise by RELP of its right to termination under Section 9.3(i).
Notwithstanding the foregoing, in the event AIP or RELP is required to file
suit to seek all or a portion of such Liquidated Damages Amount, and it
ultimately succeeds, it shall be entitled to all expenses, including attorney's
fees and expenses, which it has incurred in enforcing its right hereunder.
(i) If either party willfully fails to perform its duties and
obligations under this Agreement, the non-breaching party is additionally
entitled to all remedies available to it at law or in equity and to recover its
expenses from the breaching party.
9.6 Extension; Waiver. At any time prior to the Effective Time, any
party hereto, by action taken by its Board of Trust Managers or General
Partner, as applicable, may, to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE X. GENERAL PROVISIONS
10.1. Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Merger;
provided, however, that the agreements contained in Article IV, the last
sentence of Section 7.4 and Sections 7.10, 7.11, 7.12, 7.13, 7.14, 7.15 and
7.16 and this Article X shall survive the Merger.
10.2. Notices. Any notice required to be given hereunder shall be in
writing and shall be sent by facsimile transmission (confirmed by any of the
methods that follow), courier service (with proof of service), hand delivery or
certified or registered mail (return receipt requested and first-class postage
prepaid) and addressed as follows:
If to AIP:
American Industrial Properties REIT
6220 N. Beltline Road, Suite 205
Irving, Texas 75063
Attention: Charles W. Wolcott, President
<PAGE> 33
Telecopy: (972) 550-6037
If to RELP:
USAA Real Estate Company
8000 I-H 10 West, Suite 600
San Antonio, Texas 78230
Attention: Patrick Duncan, Senior Vice-President
Telecopy: (210) 498-6214
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
delivered.
10.3. Assignment; Binding Effect; Benefit. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except as provided in the
following sentence, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective heirs, successors, executors, administrators and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement. The
provisions of Article IV and Sections 7.11, 7.12, 7.13, 7.14 and 7.15
(collectively, the "Third Party Provisions") shall benefit the persons
identified therein, but the aggregate liability of AIP with respect thereto
shall not exceed the amount specified in Article IX.
10.4. Entire Agreement. This Agreement, the Exhibits, the RELP
Disclosure Letter, the AIP Disclosure Letter, the RELP Ancillary Agreements,
the AIP Ancillary Agreements and any documents delivered by the parties in
connection herewith constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
10.5. Confidentiality. (a) As used herein, "Confidential Material"
means, with respect to either party hereto (the "Providing Party"), all
information (written or oral) furnished (whether before or after the date
hereof) by the Providing Party and its directors, officers, employees,
affiliates or representatives of advisors, including counsel, lenders and
financial advisors (collectively, the "Providing Party Representatives") to the
other party hereto (the "Receiving Party") or such Receiving Party's directors,
officers, employees, affiliates or representatives of advisors, including
counsel, lenders and financial advisors or the Receiving Party's potential
sources of financing for the transactions contemplated by this Agreement
(collectively "the Receiving Party Representatives") and all analyses,
compilations, forecasts and other studies or other documents prepared by the
Providing Party or the Providing Party Representatives in connection with its
or their review of the transactions contemplated by this Agreement which
contain or reflect such information. The term "Confidential Material" does not
include, however, information which (i) at the time of disclosure
<PAGE> 34
or thereafter is generally available to and known by the public other than as a
result of a disclosure directly or indirectly by the Receiving Party or the
Receiving Party Representatives in violation of this Agreement, (ii) at the
time of disclosure was available on a nonconfidential basis from a source other
than the Providing Party or the Providing Party Representatives, providing that
such source is not and was not bound by a confidentiality agreement with the
Providing Party, (iii) was known by the Receiving Party prior to receiving the
Confidential Material from the Providing Party or has been independently
acquired or developed by the Receiving Party without violating any of its
obligations under this Agreement, or (iv) is contained in any RELP Reports or
AIP Reports or Proxy Statement/Prospectus.
(b) Subject to paragraph (c) below or except as required by law, the
Confidential Material will be kept confidential and will not, without the prior
written consent of the Providing Party, be disclosed by the Receiving Party or
its Representatives, in whole or in part and will not be used by the Receiving
Party or its Representatives, directly or indirectly, for any purpose other
than in connection with this Agreement, the Merger or the evaluating,
negotiating or advising with respect to a transaction contemplated herein.
Moreover, each Receiving Party agrees to transmit Confidential Material to its
Representatives only if and to the extent that such Representatives need to
know the Confidential Material for purposes of such transaction and are
informed by such Receiving Party of the confidential nature of the Confidential
Material and of the terms of this Section.
(c) In the event that either Receiving Party, its Representatives or
anyone to whom such Receiving Party or its Representatives supply the
Confidential Material, are requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand, any informal or formal investigation by any government or
governmental agency or authority or otherwise in connection with legal
processes) to disclose any Confidential Material, such Receiving Party agrees
(i) to immediately notify the Providing Party of the existence, terms and
circumstances surrounding such a request, (ii) to consult with the Providing
Party on the advisability of taking legally available steps to resist or narrow
such request and (iii) if disclosure of such information is required, to
furnish only that portion of the Confidential Material which, in the opinion of
such Receiving Party's counsel, such Receiving Party is legally compelled to
disclose and to cooperate with any action by the Providing Party to obtain an
appropriate protective order or otherwise reliable assurances that confidential
treatment will be accorded the Confidential Material (it being agreed that the
Providing Party shall reimburse the Receiving Party for all reasonable out-of-
pocket expenses incurred by the Receiving Party in connection with such
cooperation).
(d) In the event of the termination of this Agreement in accordance
with its terms, promptly upon request from either Providing Party, the
Receiving Party shall, except to the extent prevented by law, redeliver to the
Providing Party or destroy all tangible Confidential Material and will not
retain any copies, extracts or other reproductions thereof in whole or in part.
Any such destruction shall be certified in writing to the Providing Party by an
authorized officer of the Receiving Party supervising the same. Notwithstanding
the foregoing, each Receiving Party and one Representative designated by each
Receiving Party shall be permitted to retain one permanent file copy of each
document constituting Confidential Material.
<PAGE> 35
(e) Each party hereto further agrees that if this Agreement is
terminated in accordance with its terms, until one year from the date of
termination, (1) it will not offer to hire or hire any person currently or
formerly employed by the other party with whom such party has had contact prior
hereto other than persons whose employment shall have been terminated by such
other party prior to the date of such offer to hire or hiring and (2) neither
it nor its affiliates shall directly or indirectly, (a) (w) solicit, seek or
offer to effect or effect, (x) negotiate with or provide any information to the
Board of Trust Managers or General Partner, as applicable, of the other party,
or officer of the other party or any shareholder or partner, as applicable, of
the other party with respect to, (y) make any statement or proposal, whether
written or oral, either alone or in concert with others, to the Board of Trust
Managers or Board of Directors of the General Partner of the other party, any
director, Trust Manager or officer of the other party or any shareholder or
partner of the other party or any other person with respect to, or (z) make any
public announcement (except as required by law in respect of actions permitted
hereby) or proposal or offer whatsoever (including, but not limited to, any
"solicitation"of "proxies"as such terms are defined or used in Regulation 14A
of the Exchange Act) with respect to, (i) any form of business combination or
similar or other extraordinary transaction involving the other party or any
affiliate thereof, including, without limitation, a merger, tender or exchange
offer or liquidation of the other party's assets, (ii) any form of
restructuring, recapitalization or similar transaction with respect to the
other party or any affiliate thereto, (iii) any purchase of any securities or
assets, or rights or options to acquire any securities or assets (through
purchase, exchange, conversion or otherwise), of the other party or any
affiliate thereof, (iv) any proposal to seek representation on the Board of
Trust Managers or the Board of Directors of the General Partner, as applicable,
or otherwise to seek to control or influence the management, Board of Trust
Managers or the Board of Directors of the General Partner, as applicable, or
policies of the other party or any affiliate thereof, (v) any request or
proposal to waive, terminate or amend the provisions of this Section 10.5 or
(vi) any proposal or other statement inconsistent with the terms of this
Section 10.5 or (b) instigate, encourage, join, act in concert with or assist
(including, but not limited to, providing or assisting in any way in the
obtaining of financing for, or acting as a joint or co-bidder for the other
party with) any third party to do any of the foregoing, unless and until such
party has received the prior written invitation or approval of a majority of
the Board of Trust Managers or the General Partner, as applicable, to do any of
the foregoing; provided that without such invitation or approval, either party
may at any time, on a confidential non-public basis, submit to the Chief
Executive Officer of AIP or the General Partner, as applicable, a proposal to
(a) amend any of the provisions of this Section 10.5(e) or (b) effect a
business combination or other extraordinary transaction with the other party
providing for the acquisition of all or substantially all of the assets or the
securities of the other party, including, without limitation, a merger, tender
offer or exchange offer. Each party hereto agrees that it will not agree with
any third party to waive its rights under this Section 10.5.
10.6. Amendment. This Agreement may be amended by the parties hereto,
by action taken by the Board of Trust Managers or the Board of Directors of the
General Partner, as applicable, at any time before or after approval of this
Agreement or any other matter presented in connection with the Merger by the
shareholders of AIP and partners of RELP, but after any such approval, no
amendment shall be made which by law requires the further approval of
shareholders or partners, as applicable, without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
<PAGE> 36
10.7. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas without regard to its rules
of conflict of laws. Each of AIP and RELP hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of Texas and of the United States District Court, Northern
District of Texas (the "Texas Courts") for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any litigation relating thereto except in such courts), waives
any objection to the laying of venue of any such litigation in the Texas Courts
and agrees not to plead or claim in any Texas Court that such litigation
brought therein has been brought in an inconvenient forum.
10.8. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
10.9. Headings. Heading of the Articles and Sections of this Agreement
are for the convenience of the parties only and shall be given no substantive
or interpretive effect whatsoever.
10.10. Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and
vice versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
10.11. Waivers. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
10.12. Incorporation. The RELP Disclosure Letter and the AIP
Disclosure Letter and all Exhibits and Schedules attached hereto and thereto
and referred to herein and therein are hereby incorporated herein and made a
part hereof for all purposes as if fully set forth herein.
10.13. Severability. If any provision of this 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 Agreement would not be
materially and adversely affected thereby, such provision shall be fully
separable, and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part thereof,
and the remaining provisions of this 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
Agreement, a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as
<PAGE> 37
may be possible, and the parties hereto request the court or any arbitrator to
whom disputes relating to this Agreement are submitted to reform the otherwise
illegal, invalid or unenforceable provision in accordance with this Section
10.13.
10.14. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any Texas Court, this
being in addition to any other remedy to which they are entitled at law or in
equity.
10.15. Subsidiaries. As used in this Agreement, the word
"Subsidiary" when used with respect to any party means any corporation,
partnership, joint venture, business trust or other entity, of which such party
directly or indirectly owns or controls at least a majority of the securities
or other interests having by their terms ordinary voting power to elect a
majority of the board of directors or others performing similar functions with
respect to such corporation or other organization.
10.16. Non-Recourse. Neither the officers, Trust Managers nor
shareholders of AIP shall be personally bound or have any personal liability
hereunder. RELP shall look solely to the assets of AIP for satisfaction of any
liability of AIP with respect to this Agreement and the Ancillary Agreements to
which it is a party. RELP will not seek recourse or commence any action against
any of the shareholders of AIP or any of their personal assets, and will not
commence any action for money judgments against any of the Trust Managers or
officers of AIP or seek recourse against any of their personal assets, for the
performance or payment of any obligation of AIP hereunder or thereunder. The
partners of RELP shall not be personally bound or have any personal liability
hereunder. AIP shall look solely to the assets of RELP for satisfaction of any
liability of RELP with respect to this Agreement and the Ancillary Agreements
to which it is a party. AIP will not seek recourse or commence any action
against any of the partners of RELP or any of their personal assets, and will
not commence any action for money judgments against any of the directors or
officers of RELP or seek recourse against any of their personal assets, for the
performance or payment of any obligation of RELP hereunder or thereunder.
<PAGE> 38
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf on the day and year first written
above.
AMERICAN INDUSTRIAL PROPERTIES REIT
/s/ CHARLES W. WOLCOTT
-----------------------------------------
Charles W. Wolcott, President and
Chief Executive Officer
USAA INCOME PROPERTIES III LIMITED
PARTNERSHIP
By: USAA Properties III, Inc., Its
General Partner
/s/ T. PATRICK DUNCAN
----------------------------------
T. Patrick Duncan
Senior Vice President - Operations
<PAGE> 1
EXHIBIT 10.4
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June
30, 1997, is entered into by and between American Industrial Properties REIT, a
Texas real estate investment trust ("AIP") , and USAA Income Properties IV
Limited Partnership, a Delaware limited partnership ("RELP"). USAA Real Estate
Company, a Delaware corporation ("Realco"), is a party to this Agreement solely
for the purpose of binding itself to the provisions of Section 7.10 hereunder.
RECITALS
A. The Board of Trust Managers of AIP (the "Board of Trust
Managers") and the general partner of RELP have each determined that a business
combination between AIP and RELP is in the best interests of their shareholders
and partners, respectively, and presents an opportunity for their respective
businesses to achieve strategic and financial benefits, and accordingly have
agreed to effect a merger subject to the terms and conditions set forth herein.
B. AIP and RELP desire to make certain representations,
warranties and agreements in connection with the merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, AIP and
RELP hereby agree as follows:
ARTICLE I. THE MERGER
1.1. The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.3), RELP shall be
merged with and into AIP in accordance with this Agreement and the Plan of
Merger (the "Plan of Merger") in substantially the form attached hereto as
Exhibit A, with such completions, additions and substitutions conforming to the
terms of this Agreement as the parties shall approve, such approval to be
conclusively evidenced by their causing the Plan of Merger containing such
completions, additions or substitutions to be filed in accordance with
applicable laws; and the separate existence of RELP shall thereupon cease (the
"Merger"). AIP shall be the surviving entity in the Merger (sometimes
hereinafter referred to as the "Survivor"). The Merger shall have the effects
specified in Section 23.60 of the Texas Real Estate Investment Trust Act, as
amended (the "Texas REIT Act") and Section 17-211 of the Delaware Revised
Uniform Limited Partnership Act (the "LP Act").
1.2. The Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place at the
offices of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P. ("Liddell, Sapp"),
located at 2200 Ross Avenue, Suite 900, Dallas, Texas at 10:00 a.m., local
time, within five business days after receipt of approval of the Merger by
AIP's shareholders and RELP's partners, or at such other time, date or place as
AIP and RELP may agree. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
<PAGE> 2
1.3. Effective Time. If all the conditions to the Merger set forth
in Article VIII shall have been fulfilled or waived (and this Agreement shall
not have been terminated as provided in Article IX), AIP and RELP shall cause
Articles of Merger satisfying the requirements of the Texas REIT Act and
Articles of Merger satisfying the requirements of the LP Act to be properly
executed, verified and delivered for filing in accordance with the LP Act and
the Texas REIT Act on the Closing Date. The Merger shall become effective for
accounting and all other purposes to the fullest extent permitted by law as of
the close of business on December 31, 1997 (the "Effective Time") or such other
date as may be agreed to by the parties. For state law purposes, the Merger
shall become effective upon the issuance of a certificate of merger by the
Secretary of State of the State of Delaware in accordance with the LP Act or at
such later time which AIP and RELP shall have agreed upon and designated in
such filings in accordance with applicable law.
ARTICLE II. DECLARATION OF TRUST
AND BYLAWS OF THE SURVIVOR
2.1. Declaration of Trust. The Declaration of Trust of AIP in
effect immediately prior to the Effective Time shall be the Declaration of
Trust of the Survivor until duly amended in accordance with applicable law.
2.2. Bylaws. The Bylaws of AIP in effect immediately prior to the
Effective Time shall be the Bylaws of the Survivor until duly amended in
accordance with applicable law.
ARTICLE III. TRUST MANAGERS AND OFFICERS OF AIP
3.1. Trust Managers. The Trust Managers of AIP immediately prior
to the Effective Time shall be the Trust Managers of AIP as of the Effective
Time.
3.2. Officers. The officers of AIP immediately prior to the
Effective Time shall be the officers of AIP as of the Effective Time.
ARTICLE IV. RELP PARTNERSHIP INTERESTS
4.1. Conversion of the RELP Partnership Interest. (a) At the
Effective Time, each Common Share of Beneficial Interest of AIP outstanding
immediately prior to the Effective Time shall remain outstanding and shall
represent one Common Share of Beneficial Interest of AIP.
(b) At the Effective Time, the general and limited partnership
interests of RELP (each a "RELP Interest"), issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of holder thereof, be converted into the right
to receive Common Shares of Beneficial Interest, $0.10 par value per share (the
"AIP Common Shares"), of AIP. The aggregate number of AIP Common Shares to be
issued to the RELP partners in connection with the Merger shall be equal to
$12,018,387 (the "Purchase Price") divided by the Share Price (the "Total
Shares"). If RELP repays any mortgage indebtedness existing on the date hereof
during the period from the date hereof to and including the Closing Date, the
Purchase Price shall be appropriately adjusted. The term "Share Price" shall
mean $2.625. The number of AIP
<PAGE> 3
Common Shares to be received by a partner shall be equal to the Total Shares
multiplied by such partner's percentage interest in RELP plus each limited
partner's pro rata portion of the general partnership interest of the RELP's
general partner.
(c) As a result of the Merger and without any action on the part
of the holder thereof, at the Effective Time, all RELP Interests shall cease
to be outstanding and shall be canceled and retired, and each holder of a RELP
Interest shall thereafter cease to have any rights with respect to such RELP
Interest, except the right to receive, without interest, the AIP Common Shares
and cash for fractional shares of AIP Common Shares in accordance with Sections
4.1(b) and 4.2(e).
4.2. Exchange of RELP Interests. (a) As of the Effective Time,
AIP shall deposit, or shall cause to be deposited, with an exchange agent
selected by AIP, which shall be AIP's Transfer Agent or such other party
reasonably satisfactory to RELP (the "Exchange Agent"), for the benefit of the
holders of RELP Interests, for exchange in accordance with this Article IV,
certificates representing the Total Shares and the cash in lieu of fractional
shares (such cash and certificates for the Total Shares together with any
dividends or distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund") to be issued pursuant to Section 4.1 and paid pursuant
to this Section 4.2 in exchange for outstanding RELP Interests.
(b) Promptly after the Effective Time, AIP shall cause the
Exchange Agent to mail to each holder of record of a RELP Interest (x) a
certificate representing the number of whole shares of AIP Common Shares and
(y) a check representing the amount of cash in lieu of fractional shares, if
any, and unpaid dividends and distributions, if any, which such holder has the
right to receive in respect of the RELP Interest surrendered pursuant to the
provisions of this Article IV, after giving effect to any required withholding
tax. No interest will be paid or accrued on the cash in lieu of fractional
shares and unpaid dividends and distributions, if any, payable to holders of
RELP Interests. In the event of a transfer of ownership of RELP Interests
which is not registered in the transfer records of RELP, a certificate
representing the proper number of AIP Common Shares, together with a check for
the cash to be paid in lieu of fractional shares, may be issued to such a
transferee if such holder presents to the Exchange Agent, all documents
required to evidence and effect such transfer and to evidence that any
applicable transfer taxes have been paid.
(c) At and after the Effective Time, there shall be no transfers
on the transfer books of RELP of RELP Interests which were outstanding
immediately prior to the Effective Time.
(d) No fractional AIP Common Shares shall be issued pursuant
hereto. In lieu of the issuance of any fractional AIP Common Shares pursuant to
Section 4.1(b), cash adjustments will be paid to holders in respect of any
fractional AIP Common Shares that would otherwise be issuable, and the amount
of such cash adjustment shall be equal to such fractional proportion of the
Share Price.
(e) Any portion of the Exchange Fund (including the proceeds of
any investments thereof and any AIP Common Shares) that remains unclaimed by
the former partners of RELP one year after the Effective Time shall be
delivered to AIP. Any former partners of RELP who have not theretofore complied
with this Article IV shall thereafter look only to AIP for delivery of their
AIP Common
<PAGE> 4
Shares, and payment of cash in lieu of fractional shares and unpaid dividends
and distributions on the AIP Common Shares deliverable in respect of each RELP
Interest such partners hold as determined pursuant to this Agreement, in each
case, without any interest thereon.
(f) None of AIP, RELP, the Exchange Agent or any other person
shall be liable to any former holder of RELP Interests for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF RELP
RELP represents and warrants to AIP as set forth below. As
contemplated below, a "RELP Disclosure Letter" will be delivered to AIP on or
before August 11, 1997. The RELP Disclosure Letter shall provide the
information or exceptions described below and shall list all of the assets of
the RELP that will not be transferred in connection with the Merger. The RELP
Disclosure Letter shall be amended prior to Closing to cause such
representations and warranties to be materially true and correct on the Closing
Date, but RELP shall remain liable for any material breach of such
representations and warranties reflected in such amendment only as provided in
Section 9.5(d), below.
5.1. Existence; Good Standing; Authority; Compliance with Law. (a)
RELP is a limited partnership, duly formed, validly existing and in good
standing under the laws of the State of Delaware. To its actual knowledge,
RELP is duly licensed or qualified to do business as a foreign limited
partnership and is in good standing under the laws of any other state of the
United States in which the character of the properties owned or leased by it
therein or in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified would not have a
material adverse effect on the business, results of operations or financial
condition of RELP (a "RELP Material Adverse Effect"). RELP has all requisite
power and authority to own, operate, lease and encumber its properties and
carry on its business as now conducted.
(b) To the RELP's actual knowledge, it is not in violation of any
order of any court, governmental authority or arbitration board or tribunal, or
any law, ordinance, governmental rule or regulation to which RELP or any of its
properties or assets is subject, where such violation would have a RELP
Material Adverse Effect. RELP has obtained all licenses, permits and other
authorizations and has taken all actions required by applicable law or
governmental regulations in connection with its business as now conducted,
where the failure to obtain any such item or to take any such action would have
a RELP Material Adverse Effect. A copy of RELP's Agreement of Limited
Partnership and Certificate of Limited Partnership (collectively, the "RELP
Organizational Documents") have been delivered or made available to AIP and its
counsel and such documents will be listed in the RELP Disclosure Letter and
were or will be true and correct when delivered or made available.
5.2. Authorization, Validity and Effect of Agreements. RELP has
the requisite power and authority to enter into the transactions contemplated
hereby and to execute and deliver this Agreement and all other documents,
agreements and instruments related to the transactions
<PAGE> 5
contemplated by this Agreement (the "RELP Ancillary Agreements"). Subject only
to the approval of this Agreement and the transactions contemplated hereby in
accordance with the Agreement of Limited Partnership of the RELP, the
consummation by RELP of this Agreement, the RELP Ancillary Agreements and the
transactions contemplated hereby have been duly authorized by all requisite
action on the part of RELP. In reliance upon the legal opinion described in
Section 8.2(e), RELP believes this Agreement constitutes, and the RELP
Ancillary Agreements (when executed and delivered pursuant hereto for value
received) will constitute, the valid and legally binding obligations of RELP,
enforceable against RELP in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity (collectively, "Equitable
Remedies").
5.3. Future Issuances. To RELP's actual knowledge, there are not
at the date of this Agreement any existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate RELP to issue, transfer or sell any RELP Interests.
After the Effective Time, AIP will have no obligation to issue, transfer or
sell any RELP Interest.
5.4. Other Interests. Except as set forth in the RELP Disclosure
Letter, RELP does not own directly or indirectly any interest or investment
(whether equity or debt) in any corporation, partnership, joint venture,
business, trust or entity (other than investments in short-term investment
securities).
5.5. No Violation. To RELP's actual knowledge, neither the
execution and delivery by RELP of this Agreement nor the consummation by RELP
of the transactions contemplated hereby in accordance with the terms hereof,
will: (i) conflict with or result in a breach of any provisions of the
Agreement of Limited Partnership of RELP; (ii) except as contemplated by the
RELP Ancillary Agreements or as will be set forth in the RELP Disclosure
Letter, violate, or conflict with, or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination or in a
right of termination or cancellation of, or accelerate the performance required
by, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties of RELP under, or result in being
declared void, voidable or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which RELP is a party, or by which RELP
or any of its properties is bound or affected, except for any of the foregoing
matters which, individually or in the aggregate, would not have a RELP Material
Adverse Effect; or (iii) other than the filings provided for in Article I, any
filings required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Securities Act or applicable state securities and "Blue
Sky" laws (collectively, the "Regulatory Filings"), require any consent,
approval or authorization of, or declaration, filing or registration with, any
domestic governmental or regulatory authority, except where the failure to
obtain any such consent, approval or authorization of, or declaration, filing
or registration with, any governmental or regulatory authority would not have
an RELP Material Adverse Effect.
5.6. SEC Documents. (a) RELP has made available or will make
available to AIP prior to July 31, 1997, each registration statement, report,
proxy statement or information statement and
<PAGE> 6
all exhibits thereto prepared by it or relating to its properties (including
registration statements covering mortgage pass-through certificates) since
January 1, 1994, each in the form (including exhibits and any amendments
thereto) filed with the SEC (collectively, the "RELP Reports"). The RELP
Reports, which were or will be filed with the SEC in a timely manner,
constitute all forms, reports and documents required to be filed by RELP under
the Securities Act of 1933, as amended (the "Securities Act"), the Exchange Act
and the rules and regulations promulgated thereunder (collectively the
"Securities Laws") for the periods stated above.
(b) To the RELP's actual knowledge, as of their respective dates,
the RELP Reports (i) complied as to form in all material respects with the
applicable requirements of the Securities Laws and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. To the
RELP's actual knowledge, each of the balance sheets of RELP included in or
incorporated by reference into the RELP Reports (including the related notes
and schedules) fairly presents the financial position of RELP as of its date
and each of the consolidated statements of income, retained earnings and cash
flows of RELP included in or incorporated by reference into the RELP Reports
(including any related notes and schedules) fairly presents the results of
operations, retained earnings and cash flows, as the case may be, of RELP for
the periods set forth therein (subject, in the case of unaudited statements, to
normal year-end audit adjustments which would not be material in amount or
effect), in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as may be
noted therein and except, in the case of the unaudited statements, as permitted
by the Securities Laws.
(c) Except as and to the extent set forth on the balance sheet of
RELP at March 31, 1997, including all notes thereto, or as set forth in the
RELP Reports, RELP has no material liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on, or reserved against in, a balance sheet of RELP or in the
notes thereto, prepared in accordance with generally accepted accounting
principles consistently applied, except liabilities arising in the ordinary
course of business since such date which would not have a RELP Material Adverse
Effect.
5.7. Litigation. To the RELP's actual knowledge, there are (i) no
continuing orders, injunctions or decrees of any court, arbitrator or
governmental authority to which RELP is a party or by which any of its
properties or assets are bound or to which USAA Properties IV, Inc. (the
"General Partner") or the General Partner's, directors, officers, or
affiliates is a party or by which any of their properties or assets are bound,
and (ii) except as will be set forth in the RELP Disclosure Letter, no actions,
suits or proceedings pending against RELP or against the General Partner or the
General Partner's directors, officers or affiliates or, to the knowledge of the
General Partner, threatened against RELP or against the General Partner or the
General Partner's directors, officers or affiliates, at law or in equity, or
before or by any federal or state commission, board, bureau, agency or
instrumentality, that in the case of clauses (i) or (ii) above are reasonably
likely, individually or in the aggregate, to have a RELP Material Adverse
Effect.
<PAGE> 7
5.8. Absence of Certain Changes. Except as disclosed in the RELP
Reports filed prior to the date hereof, since March 31, 1997, (i) RELP
conducted its business only in the ordinary course of such business (which for
purposes of this section only, shall include all acquisitions of real estate
properties and financing arrangements made in connection therewith or otherwise
will be set forth in the RELP Disclosure Letter); (ii) there has not been any
RELP Material Adverse Effect; (iii) there has not been any distribution,
setting aside or payment of any distribution with respect to any RELP Interest,
and (iv) there has not been any material change in RELP's accounting
principles, practices or methods.
5.9. Taxes. (a) Except as may be set forth in the RELP Disclosure
Letter, RELP (i) has timely filed all federal, state and foreign tax returns
including, without limitation, information returns and reports required to be
filed by it for tax periods ended prior to the date of this Agreement or
requests for extensions have been timely filed and any such request has been
granted and has not expired and all such returns are accurate and complete in
all material respects, (ii) has paid or accrued all taxes shown to be due and
payable on such returns or which have become due and payable pursuant to any
assessment, deficiency notice, 30-day letter or other notice received by it and
(iii) has properly accrued all taxes for such periods and periods subsequent to
the periods covered by such returns. RELP has not received notice that the
federal, state and local income and franchise tax returns of RELP has been or
will be examined by any taxing authority. RELP has not executed or filed with
the Internal Revenue Service (the "IRS") or any other taxing authority any
agreement now in effect extending the period for assessment or collection of
any income or other taxes.
(b) Except as may be set forth in the RELP Disclosure Letter, RELP
is not a party to any pending action or proceeding by any governmental
authority for assessment or collection of taxes, and no claim for assessment or
collection of taxes has been asserted against it. True, correct and complete
copies of all federal, state and local income or franchise tax returns filed by
RELP since January 1, 1991 and all communications relating thereto have been
delivered to AIP or made available to representatives of AIP or will be so
delivered or made available prior to July 31, 1997. RELP does not hold any
asset (i) the disposition of which could be subject to rules similar to Section
1374 of the Internal Revenue Code of 1986, as amended (the "Code") as a result
of an election under IRS Notice 88-19 or (ii) that is subject to a consent
filed pursuant to Section 341(f) of the Code and regulations thereunder. For
purposes of this Section 5.9, "taxes" includes any interest, penalty or
additional amount payable with respect to any tax.
5.10. Books and Records. The books of account and other financial
records of RELP are in all material respects true, complete and correct, have
been maintained in accordance with good business practices, and are accurately
reflected in all material respects in the financial statements included in the
RELP Reports.
5.11. Properties. (a) RELP owns fee simple title to each of the
real properties reflected on the most recent balance sheet of RELP included in
the RELP Reports or as may be identified in the RELP Disclosure Letter (the
"RELP Properties"), which are all of the real estate properties owned by it,
free and clear of liens, mortgages or deeds of trust, claims against title,
charges which are liens or security interests ("Encumbrances") except as will
be noted in the RELP Disclosure
<PAGE> 8
Letter. To RELP's actual knowledge, the RELP Properties are not subject to any
rights of way, written agreements, laws, ordinances and regulations affecting
building use or occupancy, or reservations of an interest in title
(collectively, "Property Restrictions"), except for (i) Encumbrances and
Property Restrictions that will be set forth in the RELP Disclosure Letter,
(ii) Property Restrictions imposed or promulgated by law or any governmental
body or authority with respect to real property, including zoning regulations,
provided they do not materially adversely affect the current use of the
property, (iii) Encumbrances and Property Restrictions disclosed on existing
title reports or current surveys (in either case copies of which title reports
and surveys have been or will be delivered or made available to AIP July 31,
1997), (iv) mechanics', carriers', workmen's, repairmen's liens and other
Encumbrances, Property Restrictions and other limitations of any kind, if any,
which have heretofore been bonded (and that will be listed in the RELP
Disclosure Letter) or which individually or in the aggregate do not exceed
$100,000, do not materially detract from the value of or materially interfere
with the present use of any of the RELP Properties subject thereto or affected
thereby, and do not otherwise materially impair business operations conducted
by RELP and which have arisen or been incurred only in its construction
activities or in the ordinary course of business.
(b) Valid policies of title insurance have been issued insuring
either (a) RELP's fee simple title to the RELP Properties or (b) first mortgage
liens thereon, subject only to the matters disclosed above and as may be set
forth in the RELP Disclosure Letter, and such policies are, at the date hereof,
in full force and effect and no claim has been made against any such policy. To
RELP's actual knowledge, except as will be set forth in the RELP Disclosure
Letter: (i) there is no certificate, permit or license from any governmental
authority having jurisdiction over any of the RELP Properties or any agreement,
easement or other right which is necessary to permit the lawful use and
operation of the buildings and improvements on any of the RELP Properties or
which is necessary to permit the lawful use and operation of all driveways,
roads and other means of egress and ingress to and from any of the RELP
Properties that has not been obtained and is not in full force and effect, or
of any pending threat of modification or cancellation of any of same; (ii) RELP
has not received written notice of any material violation of any federal, state
or municipal law, ordinance, order, regulation or requirement affecting any
portion of any of the RELP Properties issued by any governmental authority;
(iii) there are no structural defects relating to the RELP Properties and no
RELP Properties whose building systems are not in working order in any material
respect; and (iv) there is (A) no physical damage to any RELP Property in
excess of $100,000 for which there is no insurance in effect covering the cost
of the restoration, (B) no current renovation to any RELP Property the cost of
which exceeds $100,000 and (C) no current restoration (excluding tenant
improvements) of any RELP Property, the cost of which exceeds $100,000.
(c) Except as will be set forth in the RELP Disclosure Letter,
RELP has not received notice to the effect that and there are no (A)
condemnation or rezoning proceedings that are pending or threatened with
respect to any of the RELP Properties or (B) zoning, building or similar laws,
codes, ordinances, orders or regulations that are or will be violated by the
continued maintenance, operation or use of any buildings or other improvements
on any of the RELP Properties or by the continued maintenance, operation or use
of the parking areas. All work to be performed, payments to be made and actions
to be taken by RELP prior to the date hereof pursuant to any agreement entered
into with a governmental body or authority in connection with a site approval,
zoning
<PAGE> 9
reclassification or other similar action relating to the RELP Properties (e.g.,
Local Improvement District, Road Improvement District, Environmental
Mitigation) has been performed, paid or taken, as the case may be, and RELP is
not aware of any planned or proposed work, payments or actions that may be
required after the date hereof pursuant to such agreements, except as will be
set forth in the RELP Disclosure Letter.
5.12. Environmental Matters. To RELP's actual knowledge, RELP has
not caused (i) the unlawful presence of any hazardous substances, hazardous
materials, toxic substances or waste materials (collectively, "Hazardous
Materials") on any of the RELP Properties, or (ii) any unlawful spills,
releases, discharges or disposal of Hazardous Materials to have occurred or be
presently occurring on or from the RELP Properties as a result of any
construction on or operation and use of such properties, which presence or
occurrence would, individually or in the aggregate, have a RELP Material
Adverse Effect; and in connection with the construction on or operation and use
of the RELP Properties, RELP has not failed to comply, in any material respect,
with any applicable local, state and federal environmental laws, regulations,
ordinances and administrative and judicial orders relating to the generation,
recycling, reuse, sale, storage, handling, transport and disposal of any
Hazardous Materials.
5.13. Labor Matters. RELP is not a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor union organization. There is no unfair labor
practice or labor arbitration proceeding pending or, to the knowledge of the
General Partner, threatened against RELP relating to its business, except for
any such proceeding which would not have a RELP Material Adverse Effect. To the
knowledge of the General Partner, there are no organizational efforts with
respect to the formation of a collective bargaining unit presently being made
or threatened involving employees of RELP or any of its Subsidiaries.
5.14. No Brokers. Except the fee that is to be paid to Houlihan
Lokey Howard & Zukin ("Houlihan") by RELP as described in Section 5.15 below,
RELP has not entered into any contract, arrangement or understanding with any
person or firm which may result in the obligation of RELP or AIP to pay any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby. RELP is not aware of any claim for
payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
5.15. Opinion of Financial Advisor. RELP has retained Houlihan to
review the transaction contemplated by this Agreement and to issue an opinion
to the effect that, as of the date of such opinion, the Purchase Price is fair
to the holders of RELP Interests from a financial point of view.
5.16. Related Party Transactions. Except as set forth in the RELP
Disclosure Letter, there are no arrangements, agreements or contracts entered
into by RELP with (i) any consultant, (ii) any person who is an officer,
director or affiliate of RELP or its General Partner, any relative of any of
the foregoing or any entity of which any of the foregoing is an affiliate, or
(iii) any person who acquired RELP Interests in a private placement.
<PAGE> 10
5.17. Contracts and Commitments. The RELP Disclosure Letter will
set forth (i) all unsecured notes or other obligations of RELP which
individually may result in total payments in excess of $100,000, (ii) all
notes, debentures, bonds and other evidence of indebtedness which are secured
or collateralized by mortgages, deeds of trust or other security interests in
the RELP Properties or personal property of RELP, and (iii) each commitment
entered into by RELP which may result in total payments or liability in excess
of $100,000. Copies of the foregoing will be delivered or made available to AIP
prior to July 31, 1997, will be listed on the RELP Disclosure Letter and will
be materially true and correct when delivered or made available. RELP has not
received any notice of a default that has not been cured under any of the
documents described in clause (i) above or is in default respecting any payment
obligations thereunder beyond any applicable grace periods. All options of RELP
to purchase real property will be set forth on the RELP Disclosure Letter and
such options and RELP's rights thereunder are in full force and effect. All
joint venture agreements to which RELP is a party will be set forth on the RELP
Disclosure Letter and RELP is not in default with respect to any obligations,
which individually or in the aggregate are material, thereunder.
5.18. Development Rights. Set forth in the RELP Disclosure Letter
will be a list of all material agreements entered into by RELP relating to the
development, rehabilitation, capital improvement or construction of office
buildings, industrial facilities or other real estate properties, which
development or construction has not been substantially completed as of the date
of this Agreement. Such agreements, true and correct copies of all of which
will be delivered or made available to AIP prior to July 31, 1997, will be
listed in the RELP Disclosure Letter, have not been modified and are valid and
binding in accordance with their respective terms.
5.19. Convertible Securities. To RELP's actual knowledge, RELP has
no outstanding options, warrants or other securities exercisable for, or
convertible into, RELP Interests, the terms of which would require any anti-
dilution adjustments by reason of the consummation of the transactions
contemplated hereby.
ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF AIP
AIP represents and warrants to RELP as set forth below. As
contemplated below, an "AIP Disclosure Letter" will be delivered to RELP on or
before August 11, 1997. The AIP Disclosure Letter shall provide the
information or exceptions described below. The AIP Disclosure Letter shall be
amended prior to Closing to cause such representations and warranties to be
materially true and correct on the Closing Date, but AIP shall remain liable
for any material breach of such representations and warranties reflected in
such amendment only as provided in Section 9.5(d), below.
6.1. Existence; Good Standing; Authority; Compliance with Law.
(a) AIP is a real estate investment trust duly organized and validly existing
under the laws of the State of Texas. To AIP's actual knowledge, AIP is duly
licensed or qualified to do business and is in good standing under the laws of
any other state of the United States in which the character of the properties
owned or leased by it therein or in which the transaction of its business makes
such qualification necessary, except where the failure to be so qualified would
not have a material adverse effect on the business, results
<PAGE> 11
of operations or financial condition of AIP and its subsidiaries taken as a
whole (an "AIP Material Adverse Effect"). AIP has all requisite power and
authority to own, operate, lease and encumber its properties and carry on its
business as now conducted. Each of AIP's Subsidiaries is a corporation, limited
liability company or partnership duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has the requisite power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business and
is in good standing in each jurisdiction in which the ownership of its property
or the conduct of its business requires such qualification, except for
jurisdictions in which such failure to be so qualified or to be in good
standing would not have an AIP Material Adverse Effect.
(b) To AIP's actual acknowledge, neither AIP nor any AIP
Subsidiary is in violation of any order of any court, governmental authority or
arbitration board or tribunal, or any law, ordinance, governmental rule or
regulation to which AIP or any AIP Subsidiary or any of their respective
properties or assets is subject, where such violation would have an AIP
Material Adverse Effect. AIP and its Subsidiaries have obtained all licenses,
permits and other authorizations and have taken all actions required by
applicable law or governmental regulations in connection with their business as
now conducted, where the failure to obtain any such item or to take any such
action would have an AIP Material Adverse Effect. Copies of AIP's and its
Subsidiaries' Declaration of Trust, Articles of Incorporation, Bylaws,
organizational documents and partnership and joint venture agreements have been
or will be prior to July 31, 1997, delivered or made available to RELP and such
documents will be listed in the AIP Disclosure Letter and were or will be true
and correct when delivered or made available. For the purposes of the
immediately preceding sentence, the term "Subsidiary"shall include the entities
set forth in the AIP Disclosure Letter, which are all of AIP's Subsidiaries.
6.2. Authorization, Validity and Effect of Agreements. AIP has
the requisite power and authority to enter into the transactions contemplated
hereby and to execute and deliver this Agreement and all other documents,
agreements and instruments related to the transactions contemplated by this
Agreement to which it is a party (the "AIP Ancillary Agreements"). Subject only
to the approval of the issuance of AIP Common Shares pursuant to the Merger
contemplated hereby by the holders of two-thirds of the outstanding AIP Common
Shares, present and voting thereon, the consummation by AIP of this Agreement,
the AIP Ancillary Agreements and the transactions contemplated hereby have been
duly authorized by all requisite action on the part of AIP. This Agreement
constitutes, and the AIP Ancillary Agreements (when executed and delivered
pursuant hereto for value received) will constitute, the valid and legally
binding obligations of AIP enforceable against AIP in accordance with their
respective terms, subject to Equitable Remedies.
6.3. Capitalization. On June 15, 1997, the authorized capital
stock of AIP consists of 10,000,000 Common Shares. As of the date hereof, all
10,000,000 Common Shares are outstanding. AIP has no outstanding bonds,
debentures, notes or other obligations (other than to Realco), the holders of
which have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the shareholders of AIP on any
matter. Except as set forth in the AIP Disclosure Letter, all such issued and
outstanding of AIP Common Shares are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights. Except as set forth in the
AIP Disclosure Letter, there are not at the date of this Agreement any existing
options, warrants, calls,
<PAGE> 12
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate AIP or any of its Subsidiaries to issue, transfer or
sell any shares or other equity interest of AIP or any of its Subsidiaries
except under any employee incentive plan approved by AIP's shareholders. There
are no agreements or understandings to which AIP is a party with respect to the
voting of any AIP Common Shares or which restrict the transfer of any such
shares, except in order to protect its REIT status.
6.4. Subsidiaries. Except as set forth in the AIP Disclosure
Letter, AIP owns directly or indirectly each of the outstanding shares of
capital stock or all of the partnership or other equity interests of each of
AIP's Subsidiaries free and clear of all liens, pledges, security interests,
claims or other encumbrances other than liens imposed by local law which are
not material.
6.5. Other Interests. Except as will be disclosed in the AIP
Disclosure Letter and except for interests in the AIP Subsidiaries, neither AIP
nor any AIP Subsidiary owns directly or indirectly any interest or investment
(whether equity or debt) in any corporation, partnership, joint venture,
business, trust or entity (other than investments in short-term investment
securities).
6.6. No Violation. Neither the execution and delivery by AIP of
this Agreement nor the consummation by AIP of the transactions contemplated
hereby in accordance with the terms hereof, will: (i) conflict with or result
in a breach of any provisions of AIP's Declaration of Trust; (ii) violate, or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties of AIP or its Subsidiaries under, or result in being
declared void, voidable or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which AIP or any of its Subsidiaries is
a party, or by which AIP or any of its Subsidiaries or any of their properties
is bound or affected, except for any of the foregoing matters which,
individually or in the aggregate, would not have an AIP Material Adverse
Effect; or (iii) other than the Regulatory Filings require any consent,
approval or authorization of, or declaration, filing or registration with, any
domestic governmental or regulatory authority, except where the failure to
obtain such consent, approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority would not have an
AIP Material Adverse Effect.
6.7. SEC Documents. (a) AIP has made available or will make
available to RELP prior to July 31, 1997, the registration statements of AIP
filed with the SEC in connection with public offerings of AIP securities since
January 1, 1994 and all exhibits, amendments and supplements thereto (the "AIP
Registration Statements"), and each registration statement, report, proxy
statement or information statement and all exhibits thereto prepared by it or
relating to its properties since the effective date of the latest AIP
Registration Statement, each in the form (including exhibits and any amendments
thereto) filed with the SEC (collectively, the "AIP Reports"). The AIP Reports,
which were or will be filed with the SEC in a timely manner, constitute all
forms, reports and documents required to be filed by AIP under the Securities
Laws.
<PAGE> 13
(b) To AIP's actual knowledge, as of their respective dates, the
AIP Reports (i) complied as to form in all material respects with the
applicable requirements of the Securities Laws, and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. To AIP's
actual acknowledge, each of the consolidated balance sheets of AIP included in
or incorporated by reference into the AIP Reports (including the related notes
and schedules) fairly presents the consolidated financial position of AIP and
the AIP Subsidiaries as of its date and each of the consolidated statements of
income, retained earnings and cash flows of AIP included in or incorporated by
reference into the AIP Reports (including any related notes and schedules)
fairly presents the results of operations, retained earnings or cash flows, as
the case may be, of AIP and the AIP Subsidiaries for the periods set forth
therein (subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein and except, in the
case of the unaudited statements, as permitted by the Securities Laws.
(c) Except as and to the extent set forth on the consolidated
balance sheet of AIP and its Subsidiaries at March 31, 1997, including all
notes thereto, or as set forth in the AIP Reports, neither AIP nor any of the
AIP Subsidiaries has any material liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on, or reserved against in, a balance sheet of AIP or in the notes
thereto, prepared in accordance with generally accepted accounting principles
consistently applied, except liabilities arising in the ordinary course of
business since such date which would not have an AIP Material Adverse Effect.
6.8. Litigation. To AIP's actual knowledge, there are (i) no
continuing orders, injunctions or decrees of any court, arbitrator or
governmental authority to which AIP or any AIP Subsidiary is a party or by
which any of its properties or assets are bound or, to which any of its
directors, officers, or affiliates is a party or by which any of their
properties or assets are bound, and (ii) except as will be set forth in the AIP
Disclosure Letter, no actions, suits or proceedings pending against AIP or any
AIP Subsidiary or, to the knowledge of AIP, against any of its Trust Managers,
officers, or affiliates or, to the knowledge of AIP, threatened against AIP or
any AIP Subsidiary or against any of its Trust Managers, officers, or
affiliates, at law or in equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality, that in the case of
clauses (i) or (ii) above are reasonably likely, individually or in the
aggregate, to have an AIP Material Adverse Effect.
6.9. Absence of Certain Changes. Except as disclosed in the AIP
Reports filed with the SEC prior to the date hereof, (i) AIP and its
Subsidiaries have conducted their business only in the ordinary course of such
business (which, for purposes of this section only, shall include all
acquisitions of real estate properties and financing arrangements made in
connection therewith); (ii) there has not been any AIP Material Adverse Effect;
(iii) there has not been any declaration, setting aside or payment of any
dividend or other distribution with respect to the AIP Common Shares; and (iv)
there has not been any material change in AIP's accounting principles,
practices or methods.
<PAGE> 14
6.10. Taxes. (a) Except as may be set forth in the AIP Disclosure
Letter, AIP and each of its Subsidiaries (i) has timely filed all federal,
state and foreign tax returns including, without limitation, information
returns and reports required to be filed by any of them for tax periods ended
prior to the date of this Agreement or requests for extensions have been timely
filed and any such request has been granted and has not expired and all such
returns are absolute and complete in all material respects, (ii) has paid or
accrued all taxes shown to be due and payable on such returns or which have
become due and payable pursuant to any assessment, deficiency notice, 30-day
letter or other notice received by it and (iii) has properly accrued all taxes
for such periods subsequent to the periods covered by such returns. Neither AIP
nor any of its Subsidiaries has received notice that the federal, state and
local income and franchise tax returns of AIP or any such Subsidiary has been
or will be examined by any taxing authority. Neither AIP nor any of its
Subsidiaries has executed or filed with the IRS or any other taxing authority
any agreement now in effect extending the period for assessment or collection
of any income or other taxes.
(b) Except as will be disclosed in the AIP Disclosure Letter,
neither AIP nor any of its Subsidiaries is a party to any pending action or
proceeding by any governmental authority for assessment or collection of taxes,
and no claim for assessment or collection of taxes has been asserted against
it. True, correct and complete copies of all federal, state and local income or
franchise tax returns filed by AIP and each of its Subsidiaries and all
communications relating thereto have been delivered to RELP or made available
to representatives of RELP or will be so delivered or made available prior to
July 31, 1997. AIP (i) has qualified to be taxed as a REIT pursuant to Sections
856 through 859 of the Code for its taxable years ended December 31, 1985
through 1996, inclusive (ii) has operated, and intends to continue to operate,
in such a manner as to qualify to be taxed as a REIT pursuant to Sections 856
through 859 of the Code for its taxable year ended on the effective date of the
Merger, and (iii) has not taken or omitted to take any action which could
result in, and each of the executive officers of AIP, each acting in his
respective capacity as such, has no actual knowledge of, a challenge to its
status as a REIT. AIP represents that each of its Subsidiaries is a Qualified
REIT Subsidiary as defined in Section 856 (i) of the Code. Neither AIP nor any
of its Subsidiaries holds any asset (i) the disposition of which could be
subject to rules similar to Section 1374 of the Code as a result of an election
under IRS Notice 88-19 or (ii) that is subject to a consent filed pursuant to
Section 341(f) of the Code and regulations thereunder. For purposes of this
Section 6.10, "taxes" includes any interest, penalty or additional amount
payable with respect to any tax.
6.11. Books and Records. (a) The books of account and other
financial records of AIP and its Subsidiaries are in all material respects
true, complete and correct, have been maintained in accordance with good
business practices, and are accurately reflected in all material respects in
the financial statements included in the AIP Reports.
(b) The minute books and other records of AIP and its Subsidiaries
contain in all material respects accurate records of all meetings and
accurately reflect in all material respects all other corporate action of the
shareholders and Trust Managers and any committees of the Board of Trust
Managers of AIP and its Subsidiaries.
<PAGE> 15
6.12. Properties. (a) AIP and its Subsidiaries own fee simple
title to each of the real properties reflected on the most recent balance sheet
of AIP included in the AIP Reports or as may be identified in the AIP
Disclosure Letter (the "AIP Properties"), which are all of the real estate
properties owned by them, free and clear of Encumbrances. To AIP's actual
knowledge, the AIP Properties are not subject to any rights of way, written
agreements, laws, ordinances and regulations affecting building use or
occupancy, or reservations of an interest in title (collectively, "Property
Restrictions"), except for (i) Encumbrances and Property Restrictions that will
be set forth in the AIP Disclosure Letter, (ii) Property Restrictions imposed
or promulgated by law or any governmental body or authority with respect to
real property, including zoning regulations, provided they do not materially
adversely affect the current use of the property, (iii) Encumbrances and
Property Restrictions disclosed on existing title reports or surveys (in either
case copies of which title reports and surveys have been or will be delivered
or made available to RELP prior to July 31, 1997), and (iv) mechanics',
carriers', workmen's, repairmen's liens and other Encumbrances, Property
Restrictions and other limitations of any kind, if any, which have heretofore
been bonded (and that will be listed in the AIP Disclosure Letter) or which
individually or in the aggregate, do not exceed $100,000, do not materially
detract from the value of or materially interfere with the present use of any
of the AIP Properties subject thereto or affected thereby, and do not otherwise
materially impair business operations conducted by AIP and its Subsidiaries and
which have arisen or been incurred only in its construction activities or in
the ordinary course of business.
(b) Valid policies of title insurance have been issued insuring
AIP's or any of its Subsidiaries' fee simple title to the AIP Properties,
subject only to the matters disclosed above and as may be set forth in the AIP
Disclosure Letter, and such policies are, at the date hereof, in full force and
effect and no material claim has been made against any such policy. To AIP's
actual knowledge, except as will be set forth in the AIP Disclosure Letter, (i)
there is no certificate, permit or license from any governmental authority
having jurisdiction over any of the AIP Properties or any agreement, easement
or other right which is necessary to permit the lawful use and operation of the
buildings and improvements on any of the AIP Properties or which is necessary
to permit the lawful use and operation of all driveways, roads and other means
of egress and ingress to and from any of the AIP Properties that has not been
obtained and is not in full force and effect, or of any pending threat of
modification or cancellation of any of same; (ii) neither AIP nor its
Subsidiaries has received written notice of any material violation of any
federal, state or municipal law, ordinance, order, regulation or requirement
affecting any portion of any of the AIP Properties issued by any governmental
authority; (iii) there are no structural defects relating to the AIP Properties
and no AIP Properties whose building systems are not in working order in any
material respect; and (iv) there is (A) no physical damage to any AIP Property
in excess of $100,000 for which there is no insurance in effect covering the
cost of the restoration, (B) no current renovation to any AIP Property the cost
of which exceeds $100,000 and (C) no current restoration (excluding tenant
improvements) of any AIP Property the cost of which exceeds $100,000.
(c) Except as will be set forth in the AIP Disclosure Letter, AIP
or its Subsidiaries have received no notice to the effect that and there are no
(A) condemnation or rezoning proceedings that are pending or threatened with
respect to any of the AIP Properties or (B) any zoning, building or similar
laws, codes, ordinances, orders or regulations that are or will be violated by
the continued maintenance, operation or use of any buildings or other
improvements on any of the AIP Properties
<PAGE> 16
or by the continued maintenance, operation or use of the parking areas in any
material respect. All work to be performed, payments to be made and actions to
be taken by AIP or its Subsidiaries prior to the date hereof pursuant to any
agreement entered into with a governmental body or authority in connection with
a site approval, zoning reclassification or other similar action relating to
the AIP Properties (e.g., Local Improvement District, Road Improvement
District, Environmental Mitigation) has been performed, paid or taken, as the
case may be, and AIP is not aware of any planned or proposed work, payments or
actions that may be required after the date hereof pursuant to such agreements,
except as will be set forth in the AIP Disclosure Letter.
6.13. Environmental Matters. To the actual knowledge of AIP, none
of AIP, any of its Subsidiaries or, any other person has caused or permitted
(i) the unlawful presence of any Hazardous Materials on any of the AIP
Properties, or (ii) any unlawful spills, releases, discharges or disposal of
Hazardous Materials to have occurred or be presently occurring on or from the
AIP Properties as a result of any construction on or operation and use of such
properties, which presence or occurrence would, individually or in the
aggregate, have an AIP Material Adverse Effect; and in connection with the
construction on or operation and use of the AIP Properties, AIP and its
Subsidiaries have not failed to comply, in any material respect, with any
applicable local, state and federal environmental laws, regulations, ordinances
and administrative and judicial orders relating to the generation, recycling,
reuse, sale, storage, handling, transport and disposal of any Hazardous
Materials.
6.14. Labor Matters. Neither AIP nor any of its Subsidiaries is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor union organization.
There is no unfair labor practice or labor arbitration proceeding pending or,
to the knowledge of the executive officers of AIP, threatened against AIP or
its Subsidiaries relating to their business, except for any such proceeding
which would not have an AIP Material Adverse Effect. To the knowledge of AIP,
there are no organizational efforts with respect to the formation of a
collective bargaining unit presently being made or threatened involving
employees of AIP or any of its Subsidiaries.
6.15. No Brokers. Except for the fee payable to Prudential
Securities Incorporated ("Prudential") as described in Section 6.16 below, AIP
has not entered into any contract, arrangement or understanding with any
person or firm which may result in the obligation of AIP or RELP to pay any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby. AIP is not aware of any claim for
payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
6.16. Opinion of Financial Advisor. AIP has retained Prudential to
review the transaction contemplated by this Agreement and to issue an opinion
as to the fairness to AIP, from a financial point of view, of the consideration
to be paid by AIP pursuant to the Merger.
6.17. RELP Share Ownership. Except as may be set forth in the AIP
Disclosure Letter, neither AIP nor any of its Subsidiaries owns any RELP
Interests or other securities convertible into RELP interests.
<PAGE> 17
6.18. AIP Common Shares. The issuance and delivery by AIP of AIP
Common Shares in connection with the Merger and this Agreement have been duly
and validly authorized by all necessary action on the part of AIP except for
the approval of its shareholders contemplated by this Agreement. The AIP Common
Shares to be issued in connection with the Merger and this Agreement, when
issued in accordance with the terms of this Agreement, will be validly issued,
fully paid and nonassessable, except that shareholders may be subject to
further assessment with respect to certain claims for tort, contract, taxes,
statutory liability and otherwise in some jurisdictions to the extent such
claims are not satisfied by AIP.
6.19. Convertible Securities. AIP has no outstanding options,
warrants or other securities exercisable for, or convertible into, shares of
AIP Common Shares, the terms of which would require any anti-dilution
adjustments by reason of the consummation of the transactions contemplated
hereby, except the preemptive rights held by certain clients of Morgan Stanley
Asset Management, Inc. and held by MS Real Estate Special Situations, Inc. and
the convertible debt securities held by Realco.
6.20. Related Party Transactions. Set forth in the AIP Disclosure
Letter will be a list of all arrangements, agreements and contracts entered
into by AIP or any of its Subsidiaries with (i) any person who is an officer,
Trust Manager or affiliate of AIP or any of its Subsidiaries, any relative of
any of the foregoing or any entity of which any of the foregoing is an
affiliate or (ii) any person who acquired AIP Common Shares in a private
placement. The copies of such documents, all of which have been or will be
delivered or made available to RELP prior to July 31, 1997, are or will be
true, complete and correct when delivered or made available.
6.21. Contracts and Commitments. The AIP Disclosure Letter will set
forth (i) all unsecured notes or other obligations of AIP and AIP Subsidiaries
which individually may result in total payments in excess of $100,000, (ii)
notes, debentures, bonds and other evidence of indebtedness which are secured
or collateralized by mortgages, deeds of trust or other security interests in
the AIP Properties or personal property of AIP and its Subsidiaries, and (iii)
each commitment entered into by AIP or any of its Subsidiaries which
individually may result in total payments or liability in excess of $100,000.
Copies of the foregoing have been or will be delivered or made available to
RELP prior to July 31, 1997, will be listed on the AIP Disclosure Letter and
are or will be materially true and correct when delivered or made available.
None of AIP or any of its Subsidiaries has received any notice of a default
that has not been cured under any of the documents described in clause (i) or
(ii) above or is in default respecting any payment obligations thereunder
beyond any applicable grace periods. All options of AIP or any of its
Subsidiaries to purchase real property will be set forth on the AIP Disclosure
Letter and such options and AIP's or its Subsidiaries' rights thereunder are in
full force and effect. All joint venture agreements to which AIP or any of its
Subsidiaries is a party will be set forth on the AIP Disclosure Letter and AIP
or its Subsidiaries are not in default with respect to any obligations, which
individually or in the aggregate are material, thereunder.
6.22. Development Rights. Set forth in the AIP Disclosure Letter
will be a list of all material agreements entered into by AIP or any of its
Subsidiaries relating to the development, rehabilitation, capital improvement
or construction of office buildings, industrial facilities or other
<PAGE> 18
real estate properties which development or construction has not been
substantially completed as of the date of this Agreement. Such agreements,
true, complete and correct copies of all of which have been or will be
delivered or made available to RELP prior to July 31, 1997, will be listed in
the AIP Disclosure Letter.
6.23. Certain Payments Resulting From Transactions. The execution
of, and performance of the transactions contemplated by, this Agreement will
not (either alone or upon the occurrence of any additional or subsequent
events) (i) constitute an event under any AIP Benefit Plan, policy, practice,
agreement or other arrangement or any trust or loan (the "Employee
Arrangements") that will or may result in any payment (whether of severance pay
or otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any employee, director or consultant of AIP or any of its Subsidiaries
unless such rights have been waived by any such person, or (ii) result in the
triggering or imposition of any restrictions or limitations on the right of AIP
or RELP to amend or terminate any Employee Arrangement and receive the full
amount of any excess assets remaining or resulting from such amendment or
termination, subject to applicable taxes. No payment or benefit which will be
required to be made pursuant to the terms of any agreement, commitment or AIP
Benefit Plan, as a result of the transactions contemplated by this Agreement,
to any officer, director or employee of AIP or any of its Subsidiaries, will be
characterized as an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code.
ARTICLE VII. COVENANTS
7.1. Acquisition Proposals. Prior to the Effective Time, RELP and
AIP each agree (i) that neither of them nor any of their Subsidiaries shall,
and each of them shall direct and use its best efforts to cause its respective
officers, General Partner, limited partners, Trust Managers, employees, agents,
affiliates and representatives (including, without limitation, any investment
banker, attorney or accountant retained by it or any of its Subsidiaries), as
applicable, not to, initiate, solicit or encourage, directly or indirectly, any
inquiries or 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, tender offer, exchange offer, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets or any equity securities (or any debt securities convertible into equity
securities) of, such party or any of its Subsidiaries, other than the
transactions contemplated by this Agreement (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Acquisition Proposal, or
otherwise facilitate any effort or attempt to make or implement an Acquisition
Proposal; (ii) that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing and each will take the
necessary steps to inform the individuals or entities referred to above of the
obligations undertaken in this Section 7.1; and (iii) that it will notify the
other party immediately if any such inquiries or proposals are received by, any
such information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it; provided, however, that nothing
contained in this Section 7.1 shall prohibit the Board of Directors of the
General Partner of RELP (the "Board of Directors") or the Board of Trust
Managers from (x)
<PAGE> 19
furnishing information to or entering into discussions or negotiations with,
any person or entity that makes an unsolicited bona fide Acquisition Proposal,
if, and only to the extent that, (A) the Board of Directors or Board of Trust
Managers, as applicable, determines in good faith that such action is required
for it to comply with its fiduciary duties to limited partners or shareholders,
as applicable, imposed by law as advised by counsel, (B) prior to furnishing
such information to, or entering into discussions or negotiations with, such
person or entity, such party provides written notice to the other party to this
Agreement to the effect that it is furnishing information to, or entering into
discussions with, such person or entity, and (C) subject to any confidentiality
agreement with such person or entity (which such party determined in good faith
was required to be executed in order for the Board of Directors or Board of
Trust Managers, as applicable, to comply with its fiduciary duties to limited
partners or shareholders, as applicable, imposed by law as advised by
counsel), such party keeps the other party to this Agreement informed of the
status (but not the terms) of any such discussions or negotiations; and (y) to
the extent applicable, complying with Rule 14e-2 promulgated under the Exchange
Act with regard to an Acquisition Proposal.
Nothing in this Section 7.1 shall (i) permit any party to terminate
this Agreement (except as specifically provided in Article IX hereof), (ii)
permit any party to enter into any agreement with respect to an Acquisition
Proposal during the term of this Agreement (it being agreed that during the
term of this Agreement, no party shall enter into any agreement with any person
that provides for, or in any way facilitates, an Acquisition Proposal (other
than a confidentiality agreement in customary form)), or (iii) affect any other
obligation of any party under this Agreement.
7.2. Conduct of Businesses.
(i) Prior to the Effective Time, except as may be set forth in
the RELP Disclosure Letter or the AIP Disclosure Letter or as contemplated by
this Agreement, unless the other party has consented in writing thereto, AIP
and RELP:
(a) Shall use their reasonable efforts, and shall cause each of
their respective Subsidiaries to use their reasonable efforts,
to preserve intact their business organizations and goodwill
and keep available the services of their respective officers
and employees;
(b) Shall confer on a regular basis with one or more
representatives of the other to report operational matters of
materiality and, subject to Section 7.1, any proposals to
engage in material transactions;
(c) Shall promptly notify the other of any material emergency or
other material change in the condition (financial or
otherwise) of the business, properties, assets or
liabilities, or any material governmental complaints,
investigations or hearings (or communications indicating that
the same may be contemplated), or the breach in any material
respect of any representation, warranty, covenant or agreement
contained herein;
(d) Shall not pay quarterly dividends or make distributions
payable with respect to the AIP Common Shares and RELP
Partnership Interests, respectively; and
<PAGE> 20
(e) Shall promptly deliver to the other true and correct copies of
any report, statement or schedule filed with the SEC
subsequent to the date of this Agreement.
(ii) Prior to the Effective Time, except as may be set forth in the
RELP Disclosure Letter, unless AIP has consented (such consent not to be
unreasonably withheld or delayed) in writing thereto, RELP:
(a) Shall conduct its operations according to its usual, regular
and ordinary course in substantially the same manner as
heretofore conducted;
(b) Shall not amend the RELP Organizational Documents;
(c) Shall not (i) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights
existing on the date hereof and disclosed pursuant to this
Agreement, issue any RELP Interests, make any distribution,
effect any recapitalization or other similar transaction, (ii)
grant, confer or award any option, warrant, conversion right
or other right not existing on the date hereof to acquire any
RELP Interest, (iii) increase any compensation or enter into
or amend any employment agreement with any of its present or
future officers or directors of the General Partner, or (iv)
adopt any new employee benefit plan or amend any existing
employee benefit plan in any material respect, except for
changes which are less favorable to participants in such
plans;
(d) Shall not declare, set aside or make any distribution or
payment with respect to any RELP Interest or directly or
indirectly redeem, purchase or otherwise acquire any RELP
Interest, or make any commitment for any such action;
(e) Shall not sell or otherwise dispose of (i) any RELP
Properties, or (ii) except in the ordinary course of business,
any of its other assets which are material, individually or in
the aggregate;
(f) Shall not make any loans, advances or capital contributions
to, or investments in, any other person;
(g) Shall not pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business consistent
with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated
by, the most recent consolidated financial statements (or the
notes thereto) of RELP included in the RELP Reports or
incurred in the ordinary course of business consistent with
past practice;
(h) Shall not enter into any commitment which individually may
result in total payments or liability by or to it in excess of
$250,000 in the case of any one commitment or in excess of
$500,000 for all commitments;
<PAGE> 21
(i) Shall not, and shall not permit any of its Subsidiaries to,
enter into any commitment with any officer, director or
affiliate of RELP or its General Partner except to the extent
the same occur in the ordinary course of business consistent
with past practice and would not have a RELP Material Adverse
Effect; and
(j) Shall not enter into or terminate any lease representing
annual revenues of $100,000 or more.
(iii) Prior to the Effective Time, except as may be set forth in the
AIP Disclosure Letter, unless RELP has consented (such consent not to be
unreasonably withheld or delayed) in writing thereto, AIP:
(a) Shall, and shall cause each of its Subsidiaries to, conduct
its operations according to their usual, regular and ordinary
course in substantially the same manner as heretofore
conducted;
(b) Shall not amend its Declaration of Trust or Bylaws except as
contemplated by this Agreement;
(c) Shall not (i) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights
(including AIP's existing dividend reinvestment plan) existing
on the date hereof and disclosed pursuant to this Agreement,
issue any shares of its capital stock, effect any share split,
reverse share split, share dividend, recapitalization or other
similar transaction, (ii) grant, confer or award any option,
warrant, conversion right or other right not existing on the
date hereof to acquire any shares of its capital shares
(except pursuant to any employee incentive plan approved by
shareholders), (iii) amend any employment agreement with any
of its present or future officers or Trust Managers, or (iv)
adopt any new employee benefit plan (including any share
option, share benefit or share purchase plan) except the
employee incentive plan to be voted on at its shareholder
meeting for the fiscal year ended December 31, 1995;
(d) Shall not declare, set aside or pay any dividend or make any
other distribution or payment with respect to any Common
Shares or directly or indirectly redeem, purchase or otherwise
acquire any Common Shares or capital stock of any of its
Subsidiaries, or make any commitment for any such action;
(e) Except as will be set forth in the AIP Disclosure Letter,
shall not, and shall not permit any of its Subsidiaries to,
sell or otherwise dispose of (i) any AIP Properties or any of
its capital stock of or other interests in Subsidiaries or
(ii) except in the ordinary course of business, any of its
other assets which are material, individually or in the
aggregate;
<PAGE> 22
(f) Shall not, and shall not permit any of its Subsidiaries to,
make any loans, advances or capital contributions to, or
investments in, any other person other than in connection with
the sale of properties;
(g) Shall not, and shall not permit any of its Subsidiaries to,
pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business consistent
with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated
by, the most recent consolidated financial statements (or the
notes thereto) of AIP included in the AIP Reports or incurred
in the ordinary course of business consistent with past
practice;
(h) Shall not, and shall not permit any of its Subsidiaries to,
enter into any commitment which individually may result in
total payments or liability by or to it in excess of $500,000
in the case of any one commitment or in excess of $500,000 for
all commitments; and
(i) Shall not, and shall not permit any of its Subsidiaries to,
enter into any commitment with any officer, Trust Manager or
affiliate of AIP or any of its Subsidiaries, except as herein
or in the AIP Disclosure Letter provided and except in the
ordinary course of business.
For purposes of this Section 7.2, any consent shall be deemed to be
unreasonably delayed if notice of consent or withholding of consent is not
received within three days of request. Further, if no response is received by
the end of business on such third day, the party receiving the request shall be
deemed to have consented to such action.
7.3 Meetings of Shareholders and Partners. Each of AIP and RELP
will take all action necessary in accordance with applicable law and its
organizational documents to convene a meeting of its shareholders or partners,
as applicable, as promptly as practicable to consider and vote upon or
otherwise to obtain the consent of its shareholders or partners, as applicable,
to (i) in the case of AIP, approve this Agreement and the transactions
contemplated hereby, and (ii) in the case of RELP, approve this Agreement and
the transactions contemplated hereby. The Board of Trust Managers and the
General Partner shall each recommend such approval and AIP and RELP shall each
take all lawful action to solicit such approval, including, without limitation,
timely mailing the Proxy Statement/Prospectus (as defined in Section 7.7);
provided, however, that such recommendation or solicitation is subject to any
action taken by, or upon authority of, the Board of Trust Managers or the
General Partner, as the case may be, in the exercise of its good faith judgment
as to its fiduciary duties to its shareholders or partners, as applicable,
imposed by law as advised by counsel. AIP and RELP shall coordinate and
cooperate with respect to the timing of such meetings and shall use their best
efforts to hold such meetings on the same day.
7.4. Filings; Other Action. Subject to the terms and conditions
herein provided, RELP and AIP shall: (a) use all reasonable efforts to
cooperate with one another in (i) determining which filings are required to be
made prior to the Effective Time with, and which consents, approvals,
<PAGE> 23
permits or authorizations are required to be obtained prior to the Effective
Time from governmental or regulatory authorities of the United States and the
several states in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and (ii) timely
making all such filings and timely seeking all such consents, approvals,
permits or authorizations; (b) use all reasonable efforts to obtain in writing
any consents required from third parties in form reasonably satisfactory to
RELP and AIP necessary to effectuate the Merger; and (c) use all reasonable
efforts to take, or cause to be taken, all other action and do, or cause to be
done, all other things necessary, proper or appropriate to consummate and make
effective the transactions contemplated by this Agreement. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purpose of this Agreement, the proper officers and directors of AIP and
the General Partner shall take all such necessary action.
7.5. Inspection of Records. From the date hereof to the Effective
Time, each of RELP and AIP shall allow all designated officers, attorneys,
accountants and other representatives of the other access at all reasonable
times to the records and files, correspondence, audits and properties, as well
as to all information relating to commitments, contracts, titles and financial
position, or otherwise pertaining to the business and affairs of RELP and AIP
and their respective Subsidiaries.
7.6. Publicity. RELP and AIP shall, subject to their respective
legal obligations (including requirements of stock exchanges and other similar
regulatory bodies), consult with each other, and use reasonable efforts to
agree upon the text of any press release before issuing any such press release
or otherwise making public statements with respect to the transactions
contemplated hereby and in making any filings with any federal or state
governmental or regulatory agency or with any national securities exchange with
respect thereto.
7.7. Registration Statement. AIP and RELP shall cooperate and
promptly prepare and AIP shall file with the SEC as soon as practicable a
Registration Statement on Form S-4 (the "Form S-4") under the Securities Act,
with respect to the AIP Common Shares issuable in the Merger, a portion of
which Registration Statement shall also serve as the joint proxy statement with
respect to the meetings of the shareholders and partners, respectively, of AIP
and RELP in connection with the Merger (the "Proxy Statement/Prospectus"). The
respective parties will cause the Proxy Statement/Prospectus and the Form S-4
to comply as to form in all material respects with the applicable provisions of
the Securities Act, the Exchange Act and the rules and regulations promulgated
thereunder. AIP shall use all reasonable efforts, and RELP will cooperate with
AIP to have the Form S-4 declared effective by the SEC as promptly as
practicable. AIP shall use its best efforts to obtain, prior to the effective
date of the Form S-4, all necessary state securities law or "Blue Sky" permits
or approvals required to carry out the transactions contemplated by this
Agreement and will pay all expenses incident thereto. AIP agrees that the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the respective meetings of shareholders and
partners, respectively, of AIP and RELP, or, in the case of the Form S-4 and
each amendment or supplement thereto, at the time it is filed or becomes
effective, will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that the foregoing shall not apply to the
extent that any such untrue statement of a material fact or omission to state a
<PAGE> 24
material fact was made by AIP in reliance upon and in conformity with written
information concerning RELP furnished to AIP by RELP specifically for use in
the Proxy Statement/Prospectus. RELP agrees that the written information
provided by it specifically for inclusion in the Proxy Statement/Prospectus and
each amendment or supplement thereto, at the time of mailing thereof and at the
time of the respective meetings of shareholders and partners, respectively, of
AIP and RELP, or, in the case of written information provided by RELP
specifically for inclusion in the Form S-4 or any amendments or supplement
thereto, at the time it is filed or becomes effective, will not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. AIP will advise
RELP, promptly after it receives notice thereof, of the time when the Form S-4
has become effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension of the qualification of the AIP
Common Shares issuable in connection with the Merger for offering or sale in
any jurisdiction, or any request by the SEC for amendment of the Proxy
Statement/Prospectus or the Form S-4 or comments thereon and responses thereto
or requests by the SEC for additional information.
7.8. Listing Application. AIP shall promptly prepare and submit to
the NYSE a listing application covering the AIP Common Shares issuable in the
Merger, and shall use its reasonable efforts to obtain, prior to the Effective
Time, approval for the listing of such AIP Common Shares, subject to official
notice of issuance.
7.9. Further Action. Each party hereto shall, subject to the
fulfillment at or before the Effective Time of each of the conditions of
performances set forth herein or the waiver thereof, perform such further acts
and execute such documents as may reasonably be required to effect the Merger.
7.10. Expenses. Subject to Section 9.5, if the Merger is approved
by RELP's partners, all transaction costs of the proposed consolidation shall
be paid by AIP. If three of the four limited partnerships party to the Proxy
Statement/Prospectus (the "Other RELPS") do not approve their proposed merger
into AIP, Realco shall reimburse AIP for AIP's expenses relating to the
proposed merger up to $250,000. If RELP and the Other RELPS approve their
proposed merger into AIP, but the shareholders of AIP do not approve the
proposer merger, and if Realco voted its AIP Common Shares in favor of such
mergers, AIP will reimburse RELP and the Other RELPS for all expenses they
incurred in connection with the proposed merger. Any expenses to be reimbursed
hereunder shall include, but not be limited to, costs of fairness opinions,
property appraisals, engineering and environmental reports, title policies,
accounting fees, legal fees, printing and solicitation expenses. RELP will
bear the costs of preparing its initial fairness opinion, with later
reimbursement by AIP in the event the Merger is approved by RELP's partners.
If the limited partners of RELP fail to approve the proposed Merger, then
Realco will reimburse AIP for the RELP's expenses (to the extent paid by AIP)
as follows: the actual cost of such RELP's fairness opinion, legal fees up to
$80,000, and the actual cost or the Allocable Share (if the actual cost is not
separately determined), of RELP's accounting fees, engineering and
environmental reports, printing and solicitation expenses. Allocable Share,
for this purpose, shall be the ratio of such RELP's net book value of assets at
March 31, 1997 to the total net book value of all of the assets of RELP and the
Other RELPS at March 31, 1997.
<PAGE> 25
7.11. Indemnification. For a period of six years from and after the
Effective Time, AIP shall indemnify the partners, or agents of RELP who at any
time prior to the Effective Time were entitled to indemnification under the
Agreement of Limited Partnership of RELP existing on the date hereof to the
same extent as such partners or agents are entitled to indemnification under
such Agreement of Limited Partnership in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement).
7.12. Reorganization. From and after the date and until the
Effective Time, neither AIP nor RELP nor any of their respective Subsidiaries
or other affiliates shall (i) knowingly take any action, or knowingly fail to
take any action, that would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a)(1)(A) of the Code; or (ii)
enter into any contract, agreement, commitment or arrangement with respect to
the foregoing. Following the Effective Time, AIP shall use its best efforts to
conduct its business in a manner that would not jeopardize the characterization
of the Merger as a reorganization within the meaning of Section 368(a)(1)(A) of
the Code.
7.13. Survival of RELP Obligations; Assumption of RELP Liabilities
by AIP. All of the obligations of RELP that are outstanding at the Closing
shall survive the Closing and shall not be merged therein. Upon the
consummation of the Merger, such obligations shall be assumed, automatically,
by AIP; provided, however, that such assumption shall not impose upon or expose
AIP to any liability for which RELP was not liable, and provided, further, that
AIP shall be entitled to the same defenses, offsets and counterclaims to which
RELP would have been entitled, but for the Merger.
7.14. Third Party Consents. AIP and RELP each shall take all
necessary corporate and other action and will use its commercially reasonable
efforts to obtain the consents and applicable approvals from third parties that
may be required to enable it to carry out the transactions contemplated by this
Agreement.
7.15. Efforts to Fulfill Conditions. AIP and RELP each shall use
commercially reasonable efforts to insure that all conditions precedent to its
obligations hereunder are fulfilled at or prior to the Closing.
7.16. Representations, Warranties and Conditions Prior to Closing.
AIP and RELP each shall use its commercially reasonable efforts to cause its
representations and warranties contained in this Agreement to be true and
correct on and as of the Closing Date in all material respects. Prior to
Closing, AIP and RELP each shall promptly notify the other in writing (i) if
any representation or warranty contained in this Agreement is discovered to be
or becomes untrue or (ii) if AIP or RELP fails to perform or comply with any of
its covenants or agreements contained in this Agreement or it is reasonably
expected that it will be unable to perform or comply with any of its covenants
or agreements contained in this Agreement.
7.17. Cooperation of the Parties. AIP and RELP each will cooperate
with the other in supplying such information as may be reasonably requested by
the other in connection with obtaining consents or approvals to the
transactions contemplated by this Agreement.
<PAGE> 26
7.18. Lock-Ups. The General Partner shall use its best efforts
prior to the Closing to have each of its directors and officers and Realco
execute a 90-day lock-up agreement in a form (reasonably acceptable to RELP)
supplied to RELP by AIP. The executed agreements will be delivered to AIP at
the Closing. AIP shall use its best efforts prior to the Closing to have each
of its Trust Managers and officers execute a 90-day lock-up agreement, in a
form (reasonably acceptable to AIP) supplied to AIP by RELP. The agreements
will be delivered to RELP at the Closing.
ARTICLE VIII. CONDITIONS
8.1. Conditions to Each Party's Obligations to Effect the Merger.
The respective obligation of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall
have been approved in the manner required by the Declaration
of Trust and Bylaws and Agreement of Limited Partnership of
AIP and RELP, respectively, and by applicable law or by
applicable regulations of any stock exchange or other
regulatory body by the holders of the AIP Common Shares and
RELP Interests entitled to vote thereon.
(b) Neither of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction which
prohibits the consummation of the transactions contemplated by
this Agreement. In the event any such order or injunction
shall have been issued, each party agrees to use its
reasonable efforts to have any such injunction lifted.
(c) The Form S-4 shall have become effective and all necessary
state securities law or "Blue Sky" permits or approvals
required to carry out the transactions contemplated by this
Agreement shall have been obtained and no stop order with
respect to any of the foregoing shall be in effect.
(d) AIP shall have obtained the approval for the listing of the
AIP Common Shares issuable in the Merger on the NYSE, subject
to official notice of issuance.
(e) All consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental commission,
board, other regulatory body or third parties required in
connection with the execution, delivery and performance of
this Agreement shall have been obtained or made, except for
filings in connection with the Merger and any other documents
required to be filed after the Effective Time and except where
the failure to have obtained or made any such consent,
authorization, order, approval, filing or registration would
not have a material adverse effect on the business, results of
operations or financial condition of AIP and RELP (and their
respective Subsidiaries), taken as a whole, following the
Effective Time.
<PAGE> 27
8.2 Conditions to Obligations of RELP to Effect the Merger. The
obligation of RELP to effect the Merger shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions, unless waived by
RELP:
(a) AIP shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing
Date and the representations and warranties of AIP contained
in this Agreement shall be true and correct in all material
respects as of the Closing Date as if made on the Closing
Date, and RELP shall have received a certificate of the
President or an Executive or Senior Vice President of AIP,
dated the Closing Date, certifying to such effect.
(b) RELP shall have received the opinion of Liddell, Sapp or
another recognized law firm selected by AIP and approved by
RELP, dated the Closing Date, to the effect that the Merger
will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a)(1)(A) of
the Code, and that RELP and AIP will each be a party to that
reorganization within the meaning of Section 368(b) of the
Code. In rendering its opinion, said counsel shall be entitled
to rely as to any factual matter upon certificates given by
executive officers of RELP and AIP and shall be entitled to
assume that the covenants of AIP pursuant to Section 7.15
shall be fully complied with.
(c) From the date of the Agreement through the Effective Time,
there shall not have occurred any change in the financial
condition, business or operations of AIP and its Subsidiaries,
taken as a whole, that would have or would be reasonably
likely to have an AIP Material Adverse Effect other than any
such change that affects both RELP and AIP in a substantially
similar manner.
(d) The opinion of Houlihan addressed to RELP that the Purchase
Price is fair, from a financial point of view, to the partners
of RELP shall not have been withdrawn or materially modified.
(e) RELP shall have received the opinion of Liddell, Sapp or
another recognized law firm selected by AIP and approved by
RELP, dated the Closing Date, as to such customary matters as
RELP may reasonably request, such opinion to be reasonably
satisfactory to RELP.
8.3 Conditions to Obligation of AIP to Effect the Merger. The
obligations of AIP to effect the Merger shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions, unless waived by AIP:
(a) RELP shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing
Date and the representations and warranties of RELP contained
in this Agreement shall be true and correct in all material
respects as of the Closing Date as if made on the Closing Date
and AIP shall have received
<PAGE> 28
a certificate of the Chief Executive Officer, President or an
Executive Vice President of the General Partner dated the
Closing Date, certifying to such effect.
(b) AIP shall have received the opinion of Liddell, Sapp or
another recognized law firm selected by RELP and approved by
AIP, dated the Closing Date, to the effect that the
consummation of the Merger will not result in AIP's failure to
continue to satisfy the requirements for qualification as a
REIT for federal income tax purposes. In rendering its
opinion, said counsel shall be entitled to rely as to any
factual matter upon certificates given by executive officers
of AIP and RELP and shall be entitled to assume that the
covenants of Section 7.15 shall be fully complied with.
(c) From the date of this Agreement through the Effective Time,
there shall not have occurred any change in the financial
condition, business or operations of RELP and its
Subsidiaries, taken as a whole, that would have or would be
reasonably likely to have an RELP Material Adverse Effect,
other than any such change that affects both RELP and AIP in a
substantially similar manner.
(d) Each person listed on Exhibit 8.3(d) attached hereto shall
have delivered to AIP a written agreement to the effect that
such person will not offer to sell, sell or otherwise dispose
of any shares of AIP Common Stock issued in the Merger,
except, in each case, pursuant to an effective registration
statement or in compliance with Rule 145, as amended from time
to time, or in a transaction which, in the opinion of legal
counsel reasonably satisfactory to AIP, is exempt from the
registration requirements of the Securities Act and that the
certificates representing the AIP shares issued to him or her
in the Merger may bear a legend to such effect.
(e) The opinion of Prudential addressed to the Board of Trust
Managers of AIP that the consideration to be paid by AIP
pursuant to the Merger is fair, from a financial point of
view, to AIP shall not have been withdrawn or materially
modified.
(f) AIP shall have received the opinion of Liddell, Sapp or
another recognized law firm selected by RELP and approved by
AIP, dated the Closing Date, as to such customary matters as
AIP may reasonably request, such opinion to be reasonably
satisfactory to AIP.
(g) The limited partners of at least two of the Other RELPS shall
have approved the merger of such limited partnership with and
into AIP.
ARTICLE IX. TERMINATION
9.1 Termination by Mutual Consent. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval of this Agreement by the partners of RELP or
the shareholders of AIP or by the mutual written consent of AIP and RELP, with
the prior approval of their respective Board of Trust Managers and General
Partner.
<PAGE> 29
9.2 Termination by Either AIP or RELP. This Agreement may be
terminated and the Merger may be abandoned by action of the General Partner of
RELP or the Board of Trust Managers of AIP if (i) the Merger shall not have
been consummated by March 31, 1998, (ii) a meeting of RELP's partners shall
have been duly convened and held and the approval of RELP's partners required
by Section 8.1(a) shall not have been obtained at such meeting or at any
adjournment thereof, (iii) a meeting of AIP's shareholders shall have been duly
convened and held and the approval of AIP's shareholders required by Section
8.1(a) shall not have been obtained at such meeting or at any adjournment
thereof, (iv) as a result of due diligence investigation by one of the parties
hereto, it is determined in good faith by such party that certain facts or
circumstances not previously known by such party constitute a Material Adverse
Effect on the business, results of operations or financial condition of the
other party, (v) a United States federal or state court of competent
jurisdiction or United States federal or state governmental, regulatory or
administrative agency or commission shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and
non-appealable, provided that the party seeking to terminate this Agreement
pursuant to this clause (v) shall have used all reasonable efforts to remove
such order, decree, ruling or injunction, or (vi) any of the conditions set
forth in Article VIII shall not have been satisfied, and provided, in the case
of a termination pursuant to clause (i) or (vi) above, that the terminating
party shall not have breached in any material respect its obligations under
this Agreement in any manner that shall have proximately contributed to the
occurrence of the failure referred to in said clause. AIP and RELP each shall
(i) deliver its Disclosure Letter to one another not later than 5:00 P.M.,
Central Time, August 11, 1997, and (ii) shall complete its due diligence
investigations not later than 5:00 P.M., Central Time, on July 31, 1997 (the
period from the date of this Agreement through July 31, 1997 being hereinafter
referred to as the "Due Diligence Period"). Until the expiration of the Due
Diligence Period, either party may terminate this Agreement without liability
or penalty due to (i) the discovery of a fact or circumstance that reasonably
could be expected to constitute a Material Adverse Effect on the business,
results of operations or financial condition of the other party, or (ii) the
party's failure to receive a written fairness opinion as described herein
within seven business days from the date of execution of this Agreement.
9.3 Termination by RELP. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the adoption and approval by the partners of RELP referred to in Section
8.1(a), by action of the General Partner, if (i) in the exercise of its good
faith judgment as to its fiduciary duties to its partners imposed by law, as
advised by counsel, the General Partner determines that such termination is
required by reason of a RELP Acquisition Proposal being made, (ii) the Board of
Trust Managers withdraws, materially modifies or changes in a manner materially
adverse to RELP its recommendations to AIP's shareholders of this Agreement or
the Merger, other than as a result of the occurrence of an event that in the
good faith judgment of the Board of Trust Managers has or is reasonably likely
to have a RELP Material Adverse Effect, (iii) the Board of Trust Managers
postpones the date scheduled for the meeting of shareholders of AIP to approve
this Agreement and the transactions contemplated hereby beyond March 31, 1998
or fails to set a date for such meeting by such date, except with the written
consent of RELP, (iv) there has been a breach by AIP of any representation or
warranty contained in this Agreement which would have or would be reasonably
likely to have an AIP Material Adverse Effect,
<PAGE> 30
which breach is not curable by March 31,1998, or (v) there has been material
breach of any of the covenants or agreements set forth in this Agreement on the
part of AIP, which breach is not curable or, if curable, is not cured within 30
days after written notice of such breach is given by RELP to AIP, or (vi) the
condition set forth in Section 8.3(g) is not satisfied..
9.4 Termination by AIP. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval by the shareholders of AIP referred to in Section 8.1(a), by
action of the Board of Trust Managers, if (i) in the exercise of its good
faith judgment as to its fiduciary duties to its shareholders imposed by law,
as advised by counsel, the Board of Trust Managers determines that such
termination is required by reason of an AIP Acquisition Proposal being made,
(ii) the General Partner withdraws, materially modifies or changes in a manner
materially adverse to AIP its recommendation to RELP's partners of this
Agreement or the Merger, other than as a result of the occurrence of an event
that in the good faith judgment of the General Partner has or is reasonably
likely to have an AIP Material Adverse Effect, (iii) the General Partner
postpones the date scheduled for the meeting of partners of RELP to approve
this Agreement and the transactions contemplated hereby beyond March 31, 1998,
or fails to set a date for such meeting by such date, except with the written
consent of AIP, (iv) there has been a breach by RELP of any representation or
warranty contained in this Agreement which would have or would be reasonably
likely to have a RELP Material Adverse Effect, which breach is not curable by
March 31, 1998, or (v) there has been a material breach of any of the covenants
or agreements set forth in this Agreement on the part of RELP, which breach is
not curable or, if curable, is not cured within 30 days after written notice of
such breach is given by AIP to RELP.
9.5. Effect of Termination and Abandonment. (a) If an election to
terminate this Agreement is made pursuant to (i) Section 9.2(i) (except as a
result of a default or breach hereunder by AIP) or Section 9.2(ii), and a RELP
Acquisition Proposal relating to RELP shall have been made and, within one year
from the date of such termination, RELP consummates a RELP Acquisition Proposal
or enters into an agreement to consummate a RELP Acquisition Proposal which is
subsequently consummated, or (ii) Section 9.3(i), RELP shall pay to AIP,
provided that AIP was not in material breach of its obligations hereunder at
the time of such termination, as liquidated damages and not as a penalty or
forfeiture, an amount equal to the lesser of (m) $415,000 (the "Liquidated
Damages Amount") and (n) the sum of (1) the maximum amount that can be paid to
AIP without causing AIP to fail to meet the requirements of Sections 856(c)(2)
and (3) of the Code determined as if the payment of such amount did not
constitute income described in Sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I)
of the Code ("Qualifying Income"), as determined by AIP's certified public
accountants, plus (2) an amount equal to the Liquidated Damages Amount less the
amount payable under clause (1) above in the event AIP receives a letter from
AIP's counsel indicating that AIP has received a ruling from the IRS to the
effect that Liquidated Damages Amount payments constitute Qualifying Income. In
addition to the Liquidated Damages Amount, AIP shall be entitled to receive
from RELP (or its successor in interest) all documented out-of-pocket costs and
expenses, up to a maximum of $207,500 in connection with this Agreement and
the transactions contemplated hereby (the "AIP Expenses") incurred by AIP. The
payments to which AIP is entitled under this Section 9.5(a) shall be its sole
remedy with respect to the termination of the Agreement under the circumstances
contemplated in this Section 9.5(a).
<PAGE> 31
(b) If an election to terminate this Agreement is made pursuant to
Section 9.2(i) (as a result of the condition set forth in Section 8.3(c) not
being satisfied), RELP shall, provided that AIP was not in material breach of
its obligations hereunder at the time of such termination, pay AIP for the AIP
Expenses, up to a maximum of $207,500, although it shall not be required to pay
the Liquidated Damages Amount, which payment of the AIP Expenses shall be AIP's
sole remedy for termination of the Agreement in such circumstances.
(c) If an election to terminate this Agreement is made pursuant to
(i) Section 9.2(i) (except as a result of a default or breach hereunder by
RELP) or Section 9.2(iii), and an AIP Acquisition Proposal relating to AIP
shall have been made and, within one year from the date of such termination,
AIP consummates an AIP Acquisition Proposal or enters into an agreement to
consummate an AIP Acquisition Proposal which is subsequently consummated, or
(ii) Section 9.4(i), AIP shall pay to RELP, provided that RELP was not in
material breach of its obligations hereunder at the time of such termination,
as liquidated damages and not as a penalty or forfeiture, an amount equal to
the Liquidated Damages Amount. In addition to the Liquidated Damages Amount,
RELP shall be entitled to receive from AIP (or its successor in interest) all
documented out-of-pocket costs and expenses, up to a maximum of $207,500, in
connection with this Agreement and the transactions contemplated hereby (the
"RELP Expenses" and, together with the AIP Expenses, the "Expenses") incurred
by RELP. The payments to which RELP is entitled under this Section 9.5(c) shall
be its sole remedy with respect to the termination of the Agreement under the
circumstances contemplated in this Section 9.5(c)
(d) If an election to terminate this Agreement is made pursuant to
Section 9.2(i) (as a result of the condition set forth in Section 8.2(c) not
being satisfied), AIP shall, provided that RELP was not in material breach of
its obligations hereunder at the time of such termination, pay RELP for the
RELP Expenses, up to a maximum of $207,500, although it shall not be required
to pay the Liquidated Damages Amount, which payment of the RELP Expenses shall
be RELP's sole remedy for termination of the Agreement in such circumstances.
(e) If this Agreement is terminated pursuant to Section 9.3(iv),
Section 9.3(v), Section 9.4(iv), or Section 9.4(v), the non-terminating party
shall, provided that the terminating party was not in material breach of its
obligations hereunder at the time of such termination, pay the terminating
party all Expenses, up to a maximum of $207,500, incurred by it and the
non-terminating party shall remain liable to the terminating party for its
breach.
(f) If either party terminates this Agreement during the Due
Diligence Period described in Section 9.2 above other than for a due diligence
related reason, the non-terminating party shall be entitled to receive the
Liquidated Damages Amount and the Expenses as provided in this Article IX.
(g) RELP agrees to amend this Section 9.5 at the request of AIP in
order to (x) maximize the portion of the Liquidated Damages Amount that may be
distributed to AIP hereunder without causing AIP to fail to meet the
requirements of Sections 856(c)(2) and (3) of the Code or (y) improve AIP's
chances of securing a favorable ruling described in this Section 9.5, provided
that no such amendment may result in any additional cost or expense to such
other party.
<PAGE> 32
(h) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article IX, all obligations of the
parties hereto shall terminate, except the obligations of the parties pursuant
to this Section 9.5 and Section 7.10 and except for the provisions of Section
10.3, 10.4, 10.5, 10.6, 10.7, 10.9, 10.10, 10.13, 10.14 and 10.16. In the event
AIP or RELP has received the Liquidated Damages Amount, such recipient shall
not assert or pursue in any manner, directly or indirectly, any claim or cause
of action against the other party hereto or any of its officers, Trust
Managers, or General Partners, as applicable, based in whole or part upon its
or their receipt, consideration, recommendation or approval of an Acquisition
Proposal or the exercise by AIP of its right to termination under Section
9.4(i) or the exercise by RELP of its right to termination under Section
9.3(i). Notwithstanding the foregoing, in the event AIP or RELP is required to
file suit to seek all or a portion of such Liquidated Damages Amount, and it
ultimately succeeds, it shall be entitled to all expenses, including attorney's
fees and expenses, which it has incurred in enforcing its right hereunder.
(i) If either party willfully fails to perform its duties and
obligations under this Agreement, the non- breaching party is additionally
entitled to all remedies available to it at law or in equity and to recover its
expenses from the breaching party.
9.6 Extension; Waiver. At any time prior to the Effective Time,
any party hereto, by action taken by its Board of Trust Managers or General
Partner, as applicable, may, to the extent legally allowed, (i) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE X. GENERAL PROVISIONS
10.1. Nonsurvival of Representations, Warranties and Agreements.
All representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Merger;
provided, however, that the agreements contained in Article IV, the last
sentence of Section 7.4 and Sections 7.10, 7.11, 7.12, 7.13, 7.14, 7.15 and
7.16 and this Article X shall survive the Merger.
10.2. Notices. Any notice required to be given hereunder shall be
in writing and shall be sent by facsimile transmission (confirmed by any of the
methods that follow), courier service (with proof of service), hand delivery or
certified or registered mail (return receipt requested and first-class postage
prepaid) and addressed as follows:
If to AIP:
American Industrial Properties REIT
6220 N. Beltline Road, Suite 205
Irving, Texas 75063
Attention: Charles W. Wolcott, President
Telecopy: (972) 550-6037
<PAGE> 33
If to RELP:
USAA Real Estate Company
8000 I-H 10 West, Suite 600
San Antonio, Texas 78230
Attention: Patrick Duncan, Senior Vice-President
Telecopy: (210) 498-6214
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
delivered.
10.3. Assignment; Binding Effect; Benefit. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, except as
provided in the following sentence, nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the parties hereto or
their respective heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement. The provisions of Article IV and Sections 7.11, 7.12, 7.13, 7.14 and
7.15 (collectively, the "Third Party Provisions") shall benefit the persons
identified therein, but the aggregate liability of AIP with respect thereto
shall not exceed the amount specified in Article IX.
10.4. Entire Agreement. This Agreement, the Exhibits, the RELP
Disclosure Letter, the AIP Disclosure Letter, the RELP Ancillary Agreements,
the AIP Ancillary Agreements and any documents delivered by the parties in
connection herewith constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
10.5. Confidentiality. (a) As used herein, "Confidential Material"
means, with respect to either party hereto (the "Providing Party"), all
information (written or oral) furnished (whether before or after the date
hereof) by the Providing Party and its directors, officers, employees,
affiliates or representatives of advisors, including counsel, lenders and
financial advisors (collectively, the "Providing Party Representatives") to the
other party hereto (the "Receiving Party") or such Receiving Party's directors,
officers, employees, affiliates or representatives of advisors, including
counsel, lenders and financial advisors or the Receiving Party's potential
sources of financing for the transactions contemplated by this Agreement
(collectively "the Receiving Party Representatives") and all analyses,
compilations, forecasts and other studies or other documents prepared by the
Providing Party or the Providing Party Representatives in connection with its
or their review of the transactions contemplated by this Agreement which
contain or reflect such information. The term "Confidential Material" does not
include, however, information which (i) at the time of disclosure
<PAGE> 34
or thereafter is generally available to and known by the public other than as a
result of a disclosure directly or indirectly by the Receiving Party or the
Receiving Party Representatives in violation of this Agreement, (ii) at the
time of disclosure was available on a nonconfidential basis from a source other
than the Providing Party or the Providing Party Representatives, providing that
such source is not and was not bound by a confidentiality agreement with the
Providing Party, (iii) was known by the Receiving Party prior to receiving the
Confidential Material from the Providing Party or has been independently
acquired or developed by the Receiving Party without violating any of its
obligations under this Agreement, or (iv) is contained in any RELP Reports or
AIP Reports or Proxy Statement/Prospectus.
(b) Subject to paragraph (c) below or except as required by law,
the Confidential Material will be kept confidential and will not, without the
prior written consent of the Providing Party, be disclosed by the Receiving
Party or its Representatives, in whole or in part and will not be used by the
Receiving Party or its Representatives, directly or indirectly, for any purpose
other than in connection with this Agreement, the Merger or the evaluating,
negotiating or advising with respect to a transaction contemplated herein.
Moreover, each Receiving Party agrees to transmit Confidential Material to its
Representatives only if and to the extent that such Representatives need to
know the Confidential Material for purposes of such transaction and are
informed by such Receiving Party of the confidential nature of the Confidential
Material and of the terms of this Section.
(c) In the event that either Receiving Party, its Representatives
or anyone to whom such Receiving Party or its Representatives supply the
Confidential Material, are requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand, any informal or formal investigation by any government or
governmental agency or authority or otherwise in connection with legal
processes) to disclose any Confidential Material, such Receiving Party agrees
(i) to immediately notify the Providing Party of the existence, terms and
circumstances surrounding such a request, (ii) to consult with the Providing
Party on the advisability of taking legally available steps to resist or narrow
such request and (iii) if disclosure of such information is required, to
furnish only that portion of the Confidential Material which, in the opinion of
such Receiving Party's counsel, such Receiving Party is legally compelled to
disclose and to cooperate with any action by the Providing Party to obtain an
appropriate protective order or otherwise reliable assurances that confidential
treatment will be accorded the Confidential Material (it being agreed that the
Providing Party shall reimburse the Receiving Party for all reasonable
out-of-pocket expenses incurred by the Receiving Party in connection with such
cooperation).
(d) In the event of the termination of this Agreement in
accordance with its terms, promptly upon request from either Providing Party,
the Receiving Party shall, except to the extent prevented by law, redeliver to
the Providing Party or destroy all tangible Confidential Material and will not
retain any copies, extracts or other reproductions thereof in whole or in part.
Any such destruction shall be certified in writing to the Providing Party by an
authorized officer of the Receiving Party supervising the same. Notwithstanding
the foregoing, each Receiving Party and one Representative designated by each
Receiving Party shall be permitted to retain one permanent file copy of each
document constituting Confidential Material.
<PAGE> 35
(e) Each party hereto further agrees that if this Agreement is
terminated in accordance with its terms, until one year from the date of
termination, (1) it will not offer to hire or hire any person currently or
formerly employed by the other party with whom such party has had contact prior
hereto other than persons whose employment shall have been terminated by such
other party prior to the date of such offer to hire or hiring and (2) neither
it nor its affiliates shall directly or indirectly, (a) (w) solicit, seek or
offer to effect or effect, (x) negotiate with or provide any information to the
Board of Trust Managers or General Partner, as applicable, of the other party,
or officer of the other party or any shareholder or partner, as applicable, of
the other party with respect to, (y) make any statement or proposal, whether
written or oral, either alone or in concert with others, to the Board of Trust
Managers or Board of Directors of the General Partner of the other party, any
director, Trust Manager or officer of the other party or any shareholder or
partner of the other party or any other person with respect to, or (z) make any
public announcement (except as required by law in respect of actions permitted
hereby) or proposal or offer whatsoever (including, but not limited to, any
"solicitation"of "proxies"as such terms are defined or used in Regulation 14A
of the Exchange Act) with respect to, (i) any form of business combination or
similar or other extraordinary transaction involving the other party or any
affiliate thereof, including, without limitation, a merger, tender or exchange
offer or liquidation of the other party's assets, (ii) any form of
restructuring, recapitalization or similar transaction with respect to the
other party or any affiliate thereto, (iii) any purchase of any securities or
assets, or rights or options to acquire any securities or assets (through
purchase, exchange, conversion or otherwise), of the other party or any
affiliate thereof, (iv) any proposal to seek representation on the Board of
Trust Managers or the Board of Directors of the General Partner, as
applicable, or otherwise to seek to control or influence the management, Board
of Trust Managers or the Board of Directors of the General Partner, as
applicable, or policies of the other party or any affiliate thereof, (v) any
request or proposal to waive, terminate or amend the provisions of this Section
10.5 or (vi) any proposal or other statement inconsistent with the terms of
this Section 10.5 or (b) instigate, encourage, join, act in concert with or
assist (including, but not limited to, providing or assisting in any way in the
obtaining of financing for, or acting as a joint or co-bidder for the other
party with) any third party to do any of the foregoing, unless and until such
party has received the prior written invitation or approval of a majority of
the Board of Trust Managers or the General Partner, as applicable, to do any of
the foregoing; provided that without such invitation or approval, either party
may at any time, on a confidential non-public basis, submit to the Chief
Executive Officer of AIP or the General Partner, as applicable, a proposal to
(a) amend any of the provisions of this Section 10.5(e) or (b) effect a
business combination or other extraordinary transaction with the other party
providing for the acquisition of all or substantially all of the assets or the
securities of the other party, including, without limitation, a merger, tender
offer or exchange offer. Each party hereto agrees that it will not agree with
any third party to waive its rights under this Section 10.5.
10.6. Amendment. This Agreement may be amended by the parties
hereto, by action taken by the Board of Trust Managers or the Board of
Directors of the General Partner, as applicable, at any time before or after
approval of this Agreement or any other matter presented in connection with the
Merger by the shareholders of AIP and partners of RELP, but after any such
approval, no amendment shall be made which by law requires the further approval
of shareholders or partners, as applicable, without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
<PAGE> 36
10.7. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas without regard to
its rules of conflict of laws. Each of AIP and RELP hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of Texas and of the United States District Court, Northern
District of Texas (the "Texas Courts") for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby (and agrees
not to commence any litigation relating thereto except in such courts), waives
any objection to the laying of venue of any such litigation in the Texas Courts
and agrees not to plead or claim in any Texas Court that such litigation
brought therein has been brought in an inconvenient forum.
10.8. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
10.9. Headings. Heading of the Articles and Sections of this
Agreement are for the convenience of the parties only and shall be given no
substantive or interpretive effect whatsoever.
10.10. Interpretation. In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa.
10.11. Waivers. Except as provided in this Agreement, no action
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
10.12. Incorporation. The RELP Disclosure Letter and the AIP
Disclosure Letter and all Exhibits and Schedules attached hereto and thereto
and referred to herein and therein are hereby incorporated herein and made a
part hereof for all purposes as if fully set forth herein.
10.13. Severability. If any provision of this 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 Agreement would not be
materially and adversely affected thereby, such provision shall be fully
separable, and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part thereof,
and the remaining provisions of this 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
Agreement, a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as
<PAGE> 37
may be possible, and the parties hereto request the court or any arbitrator to
whom disputes relating to this Agreement are submitted to reform the otherwise
illegal, invalid or unenforceable provision in accordance with this Section
10.13.
10.14. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any Texas Court, this
being in addition to any other remedy to which they are entitled at law or in
equity.
10.15. Subsidiaries. As used in this Agreement, the word
"Subsidiary" when used with respect to any party means any corporation,
partnership, joint venture, business trust or other entity, of which such party
directly or indirectly owns or controls at least a majority of the securities
or other interests having by their terms ordinary voting power to elect a
majority of the board of directors or others performing similar functions with
respect to such corporation or other organization.
10.16. Non-Recourse. Neither the officers, Trust Managers nor
shareholders of AIP shall be personally bound or have any personal liability
hereunder. RELP shall look solely to the assets of AIP for satisfaction of any
liability of AIP with respect to this Agreement and the Ancillary Agreements to
which it is a party. RELP will not seek recourse or commence any action against
any of the shareholders of AIP or any of their personal assets, and will not
commence any action for money judgments against any of the Trust Managers or
officers of AIP or seek recourse against any of their personal assets, for the
performance or payment of any obligation of AIP hereunder or thereunder. The
partners of RELP shall not be personally bound or have any personal liability
hereunder. AIP shall look solely to the assets of RELP for satisfaction of any
liability of RELP with respect to this Agreement and the Ancillary Agreements
to which it is a party. AIP will not seek recourse or commence any action
against any of the partners of RELP or any of their personal assets, and will
not commence any action for money judgments against any of the directors or
officers of RELP or seek recourse against any of their personal assets, for the
performance or payment of any obligation of RELP hereunder or thereunder.
<PAGE> 38
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year first
written above.
AMERICAN INDUSTRIAL PROPERTIES REIT
/s/ CHARLES W. WOLCOTT
-----------------------------------
Charles W. Wolcott, President and
Chief Executive Officer
USAA INCOME PROPERTIES IV LIMITED
PARTNERSHIP
By: USAA Properties IV, Inc.,
Its General Partner
/s/ T. PATRICK DUNCAN
-------------------------------
T. Patrick Duncan Senior
Vice President - Operations
<PAGE> 1
EXHIBIT 10.5
COMMON SHARE PURCHASE AGREEMENT
dated as of June 20, 1997
Among
AMERICAN INDUSTRIAL PROPERTIES REIT,
and
MS REAL ESTATE SPECIAL SITUATIONS, INC.
and
MORGAN STANLEY ASSET MANAGEMENT, INC.
as Agent and Attorney-In-Fact on behalf of the
clients listed on Exhibit A hereto
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION . . . . . . . . . . . . . . -1-
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . -10-
SECTION 2. PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . -10-
2.1 Purchase and Sale of the Common Shares . . . . . . . . . . . . . . -10-
2.2 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . -10-
2.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
2.4 Share Ownership Limitation . . . . . . . . . . . . . . . . . . . . -11-
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . -11-
3.1 Organization and Related Matters . . . . . . . . . . . . . . . . . -11-
3.2 Capital Stock; Title to Shares. . . . . . . . . . . . . . . . . . -12-
3.3 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . -13-
3.4 SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
3.5 Authorization; No Conflicts . . . . . . . . . . . . . . . . . . . -14-
3.6 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . -15-
3.7 Compliance with Law and Permits . . . . . . . . . . . . . . . . . -16-
3.8 Dividends and Other Distributions . . . . . . . . . . . . . . . . -16-
3.9 Certain Interests . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.10 No Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . -17-
3.11 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . -17-
3.12 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
3.13 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
3.14 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
3.15 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . -22-
3.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
3.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . -23-
3.18 Trust Records; Accounting Records . . . . . . . . . . . . . . . . -23-
3.19 New York Stock Exchange Listing . . . . . . . . . . . . . . . . . -23-
3.20 Disclosure of Facts . . . . . . . . . . . . . . . . . . . . . . . -24-
3.21 Pension-Held REIT . . . . . . . . . . . . . . . . . . . . . . . . -24-
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . . . . -24-
4.1 Organization and Related Matters . . . . . . . . . . . . . . . . . -24-
4.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.4 No Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . -25-
4.5 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . -25-
4.6 Investment Representation . . . . . . . . . . . . . . . . . . . . -25-
4.7 Legends; Stop-Transfer Orders . . . . . . . . . . . . . . . . . . -25-
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
4.8 Status for REIT Ownership and Income Tests . . . . . . . . . . . . . . . . -25-
4.9 Authority of MSAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
SECTION 5. COVENANTS WITH RESPECT TO CONDUCT OF SELLER PRIOR TO FINAL CLOSING . . . . -26-
5.1 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
5.2 Material Adverse Changes; SEC Filings; Reports; Financial Statements . . . -27-
5.3 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
5.4 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . -29-
5.5 Adjustment of Share Price . . . . . . . . . . . . . . . . . . . . . . . . -29-
SECTION 6. ADDITIONAL CONTINUING COVENANTS AND AGREEMENTS . . . . . . . . . . . . . -31-
6.1 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
6.2 Appointment of Trust Managers . . . . . . . . . . . . . . . . . . . . . . -31-
6.3 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.4 Status for REIT Ownership and Income Tests . . . . . . . . . . . . . . . . -32-
6.5 Prohibited Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.6 Seller/Buyer Registration Rights Agreement . . . . . . . . . . . . . . . . -32-
6.7 REIT Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.8 Preemptive Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
6.9 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
6.10 Furnish Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
6.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
6.12 Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
SECTION 7. GENERAL CONDITIONS OF PURCHASE . . . . . . . . . . . . . . . . . . . . . -34-
7.1 No Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.2 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.3 Absence of Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.4 New York Stock Exchange . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.5 Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
SECTION 8. CONDITIONS TO OBLIGATIONS OF BUYERS . . . . . . . . . . . . . . . . . . . -35-
8.1 Accuracy of Seller's Representations and Warranties . . . . . . . . . . . -35-
8.2 Performance by Seller . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.3 No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.4 Certification by Seller . . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.5 Opinion of Seller's Counsel . . . . . . . . . . . . . . . . . . . . . . . -35-
8.6 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
8.7 Realco Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
SECTION 9. CONDITIONS TO OBLIGATIONS OF SELLER . . . . . . . . . . . . . . . . . . . -36-
9.1 Accuracy of Buyers' Representations and Warranties . . . . . . . . . . . . -36-
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
9.2 Buyers' Performance . . . . . . . . . . . . . . . . . . . . . . . -36-
9.3 Certification . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
9.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . -36-
9.5 REIT Status . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
SECTION 10. TERMINATION OF OBLIGATIONS; SURVIVAL . . . . . . . . . . . . . . . -36-
10.1 Termination of Agreement . . . . . . . . . . . . . . . . . . . . . -36-
10.2 Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . -37-
10.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . -37-
10.4 Survival of Representations, Warranties and Covenants . . . . . . -37-
SECTION 11. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . -37-
11.1 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . -37-
11.2 Obligations of Buyers . . . . . . . . . . . . . . . . . . . . . . -38-
11.3 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
11.4 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
11.5 Notice by Seller . . . . . . . . . . . . . . . . . . . . . . . . . -40-
SECTION 12. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
12.1 Amendments; Waivers . . . . . . . . . . . . . . . . . . . . . . . -40-
12.2 Schedules; Exhibits; Integration . . . . . . . . . . . . . . . . . -40-
12.3 Best Efforts; Further Assurances . . . . . . . . . . . . . . . . . -40-
12.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
12.5 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
12.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.8 Publicity and Reports . . . . . . . . . . . . . . . . . . . . . . -41-
12.9 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.10 Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . -42-
12.11 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
12.12 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
12.13 Remedies; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . -43-
12.14 Representation By Counsel; Interpretation . . . . . . . . . . . . -43-
12.15 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
12.16 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
12.17 Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
EXHIBITS
EXHIBIT A MSAM Clients
EXHIBIT B Registration Rights Agreement
</TABLE>
-iii-
<PAGE> 5
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 8.5 List of Opinions of Seller's Counsel
SCHEDULE 9.4 List of Opinions of MSRE's and MSAM's Counsel
-iv-
<PAGE> 6
COMMON SHARE PURCHASE AGREEMENT
THIS COMMON SHARE PURCHASE AGREEMENT (this "AGREEMENT") is made and
entered into as of June 20, 1997, by and among AMERICAN INDUSTRIAL PROPERTIES
REIT, a Texas real estate investment trust ("SELLER"), MS Real Estate Special
Situations Inc., a Delaware corporation ("MSRE"), and Morgan Stanley Asset
Management Inc., a Delaware corporation (the "MSAM"), as agent and
attorney-in-fact on behalf of the clients (the "MSAM PURCHASERS") listed on
Exhibit A hereto (the MSAM Purchasers and MSRE shall be referred to herein
collectively as "BUYERS").
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 Buyers, and Buyers desire to
purchase from Seller, severally and not jointly, Common Shares having an
aggregate purchase price as specified herein of up to $20 million (the
"Shares") upon the terms and subject to the conditions set forth in this
Agreement.
C. The proceeds from the sale of the 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 1. DEFINITIONS AND RULES OF CONSTRUCTION
1.1 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 Common Share Purchase Agreement, by and
among Seller, MSRE and MSAM, on behalf of the MSAM Purchasers, as amended from
time to time pursuant to the terms of this Agreement, together with all
Exhibits and all Schedules attached hereto.
-1-
<PAGE> 7
"ANNUAL MEETING" shall mean the Seller's annual meeting to be
held June 30, 1997 or any adjournments or postponements thereof.
"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.
"BANKRUPTCY CODE" means Title 11 of the United States Code
entitled "Bankruptcy," as now and hereafter in effect, and any successor
statute, as well as any existing or future law of any jurisdiction, foreign or
domestic, relating to bankruptcy, insolvency, reorganization, conservatorship
or relief of debtors.
"BUSINESS DAY" means a day other than a Saturday, a Sunday or
a day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"BUYERS" means collectively, the MSAM Purchasers and MSRE, or
their permitted assigns (each, a "Buyer").
"BUYER INDEMNIFIED PERSON" has the meaning set forth in
Section 11.1 of this Agreement.
"CAPITALIZED LEASE" means any lease of property, real or
personal, the obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of the lessee.
-2-
<PAGE> 8
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the
obligation of such Person to pay rent or other amounts under a Capitalized
Lease and, for purposes of this Agreement, the amount of such obligation shall
be the capitalized amount thereof, determined in accordance with GAAP.
"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 each 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.
"COMMISSION" has the meaning set forth in Section 6.12(a) of
this Agreement.
"COMMON SHARES" means common shares of beneficial interest,
par value $.10 per share, of Seller.
"CONTRACT" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, lease, license or understanding,
whether or not in writing.
"CURRENTLY OUTSTANDING SHARES" has the meaning set forth in
Section 2.4 of this Agreement.
"DEBT" means, with respect to any Person, without duplication,
and without regard to whether it is contingent or direct, (a) all indebtedness
of such Person for borrowed money, (b) any obligation incurred for all or any
part of the purchase price of property or services, other than accounts
payable and accrued expenses included in current liabilities in accordance with
GAAP and incurred in respect of property or services purchased in the ordinary
course of business, (c) indebtedness or obligations evidenced by bonds, notes
or similar written instruments, (d) all reimbursement obligations of such
Person (whether contingent or otherwise) in respect of letters of credit,
banker's acceptances, surety or other bonds and similar instruments, (e) any
obligation (whether or not such Person has assumed or becomes liable for the
payment of such obligation) secured by a lien on any
-3-
<PAGE> 9
property of such Person, (f) all Capitalized Lease Obligations of such Person
and (g) all Guarantees by such Person of obligations of any other Person of the
types referred to in the foregoing clauses (a) through (f), inclusive,
excluding, (i) the payment of commissions to Prudential Securities Incorporated
in connection with the transactions contemplated herein and to be voted upon at
the Annual Meeting, and (ii) a $25 million line of credit from Prudential
Securities Incorporated or its Affiliates (the "Prudential Line of Credit").
"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)
-4-
<PAGE> 10
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.
"EQUITABLE REMEDIES" has the meaning set forth in Section 3.5
of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FINAL CLOSING DATE" means the date on which Buyers have
purchased, in the aggregate with all Common Shares as Buyers may have purchased
on previous Closing Dates, Common Shares having an aggregate purchase price of
$20 million.
"FIRST CLOSING DATE" has the meaning set forth in Section 2.3
of this Agreement.
"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.
"GUARANTEE" means, with respect to any Person, any guarantee
or other contingent liability (other than any endorsement for collection or
deposit in the ordinary course of business and performance bonds, indemnities
and similar obligations not guaranteeing or otherwise insuring payment of any
Debt or other financial obligation), direct or indirect, of such Person with
respect to any Debt or other obligation of another Person (including
obligations under leases), through an agreement or otherwise, including (a) any
other endorsement or discount with recourse or undertaking substantially
equivalent to or having economic effect similar to a guarantee in respect of
any such Debt or other obligations and (b) any agreement (i) to purchase, or to
advance or supply funds for the payment or purchase of, any such obligations,
(ii) to purchase, sell or lease property, products, materials or supplies, or
transportation or services, in respect of enabling such other Person to pay any
such obligation or to assure the owner thereof against loss regardless of the
delivery or nondelivery of the property, products, materials or supplies or
transportation or services or (iii) to make any loan, advance or capital
contribution to or other investment in, or to otherwise provide funds to or
for, such other Person in respect of enabling such Person to satisfy any
obligation (including any liability for a dividend, stock liquidation payment
or expense) or to assure a minimum equity, working capital or
-5-
<PAGE> 11
other balance sheet condition in respect of any such obligation. The amount of
any Guarantee shall be equal to the outstanding amount of the obligations of
such other Person directly or indirectly guaranteed.
"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 PERSON" shall mean each Buyer Indemnified Person
and each Seller Indemnified Party.
"INDEMNIFYING PARTY" has the meaning set forth in Section
11.3(a) of this Agreement.
"INITIAL REIT YEAR" has the meaning set forth in Section
3.14(c) of this Agreement.
-6-
<PAGE> 12
"INVESTMENT COMMITTEE" means the investment committee of the
Seller's Board of Trust Managers which after the Annual Meeting shall consist
of one Trust Manager designee of MSAM, one Trust Manager designee of Realco and
one independent Trust Manager.
"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, 1996 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, 1996 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.
"MINIMUM EQUITY CAPITALIZATION" means $150 million as
calculated using the average closing price of the Common Shares on the New York
Stock Exchange for the 10 trading days immediately preceding the applicable
date of determination multiplied by the current number of issued and
outstanding Common Shares and Common Share equivalents; provided, however, it
shall not in any event include operating partnership units in excess of $50
million.
"MSAM" means Morgan Stanley Asset Management, Inc., a Delaware
corporation.
-7-
<PAGE> 13
"MSAM PURCHASERS" means the clients of MSAM listed on Exhibit
A hereto.
"MSRE" means MS Real Estate Special Situations Inc., a
Delaware corporation.
"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 individual, corporation, partnership,
limited liability company, joint venture, an unincorporated organization,
government or any department or agency thereof, estate, trust, association, or
private foundation within the meaning of Section 509(a) of the Code, or joint
stock company.
"PREEMPTIVE RIGHTS" has the meaning set forth in Section 6.8
of this Agreement.
"PREFERRED SHARES" means any class of capital stock of a
Person which is entitled to a preference or priority over any other class of
capital stock of such Person with respect to any distribution of such Person's
assets, whether with respect to dividends, or upon liquidation or dissolution,
or both.
"PROPERTIES" means the real property owned or leased by
Seller, Subsidiaries and Seller Partnerships listed on Schedule 3.13 hereto.
"PURCHASE PRICE" means, with respect to any Closing Date, the
aggregate price paid for the Common Shares purchased by Buyers on such Closing
Date.
"REALCO" means USAA Real Estate Company, a Delaware
corporation.
"REALCO DEBT" has the meaning set forth in Section 3.2 of this
Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the registration rights
agreement among Seller, MSRE and MSAM, on behalf of the MSAM Purchasers, to be
executed contemporaneously with the execution of this Agreement.
"REIT" has the meaning set forth in Section 3.14(b) of this
Agreement.
-8-
<PAGE> 14
"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 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 12.2 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.
"SHARE OWNERSHIP LIMITATION" has the meaning set forth in
Section 2.4 of this Agreement.
"SHARE PRICE" has the meaning set forth in Section 2.1 of this
Agreement.
"SHAREHOLDER APPROVAL" means the approval by Seller's
shareholders at the Annual Meeting of the proposal to approve the sale to
Buyers of Common Shares having an aggregate purchase price of up to $20
million, and the authorization of the issuance of a sufficient number of
Common Shares to allow such sale to occur.
"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.
-9-
<PAGE> 15
"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.
1.2 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 2. PURCHASE AND SALE
2.1 PURCHASE AND SALE OF THE COMMON SHARES. Subject to the
terms and conditions set forth herein, Seller shall issue to Buyers, and Buyers
shall purchase from Seller, severally and not jointly, up to an aggregate of
8,163,265 Common Shares (the "Shares") at a price of $2.45 per Common Share,
subject to adjustment as set forth in Section 5.5 (the "Share Price").
2.2 USE OF PROCEEDS. The proceeds of the purchase of Shares
hereunder shall be used by the Seller to purchase real property as approved by
the Investment Committee.
2.3 CLOSING.
(a) (i) Within five Business Days of Seller's receiving the
Shareholder Approval (or on such other date as shall have been agreed to by
MSAM and Seller) (the "FIRST CLOSING DATE"), each Buyer shall purchase the
number of Shares set forth opposite such Buyer's name, as set forth on Exhibit
A hereto (the "MAXIMUM SHARE COMMITMENT"), subject to Section 2.4 .
-10-
<PAGE> 16
(ii) Seller shall provide MSAM with prompt notice of any increase
in the number of its Currently Outstanding Shares. On one or more subsequent
dates (each, a "Subsequent Closing Date, and together with the First Closing
Date, each a "Closing Date") and each within five Business Days of MSAM's
receipt of written notice by Seller as to an increase in the number of
Currently Outstanding Shares (or on such other date as shall have been agreed
to by MSAM and Seller), each Buyer shall purchase the number of Shares, if any,
equal to the difference between (x) such Buyer's Maximum Share Commitment, and
(y) the number of Shares purchased by such Buyer on previous Closing Dates,
subject to Section 2.4. Each Closing shall take place at such time and place
within the time periods specified in this Section 2.3 as MSAM and Seller shall
mutually agree.
(b) At each Closing, Seller shall deliver to MSRE and MSAM the
certificates evidencing the Shares purchased by Buyers on the applicable
Closing Date, registered in the names of each Buyer or its nominee in such
proportions as specified by MSAM hereto. 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 purchased by Buyers on the
applicable Closing Date.
(c) At each Closing, MSRE and MSAM, on behalf of the MSAM
Purchasers, shall pay and deliver to Seller the proportion of the Purchase
Price payable by MSRE or the MSAM Purchasers in the aggregate, as the case may
be, in accordance with the number of Shares purchased by MSRE or the MSAM
Purchasers in the aggregate, as the case may be, on the applicable Closing
Date.
(d) Notwithstanding anything herein to the contrary, the parties
agree that MSAM shall be entitled on any Closing Date to reallocate among the
Buyers the Aggregate Commitment Amounts and the Maximum Share Commitment set
forth on Exhibit A (subject to Section 2.4) in such manner as shall have been
agreed to by Buyers.
2.4 SHARE OWNERSHIP LIMITATION. Notwithstanding anything in
this Agreement to the contrary, Buyers will not be required to purchase Shares
hereunder to the extent that such purchase would result in any Buyer owning in
excess of the percentage set forth opposite such Buyer's name on Exhibit A
hereto (the "SHARE OWNERSHIP LIMITATION") of the Common Shares outstanding
immediately after such purchase assuming no conversion of any convertible
securities then outstanding (the "CURRENTLY OUTSTANDING SHARES"). At least two
Business Days prior to each Closing, Seller shall deliver to MSRE and MSAM a
certificate as to the Currently Outstanding Shares, and MSAM shall notify
Seller as to the number of Shares that each Buyer may purchase in accordance
with the Share Ownership Limitation based on such number of Currently
Outstanding Shares, such Buyer's aggregate commitment amount and, following the
First Closing Date, the number of Shares purchased by such Buyer on previous
Closing Dates.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to, and agrees with, MSAM and each
Buyer as follows:
3.1 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
-11-
<PAGE> 17
"SUBSIDIARIES") and all Partnerships of Seller (the "SELLER PARTNERSHIPS") 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 MSAM. 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.
3.2 CAPITAL STOCK; TITLE TO SHARES. The authorized Capital
Stock of Seller consists of 10,000,000 Common Shares, all of which 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 other than the Seller's note in the
aggregate principal amount of $5,449,618 (the "REALCO DEBT") held by Realco.
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
-12-
<PAGE> 18
issued at the time of issuance and are fully paid and nonassessable. Except as
contemplated by this Agreement, there are no preemptive rights in respect of
any Common Shares or Capital Stock of any Subsidiary or any Seller Partnership.
Upon any issuance of Shares to any Buyer, such Shares will have been duly
authorized, validly issued and be validly outstanding, fully paid and
nonassessable, and the issuance of such Shares will not be subject to
preemptive rights of any other shareholder of Seller. Each Buyer shall receive
good and marketable title to all Shares acquired by such Buyer pursuant to this
Agreement, free and clear of all Encumbrances created by Seller, 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 except for a class of preferred shares of
beneficial interest which the shareholders are being asked to approve at the
Annual Meeting, none of which shall be issued and outstanding as of the First
Closing Date, there are no shares of any class of Capital Stock of Seller
having any priority in respect thereof.
3.3 FINANCIAL STATEMENTS.
(a) AUDITED FINANCIAL STATEMENTS. Seller has delivered to MSAM
the consolidated balance sheets of Seller (which reflect the financial position
of all Subsidiaries and Seller Partnerships), as of December 31, 1994, 1995 and
1996, and the respective related consolidated statements of operations, cash
flows and shareholders' 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, 1996, 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 5, 1997.
(b) UNAUDITED FINANCIAL STATEMENTS. Seller has delivered to
MSAM the consolidated balance sheets of Seller (which reflect the financial
position of all Subsidiaries and Seller Partnerships), as of March 31, 1997 and
the related consolidated statements of operations, cash flows and shareholders'
equity for the period then ended (the "UNAUDITED FINANCIAL STATEMENTS"). The
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 March 31, 1997.
(c) NO MATERIAL ADVERSE CHANGES. Since March 31, 1997, except as
set forth in Schedule 3.3, or specifically disclosed in any SEC Filings filed
since March 31, 1997 and prior to the date of this Agreement (copies of which
have been provided to MSAM), Seller, Subsidiaries and
-13-
<PAGE> 19
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 March 31, 1997 in the ordinary course of business in a manner
consistent with past practice and are not material in amount, or (ii) are set
forth in Schedule 3.3 hereto.
3.4 SEC REPORTS. Seller has filed with the Commission 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 Commission since
December 31, 1994. Such forms, reports, statements, including registration
statements, and other material documents required to be filed with the
Commission by Seller since December 31, 1994 are collectively referred to in
this Agreement as the "SEC FILINGS." Seller has made available to MSAM 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.
3.5 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
-14-
<PAGE> 20
except the shareholder consent needed to increase the number of authorized
Common Shares to allow the issuance and sale of Shares on any Closing Date to
occur. 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 (collectively, "EQUITABLE REMEDIES"). 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 or 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.
3.6 LEGAL PROCEEDINGS. Except as set forth in Schedule 3.6,
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 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, 1997 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
-15-
<PAGE> 21
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.
3.7 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 MSAM 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.
3.8 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 December 31, 1996.
3.9 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
-16-
<PAGE> 22
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.
3.10 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 Prudential Securities
Incorporated.
3.11 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 MSAM. 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
-17-
<PAGE> 23
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.
3.12 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.
3.13 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") as of the date hereof. 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 MSAM a true, correct and complete
copy of a rent roll with respect to each Property as of the date hereof 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
-18-
<PAGE> 24
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 April 30, 1997 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, 1997. 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, 1997, 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
any 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, any Subsidiary
or any Seller Partnership.
-19-
<PAGE> 25
(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
-20-
<PAGE> 26
complied with, and through the Final 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 Final 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, 1997 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 Final 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 Final 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 Final 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 any 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 Final 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
-21-
<PAGE> 27
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 First Closing
Date.
(k) Seller has made available (or, with respect to all Tax
Returns filed after the date hereof, will make available) to MSAM 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 First 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 MSAM all relevant information
with respect to the federal income tax net operating loss carryovers of Seller
as of December 31, 1996, 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 First 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 MSAM 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
-22-
<PAGE> 28
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 MSAM 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
-23-
<PAGE> 29
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 issuance or sale and
delivery of any Shares to Buyers pursuant to this Agreement 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 MSAM
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.
3.21 PENSION-HELD REIT. For purposes of Section 856(h)(3) of the
Code, Seller hereby represents that at any time during the shorter of (i) the
two-year period ending immediately prior to the First Closing Date or (ii) the
period during which Seller was in existence, to the best of Seller's knowledge,
no "qualified trust" has held, directly or indirectly, more than 10% of the
interests in Seller.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER
Each of MSRE and MSAM represents and warrants with respect to itself
(except as indicated) to, and agrees with, Seller as follows:
4.1 ORGANIZATION AND RELATED MATTERS. It is a corporation duly
organized and validly existing under the laws of the state of its
incorporation. It has all necessary corporate power and corporate authority to
carry on its business as now being conducted. It has all necessary corporate
power and corporate authority to execute, deliver and perform this Agreement
and the transactions contemplated hereby.
4.2 AUTHORIZATION. The execution, delivery and performance of
this Agreement have been duly and validly authorized by it and by all other
necessary corporate action on its part and no other corporate proceedings on
its part are necessary to authorize this Agreement or consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by it and constitutes its legally valid and binding obligation,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by Equitable Remedies. The execution and delivery
of this Agreement by it 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 its material Contracts, other than any filing required under
the Exchange Act.
4.3 NO CONFLICTS. The execution, delivery and performance of
this Agreement by it will not violate the provisions of, or constitute a breach
or default (whether upon lapse of time and/or the
-24-
<PAGE> 30
occurrence of any act or event or otherwise) under, (a) its certificate of
incorporation and bylaws, pursuant to which it was organized and by which it is
governed, (b) any Law to which it is subject or (c) any Contract to which it is
a party that is material to the financial condition, results of operations or
conduct of its business.
4.4 NO BROKERS OR FINDERS. No agent, broker, finder or
investment or commercial banker, or other Person or firms engaged by or acting
on its behalf or on behalf of 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 broker's or
finder's or similar fees or other commissions as a result of this Agreement or
such transactions.
4.5 LEGAL PROCEEDINGS. There is no Order or Action pending
against or, to its knowledge, affecting it that individually or when aggregated
with one or more other Actions has, or if determined adversely would have, a
material adverse effect on its business, properties, or financial condition or
on its ability to perform this Agreement.
4.6 INVESTMENT REPRESENTATION. Each Buyer is acquiring the
Shares from Seller for its own account, for investment purposes only and not
with a view to or for sale in connection with the distribution thereof. It
agrees to execute any further certificate or other document representing such
investment intent or as to any other matter reasonably requested by Seller to
assure compliance with applicable securities laws.
4.7 LEGENDS; STOP-TRANSFER ORDERS.
(a) The certificates for Shares will bear legends in
substantially the following form:
THE SHARES 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 UNDER SUCH LAWS OR IS EXEMPTED FROM SUCH
REGISTRATION REQUIREMENTS.
(b) The certificates for Shares may also bear any legend
required by any applicable state blue sky law.
(c) Any certificates for 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.
4.8 STATUS FOR REIT OWNERSHIP AND INCOME TESTS. At the
Closing, each of MSRE and each MSAM Purchaser will own (assuming for purposes
of this representation, only the Common
-25-
<PAGE> 31
Shares purchased pursuant to this Agreement) on a fully-diluted basis Common
Shares of Seller which shall not exceed the following percentages: MSRE 5.0%,
Stichting Pensionfonds ABP 5.0%, Stichting Bedrijfspensioenfonds Voor De
Metaalnijverheid 5.0%, Morgan Stanley Real Estate Special Situations Fund I,
L.P. 9.99%, and Morgan Stanley Real Estate Special Situations Fund II, L.P.
9.99%. At the Closing, to the best of MSAM's knowledge, the purchase of the
Common Shares by the MSAM Purchasers will not result in a "qualified trust" as
defined in Code Section 856(h)(3) holding more than 25% in value of the
Seller's outstanding stock. MSRE and/or the MSAM Purchasers are not purchasing
the Common Shares, and will not hold any or all of the Common Shares so
purchased, through any arrangement or entity that would be deemed, for federal
income tax purposes, to be a partnership between MSRE and/or the MSAM
Purchasers. The Common Shares that each MSAM Purchaser owns will not be
considered to be owned by any individual (or entity treated as an individual
under Section 856(h) of the Code, other than through the operation of Section
856(h)(3)(A)(ii)) who after application of the stock ownership rules of Section
856(h) of the Code would own more than 9.8% of the lesser of the number or
value of any outstanding class of Capital Stock, unless, at the time of the
Closing, such individual or entity is already considered to own, under Section
856(h) of the Code, 9.7% or more of the lesser of the number or value of such
class of Capital Stock.
At the Closing, the Common Shares owned by MSRE shall not exceed, on a
fully-diluted basis, 5% of all outstanding Common Shares. At the Closing, and
at all times thereafter, applying the stock ownership rules of Code Section
856(h), as in effect at the time of the Closing (a) MSRE will be treated as a
corporation, and the Common Shares that it owns will be treated as owned
proportionately by its shareholders and (b) no individual (or entity treated as
an individual under Section 856(h) of the Code) will be considered as owning
more than 9.8% of the Common Shares owned by MSRE.
At the Closing, and at all times thereafter, applying the stock
ownership rules of Code Section 856(h), as in effect at the time of the
Closing, (a) MSRE will be treated as a corporation, and the Common Shares that
it owns will be treated as owned proportionately by its shareholders and (b)
the Common Shares that MSRE owns will not be considered to be owned by any
individual (or entity treated as an individual under Section 856(h) of the
Code) who after application of the stock ownership rules of Section 856(h) of
the Code would own more than 9.8% of the lesser of the number or value of any
outstanding class of Capital Stock.
4.9 AUTHORITY OF MSAM. MSAM is duly authorized to enter into
this Agreement and to consummate the transactions contemplated hereby on behalf
of the MSAM Purchasers.
SECTION 5. COVENANTS WITH RESPECT TO CONDUCT OF SELLER PRIOR TO FINAL
CLOSING
From the date of this Agreement up to and including the Final Closing
Date, Seller covenants and agrees to take such actions, or refrain from taking
such actions, as are set forth in this Section 5.
5.1 ACCESS. Seller shall, and shall cause the Subsidiaries and
Seller Partnerships to, authorize and permit MSAM and its representatives
(which term shall be deemed to include its independent accountants and counsel)
to have reasonable access during normal business hours, upon
-26-
<PAGE> 32
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 MSAM 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 MSAM and its partners and their respective officers,
employees, accountants and counsel, as MSAM 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 Final Closing
Date, Seller will permit, and cause Subsidiaries and Seller Partnerships to
permit, MSAM and its 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.
5.2 MATERIAL ADVERSE CHANGES; SEC FILINGS; REPORTS; FINANCIAL
STATEMENTS.
(a) Seller shall promptly notify MSAM 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 MSAM.
(b) Seller will, and will cause the Subsidiaries and Seller
Partnerships to, furnish to MSAM as soon as available copies of all SEC
Filings, and all material reports, renewals, filings, certificates, statements
and other documents filed with any Governmental Entity.
5.3 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 the Final
Closing Date, 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 MSAM, 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 without MSAM's consent if prior
to the date of the Annual Meeting or if after such date, without the consent
of the Investment Committee; 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 First Closing Date; or
(d) issue, sell, redeem or acquire for value, or agree to do so,
any debt obligations (other than the Prudential Line of Credit), 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
-27-
<PAGE> 33
$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), (ii) liabilities arising
out of, incurred in connection with, or related to the consummation of the
transactions contemplated by this Agreement, (iii) payments to Realco under the
Realco Debt and (iv) purchases of real property in accordance with Section
5.3(b); or
(f) merge (if Seller is not the surviving entity), 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) except as proposed at the Annual Meeting, 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 except the extinguishment of debt under the Realco Debt
through the conversion of the Realco Debt to Common Shares; 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, share option (including,
without limitation, the granting of any share option or share appreciation
right or performance or restricted share award), share purchase or other
employee benefit plan, (ii) except as approved by the Compensation Committee
prior to the date of this Agreement or except as approved by the Compensation
Committee and approved by a unanimous vote of the Seller's Board of Trust
Managers, 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, share
option (including, without limitation, the granting of any share option or
share appreciation right or performance or restricted share award), share
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
-28-
<PAGE> 34
of Seller, Subsidiaries or Seller Partnerships, or (iii) except as proposed at
the Annual Meeting, 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 Commission; 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) except as provided in Section 5.3(b), 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) 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
(q) agree to or make any commitment to take any action
prohibited by this Section 5.3.
5.4 NOTIFICATION OF CERTAIN MATTERS. Seller shall give prompt
notice to MSAM, and MSAM and MSRE 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 Final Closing
Date and (b) any failure of MSRE, MSAM 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.
5.5 ADJUSTMENT OF SHARE PRICE. The Share Price will be subject
to adjustment from time to time prior to the Final Closing Date as follows:
(a) If Seller shall at any time prior to the Final
Closing Date (i) pay a dividend or make any other distribution payable in
Common Shares to holders of any class of Capital Stock of Seller, (ii)
subdivide or reclassify the outstanding Common Shares into a greater number of
shares or (iii) combine or reclassify the outstanding Common Shares into a
smaller number of shares, the Share Price in effect at the time of the record
date for such dividend or distribution or the effective date of such
subdivision, combination or reclassification will be proportionately adjusted
so that each Buyer
-29-
<PAGE> 35
will be entitled to receive upon purchase after such time the number of Common
Shares that such Buyer would have owned or been entitled to receive had such
purchase occurred immediately prior to such time (subject to the Share
Ownership Limitation). An adjustment made pursuant to this subsection (a) will
become effective immediately after the record date in the case of a dividend or
other distribution and will become effective immediately after the effective
date of any such subdivision, combination, reclassification or change, provided
that, if such dividend or distribution is not ultimately paid or made, the
Share Price shall be readjusted to be equal to the Share Price in effect
immediately prior to such record date. Such adjustment will be made
successively whenever any event listed above occurs.
(b) If Seller shall at any time prior to the Final
Closing Date issue rights or warrants to all holders of Common Share entitling
them (for a period commencing no earlier than the record date for the
determination of holders of Common Shares entitled to receive such rights or
warrants and expiring within 45 days after such record date) to subscribe for
or purchase Common Shares at a price per share less than the Current Market
Price (as defined in subsection (d) below) of Common Shares on such record
date, the Share Price will be adjusted effective as of immediately after such
record date so that it shall equal the price determined by multiplying the
Share Price in effect immediately prior thereto by a fraction, the numerator of
which is the number of Common Shares outstanding on such record date plus the
number of Common Shares that the aggregate offering price of the Common Shares
so offered for subscription or purchase or purchased would purchase at the
Current Market Price per Common Share, and the denominator of which is the
number of Common Shares outstanding on such record date plus the number of
additional Common Shares which may be purchased upon the exercise of the rights
or warrants issued, provided that, if such issuance is not ultimately made,
the Share Price shall be readjusted to be equal to the Share Price in effect
immediately prior to such record date. Common Shares owned by or held for the
account of Seller shall not be deemed outstanding for the purpose of any such
computation. Such adjustment will be made successively whenever such rights or
warrants are issued.
(c) If Seller shall at any time prior to the Final
Closing Date distribute to all holders of Common Shares any shares of any class
of Capital Stock other than Common Shares, evidences of indebtedness or other
assets (other than cash dividends or distributions out of retained earnings),
or shall distribute to holders of Common Shares rights or warrants to subscribe
to securities (other than those referred to in subsection (b) above), then in
each such case the Share Price will be adjusted so that it equals the price
determined by multiplying the Share Price in effect immediately prior to the
date of such distribution by a fraction, the numerator of which is the Current
Market Price per Common Share on the record date mentioned below less the then
fair market value (as determined by the Board of Trust Managers, whose
determinations shall be conclusive evidences of such fair market value) of said
shares, evidences of indebtedness, assets, rights or warrants or distributions
applicable to one Common Share, and the denominator of which is such Current
Market Price. Such adjustment will become effective immediately after the
record date for the determination of the holders of Common Shares entitled to
receive such distribution, provided that, if such issuance is not ultimately
made, the Share Price shall be readjusted to be equal to the Share Price in
effect
-30-
<PAGE> 36
immediately prior to such record date. Such adjustment will be made
successively whenever such a distribution is made.
(d) For the purpose of computation under subsections (b)
and (c) above, the "Current Market Price" per Common Share at any date will be
deemed to be the average of the daily closing price for the Common Shares on
the New York Stock Exchange for 20 consecutive trading days commencing 30
trading days before such date.
SECTION 6. ADDITIONAL CONTINUING COVENANTS AND AGREEMENTS
6.1 USE OF PROCEEDS. The proceeds from the sale of the Shares
to Buyers, 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 the purchase of real property
in accordance with Section 2.2.
6.2 APPOINTMENT OF TRUST MANAGERS.
(a) GENERAL. Effective immediately following the Annual
Meeting, Seller shall increase the number of its Trust Managers from five to
seven, and Seller shall appoint two individuals designated by MSAM 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 seven under this Section 6.2(a), until Seller achieves the Minimum
Equity Capitalization, Seller shall nominate, and use its best efforts to have
such persons elected (which efforts shall include, without limitation,
including MSAM's nominees in management's slate for nomination and election and
solicitation of proxies on their behalf), two designees of MSAM (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 MSAM
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 seven persons, including the designees of MSAM. Such
designees of MSAM 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 MSAM serving as a Trust Manager pursuant to the first
sentence of this Section 6.2(a), Seller agrees to promptly appoint a
replacement designee selected by MSAM 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 seven pursuant to this Section 6.2(a).
(b) OBSERVATION RIGHTS. In the event that the designees
selected by MSAM to serve as Trust Managers are not, for any reason, elected by
Seller's shareholders, MSAM shall have full observation rights with respect to
Seller's Trust Managers, including the right to obtain full and timely notice
of all meetings of the Trust Managers and of each of its committees, to obtain
copies of all
-31-
<PAGE> 37
written and other materials disseminated to Trust Managers and to designate a
person to attend in person or by telephone all meetings of the Trust Managers
or their committees. If MSAM receives observation rights pursuant to the
provisions of this paragraph, MSAM and its designees in respect of such rights
shall each execute a confidentiality agreement in form and substance reasonably
satisfactory to Seller.
(c) RESIGNATIONS. At such time as Seller achieves Minimum Equity
Capitalization, MSAM shall cause one of its designees to not seek re-election
at the next annual meeting, or at Seller's option, to immediately resign. At
such time as Seller achieves equity capitalization of $250 million (calculated
in the same manner as Minimum Equity Capitalization), MSAM shall cause its
remaining designee to not seek re-election at the next annual meeting, or at
Seller's option, to immediately resign.
(d) QUALIFICATIONS. Each of the representatives designated by
MSAM in accordance with this Section 6.2 shall be a Person selected by MSAM 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.
(e) COMMITTEES. At any time that MSAM shall have exercised its
rights under this Section 6.2 to appoint a designee as Trust Manager, Seller
shall appoint at least one of MSAM's designees on each committee of the Trust
Managers, and each such committee shall contain no more than three members
until expiration of the latest term of office of any designee of MSAM pursuant
to Section 6.2(a) or 6.2(b).
6.3 ENVIRONMENTAL MATTERS. Seller will advise MSAM 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.
6.4 STATUS FOR REIT OWNERSHIP AND INCOME TESTS. Following the
First Closing Date, and at all subsequent times during which any Buyer owns any
of the Shares, applying the stock ownership rules of Section 856(h) of the
Code, the representation set forth in Section 4.8 will remain true and correct.
6.5 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, or approved by Seller's shareholders
in accordance with applicable state law.
6.6 SELLER/BUYER REGISTRATION RIGHTS AGREEMENT.
Contemporaneously with the First Closing Date, MSRE, MSAM on behalf of the
MSAM Purchasers and Seller shall enter into a Registration Rights Agreement
substantially in the form of Exhibit B.
-32-
<PAGE> 38
6.7 REIT QUALIFICATION. Seller shall take all actions necessary
to maintain Seller's qualification as a REIT and, without the written consent
of MSAM, 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. Seller covenants and agrees that (i) it will duly and promptly notify
MSAM upon becoming aware that any "qualified trust" holds or is expected to
hold, directly or indirectly, more than 10% of the interests in Seller, and
(ii) it will provide MSAM such information and/or verification as MSAM shall
reasonably request in order to verify whether Seller constitutes a
"pension-held REIT" as defined under Section 856(h)(3)(C) of the Code.
6.8 PREEMPTIVE RIGHTS. In the event that Seller shall at any
time subsequent to the date of this Agreement issue any Common Shares to any
Person or Persons (other than (i) Common Shares issued to Realco in connection
with the conversion of the Realco Debt to Common Shares, (ii) Common Shares
issued pursuant to an employee share option, share purchase, share incentive or
compensation plan or (iii) Common Shares issued to any partners in Affiliates
of Realco in connection with the merger of such Affiliates with and into
Seller) (each such issuance, a "Subsequent Offering")), Buyers shall have the
right to purchase, on the same terms and conditions as the other purchasers in
the Subsequent Offering, Common Shares in an amount not to exceed, in the
aggregate, such number of Common Shares as is equal to the total number of
Common Shares offered in the Subsequent Offering times a fraction, the
numerator of which is the number of Common Shares then owned by Buyers in the
aggregate and the denominator of which is the total number of Common Shares
outstanding immediately prior to such Subsequent Offering, in such proportion
with respect to each Buyer as specified on Exhibit A hereto (subject to the
Share Ownership Limitation). Notwithstanding the foregoing, with respect to
each Subsequent Offering by Seller in the amount of $10 million or more, the
amount of shares Buyers may purchase in the aggregate pursuant to such
Preemptive Rights shall be reduced by 5% of the total Common Shares outstanding
(on a fully-diluted basis) after each such Subsequent Offering. The Buyers'
Preemptive Rights will immediately terminate once Seller achieves a Minimum
Equity Capitalization.
6.9 DEBT. Neither Seller, any Subsidiary or any Seller
Partnership shall, without the prior written consent of MSAM (i) incur, create,
assume, guarantee or in any way become liable for, or permit to exist, any Debt
prior to such time as the Seller achieves a Minimum Equity Capitalization,
except to the extent the proceeds of such Debt is to be used to acquire real
property, and such acquisition occurs within 90 days of the date such Debt is
incurred; or (ii) issue or have outstanding any Preferred Shares, or any
warrants, options, conversion rights or other rights to subscribe for, purchase
or acquire any Preferred Shares, prior to such time as the Seller achieves
Minimum Equity Capitalization.
6.10 FURNISH DOCUMENTS. (a) Seller shall furnish or cause to be
furnished to MSAM within five Business Days after Seller is required to file
the same with the Commission , copies of the periodic information, documents
and other reports which Seller is required to file with the Commission pursuant
to Section 13(a) of the Exchange Act. If Seller ceases to be required to file
information, documents and other reports pursuant to Section 13 of the Exchange
Act, it shall remain obligated to furnish the same information, documents and
reports otherwise required under Section
-33-
<PAGE> 39
13(a) of the Exchange Act to MSAM within five Business Days after Seller would
have been required to file the same with the Commission; and
(b) Seller shall furnish or cause to be furnished to
MSAM, within five Business Days after the effective date thereof, copies of any
amendment or modification to its Charter Documents.
6.11 TAXES. Seller shall, and shall cause each Subsidiary and
Seller Partnership to, pay, when due, all taxes, assessments and governmental
charges or levies imposed upon it and all claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and any other like person or
entity which, if unpaid, might result in the creation of a lien upon the income
of Seller or its assets; provided that items of the foregoing description need
not be paid while being contested in good faith and by appropriate proceedings
and adequate reserves with respect thereto have been provided on the books of
Seller, such Subsidiary of such Seller Partnership, as the case may be.
6.12 ADDITIONAL INFORMATION Seller shall execute and deliver or
cause to be executed and delivered to MSAM upon MSAM's reasonable request such
other and further instruments or documents as in the reasonable judgment of
MSAM and Seller are necessary to conform, create, evidence, preserve or
maintain Buyers' rights in the Shares, and Seller shall do all such additional
acts, give such assurances and execute such instruments as MSAM may reasonably
require to vest more completely in and assure to Buyers their rights in the
Shares.
SECTION 7. GENERAL CONDITIONS OF PURCHASE
The obligations of the parties to effect each Closing shall be subject
to the following conditions unless waived in writing by all parties:
7.1 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 applicable Closing Date.
7.2 APPROVALS. To the extent required by applicable Law, all
Permits and Approvals required to be obtained in connection with each 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
applicable Closing Date.
-34-
<PAGE> 40
7.3 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 applicable Closing Date whether or not any of
the parties hereto or its Affiliates is a party.
7.4 NEW YORK STOCK EXCHANGE. Assuming receipt of Shareholder
Approval, the Shares shall have been approved for listing, upon official notice
of issuance, on 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.
7.5 SHAREHOLDER APPROVAL. Seller shall have received
Shareholder Approval.
SECTION 8. CONDITIONS TO OBLIGATIONS OF BUYERS
The obligations of Buyers to effect each Closing shall be subject to
the following conditions except to the extent waived in writing by MSAM:
8.1 ACCURACY OF SELLER'S REPRESENTATIONS AND WARRANTIES. All
representations and warranties of Seller set forth in this Agreement shall be
true and correct in all material respects on the applicable Closing Date as if
made on and as of such Closing Date.
8.2 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 applicable Closing Date, including the
covenants set forth in Section 5.
8.3 NO MATERIAL ADVERSE CHANGE. During the period from
December 31, 1996 to the applicable Closing Date, (i) there shall not have been
any material adverse change or any development involving a material adverse
change in the condition (financial or otherwise) of Seller, any Subsidiary or
any Seller Partnership, taken as a whole, or in the earnings, business,
prospects or operations of Seller, any Subsidiary or any Seller Partnership,
taken as a whole, 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 MSAM, significantly impair the marketability
or value of the Shares, (iii) the trading in any securities of Seller 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.
-35-
<PAGE> 41
8.4 CERTIFICATION BY SELLER. MSAM shall have received a
certificate, addressed to MSAM and each Buyer and dated as of the applicable
Closing Date, signed by the President of Seller, certifying, in such detail as
MSAM and its counsel reasonably may request, that all of the conditions
specified in Section 8 have been fulfilled.
8.5 OPINION OF SELLER'S COUNSEL. MSAM shall have received from
counsel for Seller an opinion, addressed to MSAM and each Buyer and dated as of
the applicable Closing Date, in form and substance reasonably satisfactory to
MSAM as to the matters set forth in Schedule 8.5.
8.6 SCHEDULES. Seller shall have delivered to MSAM updated
Schedules, if any, to this Agreement.
8.7 REALCO CONSENT. Seller shall have received all necessary
consents or waivers from Realco in connection with the matters contemplated by
this Agreement.
SECTION 9. CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to effect each Closing shall be subject to
the following conditions, except to the extent waived in writing by Seller:
9.1 ACCURACY OF BUYERS' REPRESENTATIONS AND WARRANTIES. All
representations and warranties of MSRE and MSAM set forth in this Agreement
shall be true and correct in all material respects on the applicable Closing
Date as if made on and as of such Closing Date.
9.2 BUYERS' PERFORMANCE. MSRE and MSAM 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 MSRE and MSAM on or before the applicable Closing Date.
9.3 CERTIFICATION. Seller shall have received a certificate,
dated as of the applicable Closing Date, signed by the President or a Vice
President of MSAM and MSRE, certifying, in such detail as Seller and its
counsel reasonably may request, that the conditions specified in Section 9 have
been fulfilled.
9.4 OPINION OF COUNSEL. Seller shall have received from counsel
to MSRE and MSAM an opinion, dated as of the applicable Closing Date, in form
and substance reasonably satisfactory to Seller as to the matters set forth in
Schedule 9.4.
9.5 REIT STATUS. The purchase of Shares by the Buyers will not
cause Seller to lose its status as a REIT under the Code.
SECTION 10. TERMINATION OF OBLIGATIONS; SURVIVAL
-36-
<PAGE> 42
10.1 TERMINATION OF AGREEMENT. This Agreement and the
transactions contemplated by this Agreement may be terminated at any time
before the Final Closing Date, as follows and in no other manner:
(a) MUTUAL CONSENT. By mutual consent in writing of MSAM and
Seller.
(b) MISREPRESENTATION OR MATERIAL BREACH. By MSAM or Seller
with written notice to the other parties if there has been a misrepresentation
or material breach on the part of Seller, MSRE or MSAM 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
10 business days after receipt of notice from MSAM or Seller of the terminating
party's intention to terminate.
(c) ENVIRONMENTAL NONCOMPLIANCE. By MSAM in the event of the
discovery of any Release or other matter prior to any 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.
10.2 SHAREHOLDER APPROVAL. If Seller does not receive
Shareholder Approval at the Annual Meeting, this Agreement shall terminate
automatically without any further action by or on behalf of any of the parties
hereto.
10.3 EFFECT OF TERMINATION. In the event that this Agreement
shall be terminated pursuant to Section 10.1 or Section 10.2, all further
obligations of the parties under this Agreement shall terminate; provided that
the obligations of the parties contained in this Section 10.3, 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.
10.4 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. (a)
The representations and warranties contained in or made pursuant to this
Agreement shall expire on the third anniversary of the Final Closing Date
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 Final 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 12 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.
(b) All covenants and agreements of the parties hereto shall be
continuing and shall survive each Closing Date pursuant to the terms thereof.
-37-
<PAGE> 43
(c) The provisions of Section 11.1 through Section 11.5 and
Section 12.12 shall survive and remain in full force and effect with respect to
MSAM notwithstanding any termination of MSAM's appointment as agent on behalf
of any or all of the MSAM Purchasers hereunder.
SECTION 11. INDEMNIFICATION
11.1 INDEMNIFICATION. In partial consideration of the commitment
of the Buyers hereunder, Seller agrees to indemnify and hold harmless MSAM,
each Buyer and any of their respective affiliates, directors, officers, agents
and employees and each other person, if any, controlling MSAM or any Buyer or
any of their respective affiliates (each a "Buyer Indemnified Person") from and
against any losses, claims, damages or liabilities (or actions in respect
thereof) to which such Buyer Indemnified Person may become subject in
connection with the matters which are the subject of the commitment made
hereunder (including any use or proposed use of the proceeds from the sale of
the Common Shares) and will reimburse any Buyer Indemnified Person for all
reasonable expenses (including the reasonable fees of counsel) as they are
incurred by any such Buyer Indemnified Person in connection with investigating,
preparing or defending any such action or claim pending or threatened, whether
or not such Buyer Indemnified Person is a party hereto. Seller shall not be
responsible for any losses, claims, damages, liabilities or expenses resulting
from such Buyer Indemnified Person's gross negligence or willful misconduct.
Seller also agrees that no Buyer Indemnified Person shall have any liability
(whether direct or indirect, in contract or tort or otherwise) to Seller for or
in connection with this Agreement except for losses, claims, damages,
liabilities or expenses to the extent that a court of competent jurisdiction or
arbitration panel shall have finally determined that such losses, claims,
damages, liabilities or expenses resulted from such Buyer Indemnified Persons's
gross negligence or willful misconduct. In the event that the foregoing
indemnity is unavailable or insufficient to hold a Buyer Indemnified Person
harmless, Seller shall contribute to amounts paid or payable by such Buyer
Indemnified Person in respect of such losses, claims, damages, liabilities and
expenses in such proportion as appropriately reflects the relative benefits
received by, and fault of Seller, on the one hand, and the Buyers, on the other
hand, in connection with the matters as to which such losses, claims, damages,
liabilities or expenses relate. The agreement of Seller in this paragraph
shall be in addition to any other liability that Seller may otherwise have.
11.2 OBLIGATIONS OF BUYERS. Each Buyer, severally and not
jointly, 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 and all 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 such Buyer in, or pursuant to, this Agreement, or (b) any
pending or threatened Action brought by such Buyer's shareholders or creditors
relating to, or arising out of or in connection with, directly or indirectly,
the transactions contemplated under this Agreement; provided, however, that
such 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
-38-
<PAGE> 44
undertaken by Seller pursuant to the terms and conditions of this Agreement and
any other action authorized in writing by such Buyer. As a condition to the
rights of any of the Seller Indemnified Parties under this Section 11, such
Buyer may require that any such Person provide a written undertaking that such
Person will repay to such Buyer any amount expended by such Buyer to indemnify,
defend or hold harmless such Person in the event and to the extent a court
determines that such Buyer's indemnification or defense of such Person is
prohibited by applicable Law. The agreement of each Buyer in this paragraph
shall be in addition to any other liability that each Buyer may otherwise have.
11.3 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
-39-
<PAGE> 45
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.
11.4 SURVIVAL. The indemnity set forth in this Section 11 shall
survive each Closing or any 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 10.4 (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 Sections 11.1 or 11.2(b), forever.
11.5 NOTICE BY SELLER. Seller, MSRE and MSAM agree to notify in
writing the other parties 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 parties), whether before or after
any Closing Date.
SECTION 12. GENERAL
12.1 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.
12.2 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.
12.3 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.
12.4 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 NEW
-40-
<PAGE> 46
YORK, 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 NEW YORK.
12.5 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 MSAM may assign the commitment of any MSAM
Purchaser to purchase Shares hereunder, and the related rights and remedies of
such MSAM Purchaser, to any other client on behalf of whom it or any of its
Affiliates acts as investment advisor, whether or not such client is initially
an MSAM Purchaser hereunder and (ii) any one or more MSAM Purchasers may at any
time subsequent to the date hereof appoint a successor agent to act on their
behalf in connection with the matters contemplated herein.
12.6 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.
12.7 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 parties.
12.8 PUBLICITY AND REPORTS. Seller and MSAM 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 parties, except to
the extent that independent legal counsel to Seller or MSAM, as the case may
be, shall advise the other parties 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).
12.9 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) as 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
parties. Notwithstanding the foregoing, MSAM shall be entitled to disclose
information relating to this Agreement and the transactions contemplated hereby
to any client on behalf of whom it or any of its Affiliates acts as investment
advisor, in connection with a contemplated investment by such
-41-
<PAGE> 47
client in Seller as described herein. 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 parties all documents (and
reproductions thereof) received by it or its representatives from such other
parties (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.
12.10 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.
12.11 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 MSAM or any Buyer, addressed to:
Morgan Stanley Asset Management
1221 Avenue of the Americas
New York, New York 10020
Attention: Russell Platt, President
Telecopy: (212) 762-7536
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
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.
-42-
<PAGE> 48
12.12 EXPENSES. Except as set forth in the next sentence, each
of the parties hereto shall pay its 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 its respective financial advisers, accountants and counsel.
Seller shall reimburse MSAM for all legal fees incurred by MSAM relating to the
transactions contemplated by this Agreement and the Registration Rights
Agreement up to a maximum of $50,000.
12.13 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. Each of the parties hereto shall be entitled to seek any equitable
remedy to the extent such remedy is available under applicable Law.
12.14 REPRESENTATION BY COUNSEL; INTERPRETATION. Each of the
parties hereto acknowledges 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 the parties hereto, and no rule of strict
construction shall be applied against any party to this Agreement.
12.15 SEVERABILITY. If any provision of this 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 Agreement would not be
materially and adversely affected thereby, such provision shall be fully
separable, and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part thereof,
and the remaining provisions of this 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
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 or any arbitrator to whom disputes relating to this
Agreement are submitted to reform the otherwise illegal, invalid or
unenforceable provision in accordance with this Section 12.15.
12.16 ARBITRATION. In the event of a dispute hereunder which
cannot be resolved by the parties, such dispute shall be settled by arbitration
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association and judgment on the award rendered by the arbitration panel may be
entered in any court or tribunal of competent jurisdiction. Any arbitration
occurring under this Section 12.16 shall be held in New York, New York in the
first instance, in Dallas, Texas in the second instance, and continuing in that
order with respect to each dispute occurring hereunder.
-43-
<PAGE> 49
12.17 AGENTS. (a) Seller acknowledges and agrees that MSAM is
acting as agent on behalf of the MSAM Purchasers and that MSAM shall not have
any liability to Seller, and shall not be obligated to purchase securities
hereunder with respect to which any such MSAM Purchaser was obligated to but
did not purchase.
(b) In the event that MSAM shall no longer act as agent on
behalf of any or all of the MSAM Purchasers in connection with the matters
contemplated by this Agreement, then (i) any agent(s) appointed by such MSAM
Purchasers as successor agent(s) to MSAM shall be entitled to, and to exercise
on behalf of such MSAM Purchasers, all of the rights and remedies provided for
herein with respect to MSAM and (ii) at any such time as no successor agent(s)
shall have been appointed by any such MSAM Purchasers, such MSAM Purchasers
shall be entitled to exercise all of the rights and remedies provided for
herein in their individual capacity, including the right to obtain, upon
request, copies of all documents and notices as specified herein. In the event
that MSAM shall no longer act as agent on behalf of any of the MSAM Purchasers
hereunder, all consents or waivers of MSAM necessary to effect any action
hereunder shall be required to be given by any successor agent(s) appointed by
such MSAM Purchasers or, if no successor(s) has been appointed, by such MSAM
Purchasers, prior to the consummation of such action.
(c) Until such time as Seller shall have received a written
notice from any MSAM Purchaser that MSAM is no longer acting as such MSAM
Purchaser's agent hereunder, Seller shall be entitled to rely on any
instructions and any notices received from MSAM on behalf of such MSAM
Purchaser as if received from such MSAM Purchaser directly.
(d) Notwithstanding anything to the contrary provided herein,
the parties hereto acknowledge and agree that MSRE shall be entitled to
exercise any right or remedy provided for herein either through MSAM, if MSRE
and MSAM shall so agree, or in its individual capacity, including the right to
obtain, upon request, copies of all documents and notices as specified herein.
In the event that MSAM shall no longer act as agent on behalf of any of the
MSAM Purchasers hereunder, all consents or waivers of MSAM necessary to effect
any action hereunder shall be required to be given by MSRE (as well as the MSAM
Purchasers or any successor agent(s) as they shall have appointed) prior to the
consummation of such action.
"MSRE"
MS REAL ESTATE SPECIAL SITUATIONS, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
-------------------------------
-44-
<PAGE> 50
"BUYERS"
MORGAN STANLEY ASSET MANAGEMENT, INC.,
as Agent and Attorney-in-fact for each
of its clients listed on
Exhibit A hereto
By:
-----------------------------------
Name:
---------------------------------
Title:
-------------------------------
"SELLER"
AMERICAN INDUSTRIAL PROPERTIES REIT
By:
-----------------------------------
Charles W. Wolcott
President and
Chief Executive Officer
-45-
<PAGE> 1
EXHIBIT 10.6
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "AGREEMENT") is made
and entered into as of July 8, 1997, by and among American Industrial
Properties REIT, a Texas real estate investment trust (the "COMPANY"), MS Real
Estate Special Situations Inc., a Delaware corporation ("MSRE") and Morgan
Stanley Asset Management Inc., a Delaware corporation ("MSAM"), acting as agent
and attorney-in-fact on behalf of the clients listed on Schedule A hereto (the
"MSAM PURCHASERS" and, together with MSRE, the "PURCHASERS").
WITNESSETH:
WHEREAS, pursuant to that certain Common Share Purchase
Agreement, dated as of June 20, 1997, among the Company, MSRE and MSAM, as
agent for the MSAM Purchasers (the "PURCHASE AGREEMENT"), the Purchasers,
severally and not jointly, agreed that they may purchase up to 8,163,265 Common
Shares (the "SHARES") of the Company (subject to the Share Ownership Limitation
described in the Purchase Agreement); and
WHEREAS, pursuant to the terms of the Purchase Agreement, the
Company, MSRE and MSAM agreed that the Company would grant certain registration
rights to the Purchasers 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 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.
Participating Purchasers: With respect to any Registration
Statement, any Purchasers holding any Registrable Securities covered by such
Registration Statement.
<PAGE> 2
Person: An individual, partnership corporation, limited
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
Preemptive Rights: See the Purchase Agreement.
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.
Purchase Agreement: See the Recitals to this Agreement.
Registrable Securities: (a) The Shares, (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 and (c) any additional
Common Shares of the Company purchased by any Purchaser pursuant to the
exercise of Preemptive Rights. 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 l44 (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.
Requesting Purchasers: Any one or more Purchasers holding
Registrable Securities representing in the aggregate not less than 25% of the
aggregate Registrable Securities outstanding.
SEC: The Securities and Exchange Commission or any successor
entity.
Securities Act: The Securities Act of 1933, as amended from
time to time.
Share Ownership Limitation: The limitation on ownership
contained in Section 2.4 of the Purchase Agreement.
2
<PAGE> 3
Shares: See the Recitals to this Agreement.
Shelf Registration: See Section 2(a) hereof.
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.
(a) Shelf Registration. Upon the written request of one
or more Requesting Purchasers that the Company effect the registration under
the Securities Act of such Requesting Purchasers' Registrable Securities
pursuant to a "shelf" registration statement, the Company promptly will give
written notice of such requested registration to all other Purchasers, and will
thereafter file such 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"), which Shelf Registration will cover
(i) the Registrable Securities that the Company has been so requested to
register by such Requesting Purchasers and (ii) all other Registrable
Securities that the Company has been requested to register by any other
Purchasers by written request given to the Company within 15 days after the
Company's giving of written notice of the Requesting Purchasers' requested
registration.
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 Participating Purchasers holding in the aggregate in excess
of 50% of the Registrable Securities covered by the Shelf Registration or any
underwriter of the Registrable Securities.
3
<PAGE> 4
If Participating Purchasers holding in the aggregate in excess of 50%
of the Registrable Securities covered by the Shelf Registration so elect, the
offering of Registrable Securities pursuant to such registration shall be in
the form of an Underwritten Offering.
(b) Demand Registration. At any time during the five year
period following the Closing Date, one or more Requesting Purchasers may make a
written request (the "DEMAND NOTICE") for registration under the Securities Act
(a "DEMAND REGISTRATION") of the Registrable Securities held by such Requesting
Purchasers. 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. Following receipt of a Demand Notice from such Requesting
Purchasers, the Company promptly will give written notice of the requested
registration to all other Purchasers, and will thereafter file a registration
statement on any appropriate form which will cover (i) the Registrable
Securities that the Company has been so requested to register by such
Requesting Purchasers and (ii) all other Registrable Securities that the
Company has been requested to register by any other Purchasers by written
request given to the Company within 15 days after the Company's giving of
written notice of the Requesting Purchasers' requested registration.
Unless each Participating Purchaser shall consent in writing, no party
(including the Company) other than any Purchaser, USAA Real Estate Company
("REALCO") or La Salle Advisory Limited Partnership ("LASALLE") 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).
Participating Purchasers holding in excess of 50% of the Registrable Securities
covered by a Demand Registration may at any time prior to the effective date of
the Registration Statement relating to such registration revoke a Demand Notice
by providing a written notice to the Company (in which case such Demand
Registration shall not count as one of the three Demand Registrations).
If Participating Purchasers holding in the aggregate in excess of 50%
of the Registrable Securities covered by the Demand Registration so elect, the
offering of Registrable Securities pursuant to such registration shall be in
the form of an Underwritten Offering. If the managing underwriter or
underwriters of such offering advise the Company and the Participating
Purchasers in writing that in their opinion the number of Registrable
Securities and shares of Realco or LaSalle, if any, 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 and shares of Realco or LaSalle, if
any, requested to be included which in the opinion of such managing underwriter
or underwriters can be sold without any such material adverse effect; provided,
however, that no Registrable Securities or shares of Realco or LaSalle, if any,
may
4
<PAGE> 5
be excluded before all shares proposed to be sold by any 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. If more than 5% of the amount of Registrable Securities proposed
to be registered hereunder are required to be excluded pursuant to this
paragraph, the number of Registrable Securities of each Participating Purchaser
and the number of shares of Realco or LaSalle, if any, to be included in such
registration shall be reduced pro rata (according to the total number of
Registrable Securities or shares, as the case may be, beneficially owned by
each such holder), to the extent necessary to reduce the total amount of
securities to be included in the offering to the amount recommended by such
managing underwriter or underwriters.
No registration pursuant to a request or requests referred to in this
subsection 2(b) shall be deemed to be a Shelf Registration.
(c) 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 all Purchasers as
soon as practicable (but in no event less than thirty days before the
anticipated filing date), and such notice shall (i) offer each Purchaser 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). Each Purchaser 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 each Participating
Purchaser that either because of (i) the kind of securities which such
Purchasers, the Company, or any other Persons intend to include in such
offering or (ii) the size of the offering which such Purchasers, 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 each Participating Purchaser and other holders
registering securities of the
5
<PAGE> 6
Company pursuant to similar incidental registration rights shall be reduced pro
rata (according to the Registrable Securities beneficially owned by each such
holder) 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.
(a) Restrictions on Public Sale by Holder of Registrable
Securities. Each Purchaser 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 the Registration Statement relating to such Underwritten Offering,
including a sale pursuant to Rule 144 under the Securities Act (except as part
of such Underwritten Offering), during the 10-day period prior to the filing of
such Registration Statement, 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.
(b) Restrictions on Sale of Securities by the Company.
The Company agrees not to effect, for its own account or for the account of any
of its security holders, 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 an Underwritten Offering, and during the 90-day
period beginning on the effective date of such Registration Statement (except
as part of such registration statement (x) where each Purchaser participating
in such registration statement consents, (y) where any Purchasers are
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 no Purchasers are simultaneously
participating in a registration statement pursuant to Section 2(b) hereof, or
(z) with respect to Realco or LaSalle, where such parties are participating in
a Demand Registration pursuant to Section 2(b) hereof) or the commencement of a
public distribution of Registrable Securities pursuant to such registr1ation
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
6
<PAGE> 7
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:
(a) 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 each Participating Purchaser
and the underwriters, if any, copies of all such documents proposed to be
filed, which documents will be subject to the review of the Participating
Purchasers and the underwriters, if any, 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
Participating Purchasers holding in the aggregate in excess of 50% of the
Registrable Securities covered by such Registration Statement or the
underwriters, if any, shall reasonably object (except in the case of a filing
pursuant to Section 2(c) hereof);
(b) 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 included in
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 included in 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 any Participating Purchaser 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(1) hereof, if
applicable;
(c) notify each Participating Purchaser and the managing
underwriters, if any, promptly, and (if requested by any such Person) confirm
such advice in writing, (l) 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
7
<PAGE> 8
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;
(d) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of the Registration Statement at the
earliest possible moment;
(e) if reasonably requested by the managing underwriter
or underwriters or by Participating Purchasers holding in the aggregate in
excess of 50% of the Registrable Securities covered by the Registration
Statement, promptly incorporate in a Prospectus supplement or post-effective
amendment such information as the managing underwriters and such Participating
Purchasers 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;
(f) furnish to each Participating Purchaser 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 each Participating Purchaser 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 any such Purchasers 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 each Participating Purchaser,
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 any
Participating Purchaser 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;
8
<PAGE> 9
(i) cooperate with the Participating Purchasers 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 each
Participating Purchaser 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 each Participating Purchaser 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 each
Participating Purchaser and the managing underwriters, if any, covering the
matters customarily covered in opinions requested in Underwritten Offerings and
such other matters as may be reasonably requested by any Participating
Purchaser and the underwriters, if any; (3) obtain "cold comfort" letters and
updates thereof from the Company's independent certified public accountants
addressed to each Participating Purchaser 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) deliver such documents and certificates as may be reasonably
requested by any Participating Purchaser 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;
9
<PAGE> 10
(n) make available for inspection by a representative of
any Participating Purchaser, any underwriter participating in any disposition
pursuant to such registration, and any attorney or accountant retained by any
Participating Purchaser 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 the Company designates 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 the Participating Purchasers 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 each Purchaser 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.
Each Purchaser agrees by acquisition of the Registrable Securities
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 4(1) hereof, such Purchaser will forthwith
discontinue disposition of Registrable Securities until such Purchaser's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 4(1) 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, such Purchaser will
deliver to the Company (at the Company's expense), all copies, other than
permanent file copies then in such Purchaser'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 such Purchaser shall receive copies of
the supplemented or amended prospectus contemplated by Section 4(1) 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
10
<PAGE> 11
securities or blue sky laws (including reasonable fees and disbursements of
counsel for the underwriters or the Purchasers 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 and the Purchasers 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 also reimburse MSAM for the fees and expenses of
counsel incurred in connection with the transactions contemplated in the
Purchase Agreement and the preparation of this Agreement, up to a maximum
aggregate amount of $50,000. 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 MSAM or
any of the Purchasers, except as expressly provided herein.
6. Indemnification: Contribution.
(a) Indemnification by Company. The Company agrees to
indemnify and hold harmless MSAM and each Purchaser and their respective
partners, officers, directors, employees and agents, and each Person who
controls any such Persons (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 MSAM or such Purchaser, as the case may be, 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 MSAM and each Purchaser, if requested.
(b) Indemnification By Holder of Registrable Securities.
Each Purchaser, severally and not jointly, 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,
11
<PAGE> 12
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 such Purchaser to the Company specifically for
inclusion in such Registration Statement or Prospectus. In no event shall the
liability of any Purchaser hereunder be greater in amount than the dollar
amount of the proceeds received by such Purchaser 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.
(c) 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.
(d) 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
12
<PAGE> 13
the indemnifying party, as well as any other relevant equitable considerations,
provided, that no Purchaser shall be required to contribute an amount greater
than the dollar amount of the proceeds received by such Purchaser 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 the
Purchasers 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 any
Purchaser, 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 any Purchaser may reasonably request, all to the extent
required from time to time to enable each Purchaser 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 any Purchaser, the Company
will deliver to such Purchaser a written statement as to whether it has
complied with such information and requirements.
8. Participation in Underwritten Registrations.
(a) If any of the Registrable Securities covered by the
Shelf Registration are to be sold in an Underwritten Offering (excluding under
Section 2(c)), the investment banker or investment bankers and manager or
managers that will administer the offering will be selected by Participating
Purchasers holding in the aggregate in excess of 50% of the Registrable
Securities covered thereby; provided that such investment bankers and managers
must be reasonably satisfactory to the Company.
(b) 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.
(a) 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
13
<PAGE> 14
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.
(b) Third Party 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 the
Purchasers hereunder without the written consent of MSAM, other than
registration rights granted on the same terms as herein with respect to the
shares purchased, or to be purchased, by LaSalle pursuant to authority granted
to the Company by its shareholders at the Annual Meeting. The Company has not
previously entered into any agreement with respect to its securities granting
any registration rights to any Person, other than the Registration Rights
Agreement, dated as of December 19, 1996, between the Company and Realco. The
Company hereby represents and warrants to each Purchaser that it has obtained
all necessary consents or waivers of Realco in connection with the execution of
this Agreement and the consummation of the transactions contemplated hereby.
(c) MSAM as Agent. (i) The Company, MSRE, MSAM and
each of the MSAM Purchasers acknowledge and agree that each of the MSAM
Purchasers has initially appointed MSAM to act as its agent and
attorney-in-fact in connection with the matters contemplated by this Agreement.
Until such time as the Company shall have received a written notice from any
MSAM Purchaser that MSAM is no longer acting as such Purchaser's agent
hereunder, the Company shall be entitled to rely on any instructions and
notices received from MSAM on behalf of such Purchaser as if received from such
Purchaser directly. The parties hereto further acknowledge and agree that MSAM
shall act solely as agent on behalf of the MSAM Purchasers in connection with
the matters set forth in this Agreement, and that MSAM shall not, under any
circumstances, have any liability to the Company in its individual capacity
arising out of or in connection with this Agreement or the transactions
contemplated hereby.
(ii) The Company agrees that for so long as MSAM shall act
as agent on behalf of any of the MSAM Purchasers hereunder, it shall deliver to
MSAM copies of all documents and notices required to be delivered to the
Participating Purchasers pursuant to Section 4 of this Agreement.
(iii) In the event that any MSAM Purchaser shall at anytime
subsequent to the date hereof appoint a successor agent to MSAM in connection
with the matters set forth in this Agreement, such successor shall be entitled
to, and to exercise on behalf of such MSAM Purchaser, all of the rights and
remedies provided for herein with respect to MSAM or such MSAM Purchaser, as
the case may be, and the rights and remedies of such MSAM Purchaser hereunder
shall not in any way be modified, limited, delayed or impaired as a consequence
of such appointment.
14
<PAGE> 15
(iv) The provisions of Sections 5, 6 and of this Section
9(c) shall remain in full force and effect with respect to MSAM notwithstanding
any termination of MSAM's appointment as agent on behalf of any or all of the
MSAM Purchasers hereunder.
(d) 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,
each Purchaser and, for so long as MSAM shall act as agent on behalf of any of
the MSAM Purchasers, MSAM; provided, that the provisions of Sections 5, 6, and
9(c) may not, under any circumstances and notwithstanding any termination of
MSAM's appointment as agent on behalf of any or all of the MSAM Purchasers
hereunder, be amended, modified, supplemented or waived without the written
consent of MSAM.
(e) 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:
(i) if to MSAM, MSRE or any of the MSAM
Purchasers, initially at 1221 Avenue of the Americas, 21st
Floor, New York, New York 10020, Attention: Russell Platt, 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(e).
(ii) 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(e).
(f) 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, provided further,
that the Company cannot assign its rights hereunder except pursuant to a
merger.
(g) 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.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) 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 NEW
YORK, WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAWS.
15
<PAGE> 16
(j) Severability. If any provision of this 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 Agreement would not
be materially and adversely affected thereby, such provision shall be fully
separable, and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part thereof,
and the remaining provisions of this 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 simultaneously as a part of this
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 or any arbitrator to whom disputes relating to this
Agreement are submitted to reform the otherwise illegal, invalid or
unenforceable provision in accordance with this Section 9(j).
(k) Arbitration. In the event of a dispute hereunder
which cannot be resolved by the parties, such dispute shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association and judgment on the award rendered by the arbitration
panel may be entered in any court or tribunal of competent jurisdiction. Any
arbitration occurring under this Section 9(k) shall be held in New York, New
York in the first instance, in Dallas, Texas in the second instance, and
continuing in that order with respect to each dispute occurring hereunder.
(l) 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: /s/ Charles W. Wolcott
--------------------------------------
Charles W. Wolcott
President and Chief Executive Officer
16
<PAGE> 17
"MSRE"
MS REAL ESTATE SPECIAL SITUATIONS INC.
By: /s/ Russell C. Platt
--------------------------------------
Russell C. Platt
President
"MSAM"
MORGAN STANLEY ASSET MANAGEMENT INC.,
as agent and attorney-in-fact
on behalf of the MSAM Purchasers
By: /s/ Russell C. Platt
--------------------------------------
Russell C. Platt
Managing Director
17
<PAGE> 18
SCHEDULE A
MSAM Purchasers
Stichting Pensioenfonds ABP
Stichting Bedrijfspensioenfonds voor de Metaalnijverheid
Morgan Stanley Real Estate Special Situations Fund II, L.P.
Morgan Stanley Real Estate Special Situations Fund I, L.P.
<PAGE> 1
EXHIBIT 10.7
COMMON SHARE PURCHASE AGREEMENT
dated as of July 3, 1997
Between
AMERICAN INDUSTRIAL PROPERTIES REIT
and
ABKB/LASALLE SECURITIES LIMITED PARTNERSHIP
as Agent for and for the benefit of a
particular client
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.2 RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
SECTION 2. PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
2.1 PURCHASE AND SALE OF THE COMMON SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
2.2 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
2.3 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
3.1 ORGANIZATION AND RELATED MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
3.2 CAPITAL STOCK; TITLE TO SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
3.3 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
3.4 SEC REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
3.5 AUTHORIZATION; NO CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
3.6 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
3.7 COMPLIANCE WITH LAW AND PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.8 DIVIDENDS AND OTHER DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.9 CERTAIN INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.10 NO BROKERS OR FINDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
3.11 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
3.12 LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
3.13 PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
3.14 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
3.15 MATERIAL CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
3.16 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
3.17 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
3.18 TRUST RECORDS; ACCOUNTING RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
3.19 NEW YORK STOCK EXCHANGE LISTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
3.20 DISCLOSURE OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
3.21 PENSION-HELD REIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
3.22 SHAREHOLDER APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
SECTION 4. REPRESENTATIONS AND WARRANTIES OF INVESTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.1 ORGANIZATION AND RELATED MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.2 AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.3 NO CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.4 NO BROKERS OR FINDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.5 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
4.6 INVESTMENT REPRESENTATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
4.7 LEGENDS; STOP-TRANSFER ORDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
4.8 STATUS FOR REIT OWNERSHIP AND INCOME TESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
4.9 AUTHORITY OF THE INVESTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
SECTION 5. COVENANTS WITH RESPECT TO CONDUCT OF SELLER PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . -26-
5.1 ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
5.2 MATERIAL ADVERSE CHANGES; SEC FILINGS; REPORTS; FINANCIAL STATEMENTS . . . . . . . . . . . . . . . -27-
5.3 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
5.4 NOTIFICATION OF CERTAIN MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
5.5 ADJUSTMENT OF SHARE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
SECTION 6. ADDITIONAL CONTINUING COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
6.1 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
6.2 APPOINTMENT OF TRUST MANAGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
6.3 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.4 STATUS FOR REIT OWNERSHIP AND INCOME TESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.5 PROHIBITED TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.6 SELLER/BUYER REGISTRATION RIGHTS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.7 REIT QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.8 PREEMPTIVE RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.9 DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
6.10 FURNISH DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
6.11 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
6.12 ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
6.13 MSRE AND MSAM CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
SECTION 7. GENERAL CONDITIONS OF PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.1 NO ORDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.2 APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.3 ABSENCE OF LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.4 NEW YORK STOCK EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
7.5 SHAREHOLDER APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
SECTION 8. CONDITIONS TO OBLIGATIONS OF THE INVESTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.1 ACCURACY OF SELLER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . -35-
8.2 PERFORMANCE BY SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.3 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.4 CERTIFICATION BY SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.5 OPINION OF SELLER'S COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
8.6 SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
8.7 REALCO, MSRE AND MSAM CONSENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
8.8 ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
8.9 CLOSING OF MSRE AND MSAM PURCHASE TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
SECTION 9. CONDITIONS TO OBLIGATIONS OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
9.1 ACCURACY OF THE INVESTOR'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . -36-
9.2 BUYERS' PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
9.3 CERTIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
9.4 OPINION OF COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
9.5 REIT STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
SECTION 10. TERMINATION OF OBLIGATIONS; SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
10.1 TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
10.2 EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
10.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . -37-
SECTION 11. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
11.1 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
11.2 OBLIGATIONS OF THE INVESTOR AND THE PECUNIARY OWNER. . . . . . . . . . . . . . . . . . . . . . . -39-
11.3 PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
11.4 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
11.5 NOTICE BY SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
SECTION 12. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
12.1 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
12.2 SCHEDULES; EXHIBITS; INTEGRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.3 BEST EFFORTS; FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.4 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.5 NO ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.6 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.7 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.8 PUBLICITY AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.9 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
12.10 PARTIES IN INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
12.11 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
12.12 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
12.13 REMEDIES; WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
12.14 REPRESENTATION BY COUNSEL; INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
12.15 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
12.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
12.17 AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
</TABLE>
-iii-
<PAGE> 5
EXHIBITS
EXHIBIT A 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 8.5 List of Opinions of Seller's Counsel
SCHEDULE 9.4 List of Opinions of Investor's Counsel
-iv-
<PAGE> 6
COMMON SHARE PURCHASE AGREEMENT
THIS COMMON SHARE PURCHASE AGREEMENT (this "AGREEMENT") is made and
entered into as of July 3, 1997, by and among AMERICAN INDUSTRIAL PROPERTIES
REIT, a Texas real estate investment trust ("SELLER"), and ABKB/LASALLE
SECURITIES LIMITED PARTNERSHIP, a registered investment advisor (the
"Investor"), as agent for and for the benefit of a particular client.
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 Investor, and Investor desires to
purchase from Seller, the number of Common Shares having an aggregate purchase
price as specified herein (the "Shares") upon the terms and subject to the
conditions set forth in this Agreement.
C. The proceeds from the sale of the 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 1. DEFINITIONS AND RULES OF CONSTRUCTION
a. 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 Common Share Purchase Agreement, by and
between Seller and the Investor, as agent for and for the benefit of a
particular client, as amended from time to time pursuant to the terms of this
Agreement, together with all Exhibits and all Schedules attached hereto.
-1-
<PAGE> 7
"ANNUAL MEETING" shall mean the Seller's annual meeting that
was held on June 30, 1997.
"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.
"BANKRUPTCY CODE" means Title 11 of the United States Code
entitled "Bankruptcy," as now and hereafter in effect, and any successor
statute, as well as any existing or future law of any jurisdiction, foreign or
domestic, relating to bankruptcy, insolvency, reorganization, conservatorship
or relief of debtors.
"BUSINESS DAY" means a day other than a Saturday, a Sunday or
a day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"CAPITALIZED LEASE" means any lease of property, real or
personal, the obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of the lessee.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the
obligation of such Person to pay rent or other amounts under a Capitalized
Lease and, for purposes of this Agreement, the amount of such obligation shall
be the capitalized amount thereof, determined in accordance with GAAP.
"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
-2-
<PAGE> 8
or other equity interests, or any other rights, warrants or options to acquire
any of the foregoing securities.
"CHARTER DOCUMENTS" means Seller's Third 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 each 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.
"COMMISSION" means the United States Securities and Exchange
Commission or any successor entity.
"COMMON SHARES" means common shares of beneficial interest,
par value $.10 per share, of Seller.
"CONTRACT" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, lease, license or understanding,
whether or not in writing.
"CURRENTLY OUTSTANDING SHARES" has the meaning set forth in
Section 2.4 of this Agreement.
"DEBT" means, with respect to any Person, without duplication,
and without regard to whether it is contingent or direct, (a) all indebtedness
of such Person for borrowed money, (b) any obligation incurred for all or any
part of the purchase price of property or services, other than accounts payable
and accrued expenses included in current liabilities in accordance with GAAP
and incurred in respect of property or services purchased in the ordinary
course of business, (c) indebtedness or obligations evidenced by bonds, notes
or similar written instruments, (d) all reimbursement obligations of such
Person (whether contingent or otherwise) in respect of letters of credit,
banker's acceptances, surety or other bonds and similar instruments, (e) any
obligation (whether or not such Person has assumed or becomes liable for the
payment of such obligation) secured by a lien on any property of such Person,
(f) all Capitalized Lease Obligations of such Person and (g) all Guarantees by
such Person of obligations of any other Person of the types referred to in the
foregoing clauses (a) through (f), inclusive, excluding, (i) the payment of
commissions to Prudential Securities Incorporated in connection with the
transactions contemplated herein and approved at the Annual Meeting, and (ii) a
$25 million line of credit from Prudential Securities Incorporated or its
Affiliates (the "Prudential Line of Credit").
-3-
<PAGE> 9
"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.
-4-
<PAGE> 10
"ENVIRONMENTAL PERMITS" has the meaning set forth in Section
3.17(a) of this Agreement.
"EQUITABLE REMEDIES" has the meaning set forth in Section 3.5
of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"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.
"GUARANTEE" means, with respect to any Person, any guarantee
or other contingent liability (other than any endorsement for collection or
deposit in the ordinary course of business and performance bonds, indemnities
and similar obligations not guaranteeing or otherwise insuring payment of any
Debt or other financial obligation), direct or indirect, of such Person with
respect to any Debt or other obligation of another Person (including
obligations under leases), through an agreement or otherwise, including (a) any
other endorsement or discount with recourse or undertaking substantially
equivalent to or having economic effect similar to a guarantee in respect of
any such Debt or other obligations and (b) any agreement (i) to purchase, or to
advance or supply funds for the payment or purchase of, any such obligations,
(ii) to purchase, sell or lease property, products, materials or supplies, or
transportation or services, in respect of enabling such other Person to pay any
such obligation or to assure the owner thereof against loss regardless of the
delivery or nondelivery of the property, products, materials or supplies or
transportation or services or (iii) to make any loan, advance or capital
contribution to or other investment in, or to otherwise provide funds to or
for, such other Person in respect of enabling such Person to satisfy any
obligation (including any liability for a dividend, stock liquidation payment
or expense) or to assure a minimum equity, working capital or other balance
sheet condition in respect of any such obligation. The amount of any Guarantee
shall be equal to the outstanding amount of the obligations of such other
Person directly or indirectly guaranteed.
"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
-5-
<PAGE> 11
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 PERSON" shall mean each Investor Indemnified
Person and each Seller Indemnified Party.
"INDEMNIFYING PARTY" has the meaning set forth in Section
11.3(a) of this Agreement.
"INITIAL REIT YEAR" has the meaning set forth in Section
3.14(c) of this Agreement.
"INVESTMENT COMMITTEE" means the investment committee of the
Seller's Board of Trust Managers which after the Annual Meeting shall consist
of one Trust Manager designee of Investor, one Trust Manager designee of
Realco, one Trust Manager designee of MSAM and one independent Trust Manager.
"INVESTOR" means ABKB/LaSalle Securities Limited Partnership,
a registered investment advisor.
"INVESTOR INDEMNIFIED PERSON" has the meaning set forth in
Section 11.1 of this Agreement.
-6-
<PAGE> 12
"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, 1996 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, 1996 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.
"MINIMUM EQUITY CAPITALIZATION" means $150 million as
calculated using the average closing price of the Common Shares on the New York
Stock Exchange for the 10 trading days immediately preceding the applicable
date of determination multiplied by the current number of issued and
outstanding Common Shares and Common Share equivalents; provided, however, it
shall not in any event include operating partnership units in excess of $50
million.
"MSAM" means Morgan Stanley Asset Management, Inc., a Delaware
corporation.
"MSAM PURCHASE AGREEMENT" means that certain Common Share
Purchase Agreement dated as of June 20, 1997, by and among Seller, MSRE and
MSAM pursuant to which MSRE and MSAM, as agent and attorney-in-fact on behalf
of certain clients, have agreed to
-7-
<PAGE> 13
purchase up to $20 million of Common Shares of Seller on terms and conditions
substantially similar to the terms and conditions contained herein.
"MSAM PURCHASERS" means the clients of MSAM listed on Exhibit
A to the MSAM Purchase Agreement.
"MSRE" means MS Real Estate Special Situations Inc., a
Delaware corporation.
"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.
"OTHER PECUNIARY OWNERS" means the other pecuniary owners for
whom the Investor is acting as agent for and on behalf of in connection with
the purchase of Common Shares of the Seller pursuant to Common Share Purchase
Agreements dated the date hereof similar to this Agreement and who, along with
the Pecuniary Owner, are purchasing Common Shares having an aggregate purchase
price of up to $15 million.
"PECUNIARY OWNER" means the client of Investor for whom
Investor is acting as Agent for and for the benefit of, in connection with the
purchase of the Common Shares pursuant to the Agreement.
"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 individual, corporation, partnership,
limited liability company, joint venture, an unincorporated organization,
government or any department or agency thereof, estate, trust, association, or
private foundation within the meaning of Section 509(a) of the Code, or joint
stock company.
"PREEMPTIVE RIGHTS" has the meaning set forth in Section 6.8
of this Agreement.
"PREFERRED SHARES" means any class of capital stock of a
Person which is entitled to a preference or priority over any other class of
capital stock of such Person with respect to any distribution of such Person's
assets, whether with respect to dividends, or upon liquidation or dissolution,
or both.
"PROPERTIES" means the real property owned or leased by
Seller, Subsidiaries and Seller Partnerships listed on Schedule 3.13 hereto.
-8-
<PAGE> 14
"PURCHASE PRICE" means, with respect to the Closing Date, the
aggregate price paid for the Common Shares purchased by Investor on the Closing
Date.
"REALCO" means USAA Real Estate Company, a Delaware
corporation.
"REALCO DEBT" has the meaning set forth in Section 3.2 of this
Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the registration rights
agreement among Seller, and Investor, as agent for and on behalf of the
Pecuniary Owner and certain Other Pecuniary Owners, to be executed
contemporaneously with the execution of this Agreement.
"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 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.
"SHARE PRICE" has the meaning set forth in Section 2.1 of this
Agreement.
"SHAREHOLDER APPROVAL" means the approval by Seller's
shareholders at the Annual Meeting of the proposal to approve the sale to
Investor of Common Shares having an aggregate
-9-
<PAGE> 15
purchase price of up to $15 million, and the authorization of the issuance of a
sufficient number of Common Shares to allow such sale to occur.
"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.
"THRESHOLD EQUITY CAPITALIZATION" means equity capitalization
of $250 million, calculated in the same manner as Minimum Equity
Capitalization.
"UNAUDITED FINANCIAL STATEMENTS" has the meaning set forth in
Section 3.3(b) of this Agreement.
b. 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.
-10-
<PAGE> 16
SECTION 2. PURCHASE AND SALE
a. PURCHASE AND SALE OF THE COMMON SHARES. Subject to
the terms and conditions set forth herein, Seller
shall sell and issue to Investor, and Investor shall
purchase from Seller, up to an aggregate of
1,956,122 Common Shares (the "Shares") at a price of
$2.45 per Common Share, subject to adjustment as set
forth in Section 5.5 (the "Share Price").
b. USE OF PROCEEDS. The proceeds of the purchase of
Shares hereunder shall be used by the Seller to
purchase real property as approved by the Investment
Committee.
c. CLOSING.
i. The Closing shall occur on or before July 11, 1997,
(the "CLOSING DATE"), and the Investor shall
purchase the number of Shares specified in Section
2.1.
ii. At the Closing, Seller shall deliver to the Investor
the certificates evidencing the Shares purchased by
the Investor on the applicable Closing Date,
registered in the name of the Investor or its
nominee. 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 purchased by the Investor on the
applicable Closing Date.
iii. At the Closing, the Investor shall pay and deliver
to Seller the Purchase Price for the Shares being
purchased by the Investor at the Closing.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to, and agrees with, the Investor and
the Pecuniary Owner as follows:
a. 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
Partnerships of Seller (the "SELLER PARTNERSHIPS")
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
-11-
<PAGE> 17
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 the
Investor. 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.
b. CAPITAL STOCK; TITLE TO SHARES. The authorized
Capital Stock of Seller consists of 500,000,000
Common Shares, 10,000,000 of which are issued and
outstanding and 10,000,000 Preferred Shares, none of
which 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
-12-
<PAGE> 18
Subsidiary or any Seller Partnership are issued or
outstanding other than the Seller's note in the
aggregate principal amount of $5,449,618 (the
"REALCO DEBT") held by Realco. 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.
Except as contemplated by this Agreement, there are
no preemptive rights in respect of any Common Shares
or Capital Stock of any Subsidiary or any Seller
Partnership. Upon any issuance of Shares to the
Investor, such Shares will have been duly
authorized, validly issued and be validly
outstanding, fully paid and nonassessable, and the
issuance of such Shares will not be subject to
preemptive rights of any other shareholder of Seller
and such Shares will be issued in compliance with
all applicable federal and state laws and stock
trading requirements. Each Buyer shall receive good
and marketable title to all Shares acquired by such
Buyer pursuant to this Agreement, free and clear of
all Encumbrances created by Seller, 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 except for a class of preferred shares
of beneficial interest which the shareholders
approved at the Annual Meeting, none of which shall
be issued and outstanding as of the First Closing
Date, there are no shares of any class of Capital
Stock of Seller having any priority in respect
thereof. All of the outstanding securities of Seller
were issued in compliance with all applicable
federal and state securities laws.
c. FINANCIAL STATEMENTS.
i. AUDITED FINANCIAL STATEMENTS. Seller has delivered
to the Investor the consolidated balance sheets of
Seller (which reflect the financial position of all
Subsidiaries and Seller Partnerships), as of
December 31, 1994, 1995 and 1996, and the respective
related consolidated statements of operations, cash
flows and shareholders' 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
-13-
<PAGE> 19
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, 1996, 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 5,
1997.
ii. UNAUDITED FINANCIAL STATEMENTS. Seller has
delivered to the Investor the consolidated balance
sheets of Seller (which reflect the financial
position of all Subsidiaries and Seller
Partnerships), as of March 31, 1997 and the related
consolidated statements of operations, cash flows
and shareholders' equity for the period then ended
(the "UNAUDITED FINANCIAL STATEMENTS"). The
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 March 31,
1997.
iii. NO MATERIAL ADVERSE CHANGES. Since March 31, 1997,
except as set forth in Schedule 3.3, or specifically
disclosed in any SEC Filings filed since March 31,
1997 and prior to the date of this Agreement (copies
of which have been provided to the Investor),
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:
(1) 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
(2) 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
(3) 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.
-14-
<PAGE> 20
iv. 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 March 31, 1997 in the ordinary course of
business in a manner consistent with past practice
and are not material in amount, or (ii) are set forth
in Schedule 3.3 hereto.
d. SEC REPORTS. Seller has filed with the Commission
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 Commission since December 31, 1994.
Such forms, reports, statements, including
registration statements, and other material documents
required to be filed with the Commission by Seller
since December 31, 1994 are collectively referred to
in this Agreement as the "SEC FILINGS." Seller has
made available to the Investor 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.
e. 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. Except for the share ownership limitation
contained therein, the Charter Documents do not in
any way prevent or restrict the transactions
contemplated hereby or preclude the Investor acting
as agent on behalf of the Pecuniary Owner, or the
Pecuniary Owner from owning or holding the amount,
value or class of Common Shares to be purchased
hereby. 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 except the
shareholder consent needed to increase the number of
authorized Common Shares to allow the issuance and
sale of Shares on any Closing Date to occur. This
Agreement has been duly
-15-
<PAGE> 21
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
(collectively, "EQUITABLE REMEDIES"). 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 or violation 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 or 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.
f. LEGAL PROCEEDINGS. Except as set forth in Schedule
3.6, 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 or any action taken or to be taken
pursuant hereto or thereto, (ii) may adversely affect
the right, title or interest of the Investor to the
Shares or (iii) individually or when aggregated with
one or
-16-
<PAGE> 22
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, 1997 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.
g. COMPLIANCE WITH LAW AND PERMITS.
i. 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.
ii. 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 the
Investor 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.
-17-
<PAGE> 23
h. 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 December
31, 1996.
i. 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.
j. 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 Prudential Securities
Incorporated.
-18-
<PAGE> 24
k. 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 the Investor. 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
-19-
<PAGE> 25
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.
l. 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.
m. PROPERTIES.
i. 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") as of the date hereof. Except as
set forth in Schedule 3.13, Seller, Subsidiary or
Seller Partnership, as applicable, owns good,
marketable 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
-20-
<PAGE> 26
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.
ii. Seller has delivered to the Investor a true,
correct and complete copy of a rent roll with respect
to each Property as of the date hereof 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
April 30, 1997 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, 1997. 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, 1997, 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.
-21-
<PAGE> 27
(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
any 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, any Subsidiary
or any Seller Partnership.
(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,
-22-
<PAGE> 28
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, 1997 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 any 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
-23-
<PAGE> 29
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 First Closing
Date.
(k) Seller has made available (or, with respect to all Tax
Returns filed after the date hereof, will make available) to the Investor
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 First 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 the Investor all relevant
information with respect to the federal income tax net operating loss
carryovers of Seller as of December 31, 1996, 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 First 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).
-24-
<PAGE> 30
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 the Investor 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 Investor true, correct, and
complete copies of all written reports of any environmental assessment,
compliance or regulatory audit, inspection, or investigation
-25-
<PAGE> 31
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 issuance or sale and
delivery of any Shares to the Investor pursuant to this Agreement 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 the
Investor 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.
3.21 PENSION-HELD REIT. For purposes of Section 856(h)(3) of the
Code, Seller hereby represents that at any time during the shorter of (i) the
two-year period ending immediately prior to the First Closing Date or (ii) the
period during which Seller was in existence, to the best of Seller's knowledge,
no "qualified trust" has held, directly or indirectly, more than 10% of the
interests in Seller.
3.22 SHAREHOLDER APPROVAL. The Seller's shareholders approved at
the Annual Meeting all of the proposals set forth in the Notice of Annual
Meeting of Shareholders and accompanying proxy statement dated May 12, 1997.
-26-
<PAGE> 32
SECTION 4. REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants with respect to itself (except as
indicated) to, and agrees with, Seller as follows:
a. ORGANIZATION AND RELATED MATTERS. It is a limited
partnership duly organized and validly existing under the
laws of the state of its organization. It has all necessary
partnership power and partnership authority to carry on its
business as now being conducted. It has all necessary
partnership power and partnership authority to execute,
deliver and perform this Agreement and the transactions
contemplated hereby.
b. AUTHORIZATION. This Agreement has been duly executed
and delivered by it and constitutes the legally valid and
binding obligation of the Investor and the Pecuniary Owner,
enforceable in accordance with its terms, except as such
enforceability may be limited by Equitable Remedies. The
execution and delivery of this Agreement by it 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 its material
Contracts, other than any filing required under the Exchange
Act.
c. NO CONFLICTS. The execution, delivery and
performance of this Agreement by it 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) its organizational documents,
pursuant to which it was organized and by which it is
governed, (b) any Law to which it is subject or (c) any
Contract to which it is a party that is material to the
financial condition, results of operations or conduct of its
business.
d. NO BROKERS OR FINDERS. No agent, broker, finder or
investment or commercial banker, or other Person or firms
engaged by or acting on its behalf or on behalf of 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 broker's or finder's or similar fees or other
commissions as a result of this Agreement or such
transactions.
e. LEGAL PROCEEDINGS. There is no Order or Action
pending against or, to its knowledge, affecting it that
individually or when aggregated with one or more other
Actions has, or if determined adversely would have, a
material adverse effect on its business, properties, or
financial condition or on its ability to perform this
Agreement.
-27-
<PAGE> 33
f. INVESTMENT REPRESENTATION. This Agreement is made
with the Investor in reliance upon such Investor's
representation to Seller, which by such Investor's execution
of this Agreement such Investor hereby confirms that the
Shares will be acquired by the Investor as agent for and on
behalf of the Pecuniary Owner, for the Pecuniary Owner's own
account, not as nominee or agent for any other party, for
investment purposes only and not with a view to or for sale
in connection with the distribution thereof. It agrees to
execute any further certificate or other document
representing such investment intent or as to any other
matter reasonably requested by Seller to assure compliance
with applicable securities laws.
g. LEGENDS; STOP-TRANSFER ORDERS.
i. The certificates for Shares will bear legends in
substantially the following form:
THE SHARES 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 UNDER SUCH LAWS OR IS EXEMPTED FROM SUCH
REGISTRATION REQUIREMENTS.
The foregoing legend shall be removed from any such certificate at the request
of the holder thereof at such time as the shares represented thereby are
registered under the Securities Act or become eligible for resale under Rule
144 promulgated under the Securities Act.
ii. The certificates for Shares may also bear any legend
required by any applicable state blue sky law.
iii. Any certificates for Shares will also bear a legend
relating to restrictions on transfer imposed pursuant to
the percentage ownership limitation contained in the Charter
Documents.
iv. Seller may impose appropriate stop-transfer instructions
relating to the restrictions set forth herein.
h. STATUS FOR REIT OWNERSHIP AND INCOME TESTS. At the
Closing, to the best of Investor's knowledge, the purchase
of the Common
-28-
<PAGE> 34
Shares by the Pecuniary Owner will not result in a "qualified
trust" as defined in Code Section 856(h)(3) holding more than
25% in value of the Seller's outstanding Capital Stock. The
Pecuniary Owner is not purchasing the Common Shares, and will
not hold any or all of the Common Shares so purchased,
through any arrangement or entity that would be deemed, for
federal income tax purposes, to be a partnership between the
Pecuniary Owner and any or all of the Other Pecuniary Owners.
The Common Shares that each Pecuniary Owner owns will not be
considered to be owned by any individual (or entity treated
as an individual under Section 856(h) of the Code), who after
application of the stock ownership rules of Section 856(h) of
the Code would own more than 9.8% of the lesser of the number
or value of any outstanding class of Capital Stock.
i. AUTHORITY OF THE INVESTOR. The Investor is duly
authorized to enter into this Agreement and to consummate the
transactions contemplated hereby as agent for and on behalf
of the Pecuniary Owner.
SECTION 5. 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.
a. ACCESS. Seller shall, and shall cause the Subsidiaries and
Seller Partnerships to, authorize and permit the Investor 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 the Investor
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
the Investor and its partners and their respective officers,
employees, accountants and counsel, as the Investor 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, the Investor and its officers, directors, agents,
attorneys, accountants, and representatives, to audit such
books and records, to meet
-29-
<PAGE> 35
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.
b. MATERIAL ADVERSE CHANGES; SEC FILINGS; REPORTS;
FINANCIAL STATEMENTS.
i. Seller shall promptly notify the Investor 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 the
Investor.
ii. Seller will, and will cause the Subsidiaries and
Seller Partnerships to, furnish to the Investor as soon as
available copies of all SEC Filings, and all material
reports, renewals, filings, certificates, statements and
other documents filed with any Governmental Entity.
c. 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 the Closing Date, 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 the Investor, which
consent may not unreasonably be withheld:
i. conduct the business of Seller, Subsidiaries and
Seller Partnerships in any manner except in the ordinary
course consistent with past practices; or
ii. purchase any real property without the consent of
the Investment Committee; or
iii. 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 First Closing
Date; or
iv. issue, sell, redeem or acquire for value, or agree
to do so, any debt obligations (other than the Prudential
Line of Credit), Common Shares or Capital Stock; or
-30-
<PAGE> 36
v. 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), (ii) liabilities arising out of, incurred in
connection with, or related to the consummation of the
transactions contemplated by this Agreement, (iii) payments
to Realco under the Realco Debt and (iv) purchases of real
property in accordance with Section 5.3(b); or
vi. merge (if Seller is not the surviving entity),
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
vii. 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
viii. amend the Charter Documents or the charter or
organizational documents of the Subsidiaries or Seller
Partnerships; or
ix. 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
x. cancel, satisfy or prepay any debt, obligation,
liability or encumbrance, or waive any claim or right of
value of Seller, Subsidiaries or Seller Partnerships except
the extinguishment of debt under the Realco Debt through the
conversion of the Realco Debt to Common Shares; or
xi. (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, share option (including, without
limitation, the granting of any share option or share
appreciation right or performance or restricted share award),
share purchase or other
-31-
<PAGE> 37
employee benefit plan, (ii) except as approved by the
Compensation Committee prior to the date of this Agreement or
except as approved by the Compensation Committee and approved
by a unanimous vote of the Seller's Board of Trust Managers,
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, share option (including,
without limitation, the granting of any share option or share
appreciation right or performance or restricted share award),
share 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
xii. 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
xiii. make any change in any significant accounting
principles or practices used by Seller, Subsidiaries or
Seller Partnerships, except as required by the Commission; or
xiv. 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
xv. except as provided in Section 5.3(b), 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
-32-
<PAGE> 38
xvi. 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
xvii. agree to or make any commitment to take any
action prohibited by this Section 5.3.
d. NOTIFICATION OF CERTAIN MATTERS. Seller shall
give prompt notice to the Investor, and the Investor 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 the Investor 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.
e. ADJUSTMENT OF SHARE PRICE. The Share Price will
be subject to adjustment from time to time prior to the
Closing Date as follows:
(a) If Seller shall at any time prior to the Closing Date (i) pay
a dividend or make any other distribution payable in Common Shares to holders of
any class of Capital Stock of Seller, (ii) subdivide or reclassify the
outstanding Common Shares into a greater number of shares or (iii) combine or
reclassify the outstanding Common Shares into a smaller number of shares, the
Share Price in effect at the time of the record date for such dividend or
distribution or the effective date of such subdivision, combination or
reclassification will be proportionately adjusted so that the Investor will be
entitled to receive upon purchase after such time the number of Common Shares
that the Investor would have owned or been entitled to receive had such purchase
occurred immediately prior to such time. An adjustment made pursuant to this
subsection (a) will become effective immediately after the record date in the
case of a dividend or other distribution and will become effective immediately
after the effective date of any such subdivision, combination, reclassification
or change, provided that, if such dividend or distribution is not ultimately
paid or made, the Share Price shall be readjusted to be equal to the Share Price
in effect immediately prior to such record date. Such adjustment will be made
successively whenever any event listed above occurs.
(b) If Seller shall at any time prior to the Closing Date issue
rights or warrants to all holders of Common Share entitling them (for a period
commencing no earlier than the record date for the determination of holders of
Common Shares entitled to receive such rights or warrants and expiring within 45
days after such record date) to subscribe for or purchase Common Shares at a
price per share less than the Current Market Price (as defined in subsection (d)
below) of Common Shares on such record date, the Share Price will be adjusted
effective as of immediately after such record date so that it shall equal the
price determined by multiplying the Share Price in effect immediately prior
thereto by a fraction, the numerator of which is the number of Common Shares
-33-
<PAGE> 39
outstanding on such record date plus the number of Common Shares that the
aggregate offering price of the Common Shares so offered for subscription or
purchase or purchased would purchase at the Current Market Price per Common
Share, and the denominator of which is the number of Common Shares outstanding
on such record date plus the number of additional Common Shares which may be
purchased upon the exercise of the rights or warrants issued, provided that, if
such issuance is not ultimately made, the Share Price shall be readjusted to be
equal to the Share Price in effect immediately prior to such record date.
Common Shares owned by or held for the account of Seller shall not be deemed
outstanding for the purpose of any such computation. Such adjustment will be
made successively whenever such rights or warrants are issued.
(c) If Seller shall at any time prior to the Closing Date
distribute to all holders of Common Shares any shares of any class of Capital
Stock other than Common Shares, evidences of indebtedness or other assets (other
than cash dividends or distributions out of retained earnings), or shall
distribute to holders of Common Shares rights or warrants to subscribe to
securities (other than those referred to in subsection (b) above), then in each
such case the Share Price will be adjusted so that it equals the price
determined by multiplying the Share Price in effect immediately prior to the
date of such distribution by a fraction, the numerator of which is the Current
Market Price per Common Share on the record date mentioned below less the then
fair market value (as determined by the Board of Trust Managers, whose
determinations shall be conclusive evidences of such fair market value) of said
shares, evidences of indebtedness, assets, rights or warrants or distributions
applicable to one Common Share, and the denominator of which is such Current
Market Price. Such adjustment will become effective immediately after the record
date for the determination of the holders of Common Shares entitled to receive
such distribution, provided that, if such issuance is not ultimately made, the
Share Price shall be readjusted to be equal to the Share Price in effect
immediately prior to such record date. Such adjustment will be made successively
whenever such a distribution is made.
(d) For the purpose of computation under subsections (b) and
(c) above, the "Current Market Price" per Common Share at any date will be
deemed to be the average of the daily closing price for the Common Shares on the
New York Stock Exchange for 20 consecutive trading days commencing 30 trading
days before such date.
SECTION 6. ADDITIONAL CONTINUING COVENANTS AND AGREEMENTS
a. USE OF PROCEEDS. The proceeds from the
sale of the Shares to the Investor, 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 the purchase of real
property as approved by the Investment Committee in
accordance with Section 2.2.
-34-
<PAGE> 40
b. APPOINTMENT OF TRUST MANAGER.
i. GENERAL. Effective immediately
following the Closing, Seller shall increase the
number of its Trust Managers from seven to eight,
and Seller shall appoint one individual designated
by the Investor as Agent for and on behalf of the
Pecuniary Owner and the Other Pecuniary Owners
collectively to fill the vacancy caused by the
increase in the number of Trust Managers under this
Section 6.2(a). Simultaneously with the designee of
the Investor becoming a Trust Manager of Seller,
Seller and such designee shall enter into an
indemnification agreement providing for
indemnification of such designee identical in form
to the indemnification agreements entered into
between Seller and other Trust Managers. In
addition, at the first annual meeting and all
subsequent annual meetings of shareholders after the
number of Trust Managers has been increased to eight
under this Section 6.2(a), until Seller achieves the
Threshold Equity Capitalization, Seller shall
nominate, and use its best efforts to have such
person elected (which efforts shall include, without
limitation, including the Investor's nominee in
management's slate for nomination and election and
solicitation of proxies on their behalf), one
designee of the Investor (which may be a different
person than the person initially appointed as Trust
Manager pursuant to the first sentence of this
Section 6.2(a) if such initial designee shall have
died, resigned, been removed or declined to be
nominated) as Trust Manager. During such time as
Seller shall have an individual designated by the
Investor serving as Trust Manager 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 eight persons,
including the designee of the Investor. Such
designee of the Investor 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 the designee of the Investor
serving as a Trust Manager pursuant to the first
sentence of this Section 6.2(a), Seller agrees to
promptly appoint a replacement designee selected by
the Investor 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 eight pursuant to this Section 6.2(a).
ii. OBSERVATION RIGHTS. In the event that
the designee selected by the Investor to serve as
Trust Manager is not, for any reason, elected by
Seller's shareholders, the Investor shall have full
observation rights with respect to Seller's Trust
Managers, including the right to obtain full and
timely notice of all meetings of the Trust Managers
and of each of its
-35-
<PAGE> 41
committees, to obtain copies of all written and
other materials disseminated to Trust Managers and
to designate a person to attend in person or by
telephone all meetings of the Trust Managers or
their committees. If the Investor receives
observation rights pursuant to the provisions of
this paragraph, the Investor and its designees in
respect of such rights shall each execute a
confidentiality agreement in form and substance
reasonably satisfactory to Seller.
iii. RESIGNATIONS. At such time as Seller
achieves Threshold Equity Capitalization, the
Investor shall cause its designee to not seek
re-election at the next annual meeting, or at
Seller's option, to immediately resign.
iv. QUALIFICATIONS. Each of the
representatives designated by the Investor in
accordance with this Section 6.2 shall be a Person
selected by the Investor in its sole discretion;
provided, however, that any such person may not have
been involved in any of the events described in Item
401(f)(1)-(4) of Regulation S-K promulgated under
the Exchange Act.
v. COMMITTEES. At any time that the
Investor shall have exercised its rights under this
Section 6.2 to appoint a designee as Trust Manager,
Seller shall appoint the Investor's designee on each
committee of the Trust Managers, and each such
committee shall contain no more than four members
until expiration of the latest term of office of any
designee of the Investor pursuant to Section 6.2(a)
or 6.2(b).
c. ENVIRONMENTAL MATTERS. Seller will
advise the Investor 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.
d. STATUS FOR REIT OWNERSHIP AND INCOME
TESTS. Following the Closing Date, and at all
subsequent times during which the Investor or the
Pecuniary Owner owns any of the Shares, applying the
stock ownership rules of Section 856(h) of the Code,
the representation set forth in Section 4.8 will
remain true and correct.
e. 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, or
approved by Seller's shareholders in accordance with
applicable state law.
-36-
<PAGE> 42
f. SELLER/BUYER REGISTRATION RIGHTS
AGREEMENT. On the Closing Date, the Investor, as
agent for and on behalf of the Pecuniary Owner and
certain Other Pecuniary Owners, and Seller shall
enter into a Registration Rights Agreement
substantially in the form of Exhibit A.
g. REIT QUALIFICATION. Seller shall take
all actions necessary to maintain Seller's
qualification as a REIT and, without the written
consent of the Investor 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. Seller covenants and agrees
that (i) it will duly and promptly notify the
Investor upon becoming aware that any "qualified
trust" holds or is expected to hold, directly or
indirectly, more than 10% of the interests in
Seller, and (ii) it will provide the Investor such
information and/or verification as the Investor
shall reasonably request in order to verify whether
Seller constitutes a "pension-held REIT" as defined
under Section 856(h)(3)(C) of the Code.
h. PREEMPTIVE RIGHTS. In the event that
Seller shall at any time subsequent to the date of
this Agreement issue any Common Shares to any Person
or Persons (other than (i) Common Shares issued to
Realco in connection with the conversion of the
Realco Debt to Common Shares, (ii) Common Shares
issued pursuant to an employee share option, share
purchase, share incentive or compensation plan or
(iii) Common Shares issued to any partners in
Affiliates of Realco in connection with the merger
of such Affiliates with and into Seller) (each such
issuance, a "Subsequent Offering")), the Investor
shall have the right to purchase, on the same terms
and conditions as the other purchasers in the
Subsequent Offering, Common Shares in an amount not
to exceed, in the aggregate, such number of Common
Shares as is equal to the total number of Common
Shares offered in the Subsequent Offering times a
fraction, the numerator of which is the number of
Common Shares then owned by the Investor in the
aggregate and the denominator of which is the total
number of Common Shares outstanding immediately
prior to such Subsequent Offering. Notwithstanding
the foregoing, with respect to each Subsequent
Offering by Seller in the amount of $10 million or
more, the amount of shares the Investor may purchase
in the aggregate pursuant to such Preemptive Rights
shall be reduced by 5% of the total Common Shares
outstanding (on a fully-diluted basis) after each
such Subsequent Offering. The Investor's Preemptive
Rights will immediately terminate once Seller
achieves a Minimum Equity Capitalization. The
Investor or the Pecuniary Owner, as applicable,
shall have the right to assign the preemptive right
to buy additional Common Shares pursuant to this
Section 6.8 to any of the Other Pecuniary Owners or
to any other client of the Investor who can make the
representation to Seller set forth in Section 4.8.
-37-
<PAGE> 43
i. DEBT. Neither Seller, any Subsidiary
or any Seller Partnership shall, without the prior
written consent of the Investor (i) incur, create,
assume, guarantee or in any way become liable for,
or permit to exist, any Debt prior to such time as
the Seller achieves a Minimum Equity Capitalization,
except to the extent the proceeds of such Debt is to
be used to acquire real property, and such
acquisition occurs within 90 days of the date such
Debt is incurred; or (ii) issue or have outstanding
any Preferred Shares, or any warrants, options,
conversion rights or other rights to subscribe for,
purchase or acquire any Preferred Shares, prior to
such time as the Seller achieves Minimum Equity
Capitalization.
j. FURNISH DOCUMENTS. Seller shall
furnish or cause to be furnished to the Investor
within five Business Days after Seller is required
to file the same with the Commission , copies of the
periodic information, documents and other reports
which Seller is required to file with the Commission
pursuant to Section 13(a) of the Exchange Act. If
Seller ceases to be required to file information,
documents and other reports pursuant to Section 13
of the Exchange Act, it shall remain obligated to
furnish the same information, documents and reports
otherwise required under Section 13(a) of the
Exchange Act to the Investor within five Business
Days after Seller would have been required to file
the same with the Commission; and
i. Seller shall furnish or cause to be
furnished to the Investor, within five
Business Days after the effective date
thereof, copies of any amendment or
modification to its Charter Documents.
k. TAXES. Seller shall, and shall cause
each Subsidiary and Seller Partnership to, pay, when
due, all taxes, assessments and governmental charges
or levies imposed upon it and all claims or demands
of materialmen, mechanics, carriers, warehousemen,
landlords and any other like person or entity which,
if unpaid, might result in the creation of a lien
upon the income of Seller or its assets; provided
that items of the foregoing description need not be
paid while being contested in good faith and by
appropriate proceedings and adequate reserves with
respect thereto have been provided on the books of
Seller, such Subsidiary of such Seller Partnership,
as the case may be.
-38-
<PAGE> 44
l. ADDITIONAL INFORMATION Seller shall
execute and deliver or cause to be executed and
delivered to the Investor upon the Investor's
reasonable request such other and further
instruments or documents as in the reasonable
judgment of the Investor and Seller are necessary to
conform, create, evidence, preserve or maintain the
Pecuniary Owner's rights in the Shares, and Seller
shall do all such additional acts, give such
assurances and execute such instruments as the
Investor may reasonably require to vest more
completely in and assure to the Pecuniary Owner its
rights in the Shares.
m. MSRE AND MSAM CLOSING. If MSRE and
MSAM, as agent and attorney-in-fact on behalf of
certain clients, do not purchase additional Common
Shares of Seller for an aggregate purchase price of
at least $4,500,000 within seven days of the Closing
Date, Seller shall rescind the sale of Shares
hereunder and promptly repay to the Investor the
full purchase price for the Shares purchased hereby.
SECTION 7. GENERAL CONDITIONS OF PURCHASE
The obligations of the parties to effect each Closing shall be subject
to the following conditions unless waived in writing by all parties:
a. 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 applicable Closing
Date.
b. APPROVALS. To the extent required by
applicable Law, all Permits and Approvals required to
be obtained in connection with each 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 applicable
Closing Date.
c. 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 applicable Closing Date
whether or not any of the parties hereto or its
Affiliates is a party.
-39-
<PAGE> 45
d. NEW YORK STOCK EXCHANGE. The Shares shall
have been approved for listing, upon official notice
of issuance, on 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.
e. SHAREHOLDER APPROVAL. Seller shall have
received Shareholder Approval.
SECTION 8. CONDITIONS TO OBLIGATIONS OF THE INVESTOR
The obligations of the Investor, as agent for and on behalf of the
Pecuniary Owner, to effect the Closing shall be subject to the following
conditions except to the extent waived in writing by the Investor:
a. ACCURACY OF SELLER'S REPRESENTATIONS AND
WARRANTIES. All representations and warranties of
Seller set forth in this Agreement shall be true and
correct in all material respects on the applicable
Closing Date as if made on and as of such Closing
Date.
b. 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 applicable Closing Date, including the
covenants set forth in Section 5.
c. NO MATERIAL ADVERSE CHANGE. During the period
from December 31, 1996 to the applicable Closing
Date, (i) there shall not have been any material
adverse change or any development involving a
material adverse change in the condition (financial
or otherwise) of Seller, any Subsidiary or any Seller
Partnership, taken as a whole, or in the earnings,
business, prospects or operations of Seller, any
Subsidiary or any Seller Partnership, taken as a
whole, 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 the Investor,
significantly impair the marketability or value of
the Shares, (iii) the trading in any securities of
Seller 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
-40-
<PAGE> 46
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.
d. CERTIFICATION BY SELLER. The Investor shall
have received a certificate, addressed to the
Investor and dated as of the applicable Closing Date,
signed by the President of Seller, certifying, in
such detail as the Investor and its counsel
reasonably may request, that all of the conditions
specified in Section 8 have been fulfilled.
e. OPINION OF SELLER'S COUNSEL. The Investor
shall have received from counsel for Seller an
opinion, addressed to the Investor and dated as of
the applicable Closing Date, in form and substance
reasonably satisfactory to the Investor as to the
matters set forth in Schedule 8.5.
f. SCHEDULES. Seller shall have delivered to the
Investor updated Schedules, if any, to this
Agreement.
g. REALCO, MSRE AND MSAM CONSENT. Seller shall
have received all necessary consents or waivers from
Realco, MSRE and MSAM in connection with the matters
contemplated by this Agreement.
h. ADDITIONAL INFORMATION. Seller's Fourth
Amended and Restated Bylaws shall have been amended
to provide for a maximum of eight (8) Trust Managers.
i. CLOSING OF MSRE AND MSAM PURCHASE TRANSACTIONS.
Seller shall have closed on the sale of the Common
Shares to MSRE and MSAM, as agent and
attorney-in-fact on behalf of the MSAM Purchasers,
pursuant o the MSAM Purchase Agreement whereby Seller
shall have received an aggregate purchase price of at
least $12,500,00 from such purchasers from the
issuance and sale of its Common Shares.
SECTION 9. CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to effect each Closing shall be subject to
the following conditions, except to the extent waived in writing by Seller:
-41-
<PAGE> 47
a. ACCURACY OF THE INVESTOR'S
REPRESENTATIONS AND WARRANTIES. All representations
and warranties of the Investor set forth in this
Agreement shall be true and correct in all material
respects on the applicable Closing Date as if made
on and as of such Closing Date.
b. BUYERS' PERFORMANCE. The Investor
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 the
Investor on or before the applicable Closing Date.
c. CERTIFICATION. Seller shall have
received a certificate, dated as of the applicable
Closing Date, signed by a Managing Director of the
Investor, certifying, in such detail as Seller and
its counsel reasonably may request, that the
conditions specified in Section 9 have been
fulfilled.
d. OPINION OF COUNSEL. Seller shall have
received from counsel to the Investors an opinion,
dated as of the applicable Closing Date, in form and
substance reasonably satisfactory to Seller as to
the matters set forth in Schedule 9.4.
e. REIT STATUS. The purchase of Shares by
the Investor, as agent for and on behalf of the
Pecuniary Owner, will not cause Seller to lose its
status as a REIT under the Code.
SECTION 10. TERMINATION OF OBLIGATIONS; SURVIVAL
a. 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:
i. MUTUAL CONSENT. By mutual consent in
writing of the Investor and Seller.
ii. MISREPRESENTATION OR MATERIAL BREACH.
By the Investor or Seller with written notice to the
other parties if there has been a misrepresentation
or material breach on the part of Seller or the
Investor, 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 10 business days after
receipt of notice from the Investor or Seller of the
terminating party's intention to terminate.
iii. ENVIRONMENTAL NONCOMPLIANCE. By the
Investor in the event of the discovery of any
Release or other matter prior to any Closing Date
-42-
<PAGE> 48
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.
iv. CLOSING. This Agreement shall
terminate if the Closing does not occur on or before
July 11, 1997.
b. 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.
c. SURVIVAL OF REPRESENTATIONS,
WARRANTIES AND COVENANTS. (a) The representations
and warranties contained in or made pursuant to this
Agreement shall expire on the third anniversary of
the Closing Date 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 12
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.
(b) All covenants and agreements of the parties hereto shall be
continuing and shall survive each Closing Date pursuant to the terms thereof.
(c) The provisions of Section 11.1 through Section 11.5 and
Section 12.12 shall survive and remain in full force and effect with respect to
the Investor notwithstanding any termination of the Investor's appointment as
agent on behalf of the Pecuniary Owner.
-43-
<PAGE> 49
SECTION 11. INDEMNIFICATION
a. INDEMNIFICATION. In partial consideration of the
commitment of the Investors as agent for and on behalf of
the Pecuniary Owner hereunder, Seller agrees to indemnify
and hold harmless the Investor and the Pecuniary Owner and
any of their respective affiliates, directors, officers,
agents and employees and each other person, if any,
controlling the Investor or the Pecuniary Owner or any of
their respective affiliates (each an "Investor Indemnified
Person") from and against any Losses (or actions in respect
thereof) to which such Investor Indemnified Person may
become subject in connection with the matters which are the
subject of the commitment made hereunder (including any use
or proposed use of the proceeds from the sale of the Common
Shares) including without limitation any and all Losses of
the Investor Indemnified Person as a result of, or based
upon or arising out of, directly or indirectly any
inaccuracy in, breach or nonperformance of, any of the
representations, warranties, covenants or agreements made by
Seller in, or pursuant to this Agreement, and will reimburse
any Investor Indemnified Person for all reasonable expenses
(including the reasonable fees of counsel) as they are
incurred by any such Investor Indemnified Person in
connection with investigating, preparing or defending any
such action or claim pending or threatened, whether or not
such Investor Indemnified Person is a party hereto. Seller
shall not be responsible for any losses, claims, damages,
liabilities or expenses resulting from such Investor
Indemnified Person's gross negligence or willful misconduct.
Seller also agrees that no Investor Indemnified Person shall
have any liability (whether direct or indirect, in contract
or tort or otherwise) to Seller for or in connection with
this Agreement except for losses, claims, damages,
liabilities or expenses to the extent that a court of
competent jurisdiction or arbitration panel shall have
finally determined that such losses, claims, damages,
liabilities or expenses resulted from such Investor
Indemnified Persons's gross negligence or willful
misconduct. In the event that the foregoing indemnity is
unavailable or insufficient to hold Investor Indemnified
Person harmless, Seller shall contribute to amounts paid or
payable by such Investor Indemnified Person in respect of
such losses, claims, damages, liabilities and expenses in
such proportion as appropriately reflects the relative
benefits received by, and fault of Seller, on the one hand,
and the Investor and the Pecuniary Owner on the other hand,
in connection with the matters as to which such losses,
claims, damages, liabilities or expenses relate. The
agreement of Seller in this paragraph shall be in addition
to any other liability that Seller may otherwise have.
-44-
<PAGE> 50
b. OBLIGATIONS OF THE INVESTOR AND THE PECUNIARY OWNER.
The Investor and the Pecuniary Owner, severally and not
jointly, agree 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 and all 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 the Investor as agent for and on behalf
of the Pecuniary Owner in, or pursuant to, this Agreement,
or (b) any pending or threatened Action brought by the
Investor's or the Pecuniary Owner's shareholders or
creditors relating to, or arising out of or in connection
with, directly or indirectly, the transactions contemplated
under this Agreement; provided, however, that the Investor
or the Pecuniary Owner, as applicable, 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
the Investor or the Pecuniary Owner, as applicable. As a
condition to the rights of any of the Seller Indemnified
Parties under this Section 11, the Investor may require that
any such Person provide a written undertaking that such
Person will repay to the Investor or the Pecuniary Owner, as
applicable, any amount expended by the Investor or the
Pecuniary Owner, as applicable, to indemnify, defend or hold
harmless such Person in the event and to the extent a court
determines that such Investor's or Pecuniary Owner's
indemnification or defense of such Person is prohibited by
applicable Law. The agreement of the Investor and the
Pecuniary Owner in this paragraph shall be in addition to
any other liability that the Investor and the Pecuniary
Owner may otherwise have.
c. PROCEDURE.
i. 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.
ii. 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
-45-
<PAGE> 51
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.
d. SURVIVAL. The indemnity set forth in this Section 11
shall survive each Closing or any 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 Sections 11.1 or
11.2(b), forever.
-46-
<PAGE> 52
e. NOTICE BY SELLER. Seller and the Investor agree to
notify in writing the other parties 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 parties), whether
before or after any Closing Date.
SECTION 12. GENERAL
a. 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.
b. 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.
c. 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.
d. 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 MARYLAND, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION
(WHETHER OF THE STATE OF MARYLAND OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK.
-47-
<PAGE> 53
e. 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 the Investor may assign the commitment of any Pecuniary
Owner to purchase Shares hereunder, and the related rights
and remedies of such Pecuniary Owner, to any other client on
behalf of whom it or any of its Affiliates acts as
investment advisor, whether or not such client is initially
the Pecuniary Owner hereunder and (ii) the Pecuniary Owner
may at any time subsequent to the date hereof appoint a
successor agent to act on its behalf in connection with the
matters contemplated herein.
f. 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.
g. 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
parties.
h. PUBLICITY AND REPORTS. Seller and the Investor 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 parties, except to the extent that independent
legal counsel to Seller or the Investor, as the case may be,
shall advise the other parties 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).
i. 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) as may otherwise be required by Law to be
-48-
<PAGE> 54
disclosed or (c) to the extent such duty as to
confidentiality is waived in writing by the other parties.
Notwithstanding the foregoing, the Investor shall be
entitled to disclose information relating to this Agreement
and the transactions contemplated hereby to any client on
behalf of whom it or any of its Affiliates acts as
investment advisor, in connection with a contemplated
investment by such client in Seller as described herein. 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 parties all documents (and
reproductions thereof) received by it or its representatives
from such other parties (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.
j. 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.
k. 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 the Investor, addressed to:
ABKB/LaSalle Securities Limited Partnership
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Stanley J. Kraska, Jr.
Telecopy: (410) 347-0612
With a copy to:
Elizabeth Grieb, Esquire
Piper & Marbury L.L.P.
36 S. Charles Street
Baltimore, Maryland 21201
Telecopy: (410) 576-1710
-49-
<PAGE> 55
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
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.
l. EXPENSES. Except as set forth in the next
sentence, each of the parties hereto shall pay its 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 its respective financial
advisers, accountants and counsel. Seller shall reimburse the
Investors for all legal fees incurred by the Investor
relating to the transactions contemplated by this Agreement
and the Registration Rights Agreement up to a maximum of
$25,000.
m. 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.
Each of the parties hereto shall be entitled to seek any
equitable remedy to the extent such remedy is available under
applicable Law.
n. REPRESENTATION BY COUNSEL; INTERPRETATION. Each
of the parties hereto acknowledges 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 the parties hereto, and no rule of
strict construction shall be applied against any party to
this Agreement.
-50-
<PAGE> 56
o. SEVERABILITY. If any provision of this 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 Agreement would not be materially and
adversely affected thereby, such provision shall be fully
separable, and this Agreement shall be construed and enforced
as if such illegal, invalid or unenforceable provision had
never comprised a part thereof, and the remaining provisions
of this 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
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 or any arbitrator to whom disputes relating to this
Agreement are submitted to reform the otherwise illegal,
invalid or unenforceable provision in accordance with this
Section 12.15.
p. ARBITRATION. In the event of a dispute hereunder
which cannot be resolved by the parties, such dispute shall
be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association and
judgment on the award rendered by the arbitration panel may
be entered in any court or tribunal of competent
jurisdiction. Any arbitration occurring under this Section
12.16 shall be held in Baltimore, Maryland in the first
instance, in Dallas, Texas in the second instance, and
continuing in that order with respect to each dispute
occurring hereunder.
q. AGENTS. (a) Seller acknowledges and agrees that
the Investor is acting as agent for and on behalf of the
Pecuniary Owner and that the Investor shall not have any
liability to Seller, and shall not be obligated to purchase
securities hereunder with respect to which the Pecuniary
Owner was obligated to but did not purchase.
(b) In the event that the Investor shall no longer act as agent for and on
behalf of the Pecuniary Owner in connection with the matters contemplated by
this Agreement, then (i) any agent(s) appointed by the Pecuniary Owner as
successor agent(s) to the Investor shall be entitled to, and to exercise on
behalf of the Pecuniary Owner, all of the rights and remedies provided for
herein with respect to the Investor and (ii) at any such time as no successor
agent(s) shall have been appointed by the Pecuniary Owner, the Pecuniary Owner
shall be entitled to exercise all of the rights and remedies provided for herein
in its individual capacity, including the right to obtain, upon request, copies
of all documents and notices as specified herein. In the event that the Investor
shall no longer act as agent on behalf of the Pecuniary Owner hereunder, all
consents or waivers of the Investor necessary to effect any action hereunder
shall be required to be given by any successor agent(s) appointed by the
Pecuniary Owner or, if no successor(s) has been appointed, by the Pecuniary
Owner, prior to the consummation of such action.
-51-
<PAGE> 57
(c) Until such time as Seller shall have received a written notice
from the Pecuniary Owner that the Investor is no longer acting as the Pecuniary
Owner's agent hereunder, Seller shall be entitled to rely on any instructions
and any notices received from the Investor on behalf of the Pecuniary Owner as
if received from the Pecuniary Owner directly.
"INVESTOR"
ABKB/LASALLE SECURITIES LIMITED
PARTNERSHIP, as Agent and for and
on behalf of the Pecuniary Owner
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
"SELLER"
AMERICAN INDUSTRIAL PROPERTIES REIT
-------------------------------------
Charles W. Wolcott
President and Chief Executive Officer
-52-
<PAGE> 1
EXHIBIT 10.8
COMMON SHARE PURCHASE AGREEMENT
dated as of July 3, 1997
Between
AMERICAN INDUSTRIAL PROPERTIES REIT
and
ABKB/LASALLE SECURITIES LIMITED PARTNERSHIP
as Agent for and for the benefit of a
particular client
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.2 RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
SECTION 2. PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
2.1 PURCHASE AND SALE OF THE COMMON SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
2.2 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
2.3 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
3.1 ORGANIZATION AND RELATED MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
3.2 CAPITAL STOCK; TITLE TO SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -12-
3.3 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
3.4 SEC REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
3.5 AUTHORIZATION; NO CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
3.6 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
3.7 COMPLIANCE WITH LAW AND PERMITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.8 DIVIDENDS AND OTHER DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.9 CERTAIN INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.10 NO BROKERS OR FINDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
3.11 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
3.12 LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
3.13 PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
3.14 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
3.15 MATERIAL CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
3.16 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
3.17 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
3.18 TRUST RECORDS; ACCOUNTING RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
3.19 NEW YORK STOCK EXCHANGE LISTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
3.20 DISCLOSURE OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
3.21 PENSION-HELD REIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
3.22 SHAREHOLDER APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
SECTION 4. REPRESENTATIONS AND WARRANTIES OF INVESTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.1 ORGANIZATION AND RELATED MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.2 AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.3 NO CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.4 NO BROKERS OR FINDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.5 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
4.6 INVESTMENT REPRESENTATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
4.7 LEGENDS; STOP-TRANSFER ORDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
4.8 STATUS FOR REIT OWNERSHIP AND INCOME TESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
4.9 AUTHORITY OF THE INVESTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
SECTION 5. COVENANTS WITH RESPECT TO CONDUCT OF SELLER PRIOR TO CLOSING . . . . . . . . . . . . . . . . . . . -26-
5.1 ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
5.2 MATERIAL ADVERSE CHANGES; SEC FILINGS; REPORTS; FINANCIAL STATEMENTS . . . . . . . . . . . . . . . -27-
5.3 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
5.4 NOTIFICATION OF CERTAIN MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
5.5 ADJUSTMENT OF SHARE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
SECTION 6. ADDITIONAL CONTINUING COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
6.1 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
6.2 APPOINTMENT OF TRUST MANAGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
6.3 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.4 STATUS FOR REIT OWNERSHIP AND INCOME TESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.5 PROHIBITED TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.6 SELLER/BUYER REGISTRATION RIGHTS AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.7 REIT QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.8 PREEMPTIVE RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.9 DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
6.10 FURNISH DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
6.11 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
6.12 ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
6.13 MSRE AND MSAM CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
SECTION 7. GENERAL CONDITIONS OF PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.1 NO ORDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.2 APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.3 ABSENCE OF LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.4 NEW YORK STOCK EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
7.5 SHAREHOLDER APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
SECTION 8. CONDITIONS TO OBLIGATIONS OF THE INVESTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.1 ACCURACY OF SELLER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . -35-
8.2 PERFORMANCE BY SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.3 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.4 CERTIFICATION BY SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.5 OPINION OF SELLER'S COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
8.6 SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
8.7 REALCO, MSRE AND MSAM CONSENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
8.8 ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
8.9 CLOSING OF MSRE AND MSAM PURCHASE TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
SECTION 9. CONDITIONS TO OBLIGATIONS OF SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
9.1 ACCURACY OF THE INVESTOR'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . -36-
9.2 BUYERS' PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
9.3 CERTIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
9.4 OPINION OF COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
9.5 REIT STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
SECTION 10. TERMINATION OF OBLIGATIONS; SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
10.1 TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
10.2 EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
10.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . . . . . . . . . . . -37-
SECTION 11. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
11.1 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
11.2 OBLIGATIONS OF THE INVESTOR AND THE PECUNIARY OWNER. . . . . . . . . . . . . . . . . . . . . . . -39-
11.3 PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
11.4 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
11.5 NOTICE BY SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
SECTION 12. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
12.1 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
12.2 SCHEDULES; EXHIBITS; INTEGRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.3 BEST EFFORTS; FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.4 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.5 NO ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.6 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.7 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.8 PUBLICITY AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.9 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
12.10 PARTIES IN INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
12.11 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
12.12 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
12.13 REMEDIES; WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
12.14 REPRESENTATION BY COUNSEL; INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
12.15 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
12.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
12.17 AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
</TABLE>
-iii-
<PAGE> 5
EXHIBITS
EXHIBIT A 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 8.5 List of Opinions of Seller's Counsel
SCHEDULE 9.4 List of Opinions of Investor's Counsel
-iv-
<PAGE> 6
COMMON SHARE PURCHASE AGREEMENT
THIS COMMON SHARE PURCHASE AGREEMENT (this "AGREEMENT") is made and
entered into as of July 3, 1997, by and among AMERICAN INDUSTRIAL PROPERTIES
REIT, a Texas real estate investment trust ("SELLER"), and ABKB/LASALLE
SECURITIES LIMITED PARTNERSHIP, a registered investment advisor (the
"Investor"), as agent for and for the benefit of a particular client.
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 Investor, and Investor desires to
purchase from Seller, the number of Common Shares having an aggregate purchase
price as specified herein (the "Shares") upon the terms and subject to the
conditions set forth in this Agreement.
C. The proceeds from the sale of the 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 1. DEFINITIONS AND RULES OF CONSTRUCTION
a. 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 Common Share Purchase Agreement, by and
between Seller and the Investor, as agent for and for the benefit of a
particular client, as amended from time to time pursuant to the terms of this
Agreement, together with all Exhibits and all Schedules attached hereto.
-1-
<PAGE> 7
"ANNUAL MEETING" shall mean the Seller's annual meeting that
was held on June 30, 1997.
"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.
"BANKRUPTCY CODE" means Title 11 of the United States Code
entitled "Bankruptcy," as now and hereafter in effect, and any successor
statute, as well as any existing or future law of any jurisdiction, foreign or
domestic, relating to bankruptcy, insolvency, reorganization, conservatorship
or relief of debtors.
"BUSINESS DAY" means a day other than a Saturday, a Sunday or
a day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"CAPITALIZED LEASE" means any lease of property, real or
personal, the obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of the lessee.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the
obligation of such Person to pay rent or other amounts under a Capitalized
Lease and, for purposes of this Agreement, the amount of such obligation shall
be the capitalized amount thereof, determined in accordance with GAAP.
"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
-2-
<PAGE> 8
or other equity interests, or any other rights, warrants or options to acquire
any of the foregoing securities.
"CHARTER DOCUMENTS" means Seller's Third 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 each 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.
"COMMISSION" means the United States Securities and Exchange
Commission or any successor entity.
"COMMON SHARES" means common shares of beneficial interest,
par value $.10 per share, of Seller.
"CONTRACT" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, lease, license or understanding,
whether or not in writing.
"CURRENTLY OUTSTANDING SHARES" has the meaning set forth in
Section 2.4 of this Agreement.
"DEBT" means, with respect to any Person, without duplication,
and without regard to whether it is contingent or direct, (a) all indebtedness
of such Person for borrowed money, (b) any obligation incurred for all or any
part of the purchase price of property or services, other than accounts payable
and accrued expenses included in current liabilities in accordance with GAAP
and incurred in respect of property or services purchased in the ordinary
course of business, (c) indebtedness or obligations evidenced by bonds, notes
or similar written instruments, (d) all reimbursement obligations of such
Person (whether contingent or otherwise) in respect of letters of credit,
banker's acceptances, surety or other bonds and similar instruments, (e) any
obligation (whether or not such Person has assumed or becomes liable for the
payment of such obligation) secured by a lien on any property of such Person,
(f) all Capitalized Lease Obligations of such Person and (g) all Guarantees by
such Person of obligations of any other Person of the types referred to in the
foregoing clauses (a) through (f), inclusive, excluding, (i) the payment of
commissions to Prudential Securities Incorporated in connection with the
transactions contemplated herein and approved at the Annual Meeting, and (ii) a
$25 million line of credit from Prudential Securities Incorporated or its
Affiliates (the "Prudential Line of Credit").
-3-
<PAGE> 9
"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.
-4-
<PAGE> 10
"ENVIRONMENTAL PERMITS" has the meaning set forth in Section
3.17(a) of this Agreement.
"EQUITABLE REMEDIES" has the meaning set forth in Section 3.5
of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"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.
"GUARANTEE" means, with respect to any Person, any guarantee
or other contingent liability (other than any endorsement for collection or
deposit in the ordinary course of business and performance bonds, indemnities
and similar obligations not guaranteeing or otherwise insuring payment of any
Debt or other financial obligation), direct or indirect, of such Person with
respect to any Debt or other obligation of another Person (including
obligations under leases), through an agreement or otherwise, including (a) any
other endorsement or discount with recourse or undertaking substantially
equivalent to or having economic effect similar to a guarantee in respect of
any such Debt or other obligations and (b) any agreement (i) to purchase, or to
advance or supply funds for the payment or purchase of, any such obligations,
(ii) to purchase, sell or lease property, products, materials or supplies, or
transportation or services, in respect of enabling such other Person to pay any
such obligation or to assure the owner thereof against loss regardless of the
delivery or nondelivery of the property, products, materials or supplies or
transportation or services or (iii) to make any loan, advance or capital
contribution to or other investment in, or to otherwise provide funds to or
for, such other Person in respect of enabling such Person to satisfy any
obligation (including any liability for a dividend, stock liquidation payment
or expense) or to assure a minimum equity, working capital or other balance
sheet condition in respect of any such obligation. The amount of any Guarantee
shall be equal to the outstanding amount of the obligations of such other
Person directly or indirectly guaranteed.
"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
-5-
<PAGE> 11
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 PERSON" shall mean each Investor Indemnified
Person and each Seller Indemnified Party.
"INDEMNIFYING PARTY" has the meaning set forth in Section
11.3(a) of this Agreement.
"INITIAL REIT YEAR" has the meaning set forth in Section
3.14(c) of this Agreement.
"INVESTMENT COMMITTEE" means the investment committee of the
Seller's Board of Trust Managers which after the Annual Meeting shall consist
of one Trust Manager designee of Investor, one Trust Manager designee of
Realco, one Trust Manager designee of MSAM and one independent Trust Manager.
"INVESTOR" means ABKB/LaSalle Securities Limited Partnership
Advisors Limited Partnership, a registered investment advisor.
"INVESTOR INDEMNIFIED PERSON" has the meaning set forth in
Section 11.1 of this Agreement.
-6-
<PAGE> 12
"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, 1996 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, 1996 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.
"MINIMUM EQUITY CAPITALIZATION" means $150 million as
calculated using the average closing price of the Common Shares on the New York
Stock Exchange for the 10 trading days immediately preceding the applicable
date of determination multiplied by the current number of issued and
outstanding Common Shares and Common Share equivalents; provided, however, it
shall not in any event include operating partnership units in excess of $50
million.
"MSAM" means Morgan Stanley Asset Management, Inc., a Delaware
corporation.
"MSAM PURCHASE AGREEMENT" means that certain Common Share
Purchase Agreement dated as of June 20, 1997, by and among Seller, MSRE and
MSAM pursuant to which MSRE and MSAM, as agent and attorney-in-fact on behalf
of certain clients, have agreed to
-7-
<PAGE> 13
purchase up to $20 million of Common Shares of Seller on terms and conditions
substantially similar to the terms and conditions contained herein.
"MSAM PURCHASERS" means the clients of MSAM listed on Exhibit
A to the MSAM Purchase Agreement.
"MSRE" means MS Real Estate Special Situations Inc., a
Delaware corporation.
"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.
"OTHER PECUNIARY OWNERS" means the other pecuniary owners for
whom the Investor is acting as agent for and on behalf of in connection with
the purchase of Common Shares of the Seller pursuant to Common Share Purchase
Agreements dated the date hereof similar to this Agreement and who, along with
the Pecuniary Owner, are purchasing Common Shares having an aggregate purchase
price of up to $15 million.
"PECUNIARY OWNER" means the client of Investor for whom
Investor is acting as Agent for and for the benefit of, in connection with the
purchase of the Common Shares pursuant to the Agreement.
"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 individual, corporation, partnership,
limited liability company, joint venture, an unincorporated organization,
government or any department or agency thereof, estate, trust, association, or
private foundation within the meaning of Section 509(a) of the Code, or joint
stock company.
"PREEMPTIVE RIGHTS" has the meaning set forth in Section 6.8
of this Agreement.
"PREFERRED SHARES" means any class of capital stock of a
Person which is entitled to a preference or priority over any other class of
capital stock of such Person with respect to any distribution of such Person's
assets, whether with respect to dividends, or upon liquidation or dissolution,
or both.
"PROPERTIES" means the real property owned or leased by
Seller, Subsidiaries and Seller Partnerships listed on Schedule 3.13 hereto.
-8-
<PAGE> 14
"PURCHASE PRICE" means, with respect to the Closing Date, the
aggregate price paid for the Common Shares purchased by Investor on the Closing
Date.
"REALCO" means USAA Real Estate Company, a Delaware
corporation.
"REALCO DEBT" has the meaning set forth in Section 3.2 of this
Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the registration rights
agreement among Seller, and Investor, as agent for and on behalf of the
Pecuniary Owner and certain Other Pecuniary Owners, to be executed
contemporaneously with the execution of this Agreement.
"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 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.
"SHARE PRICE" has the meaning set forth in Section 2.1 of this
Agreement.
"SHAREHOLDER APPROVAL" means the approval by Seller's
shareholders at the Annual Meeting of the proposal to approve the sale to
Investor of Common Shares having an aggregate
-9-
<PAGE> 15
purchase price of up to $15 million, and the authorization of the issuance of a
sufficient number of Common Shares to allow such sale to occur.
"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.
"THRESHOLD EQUITY CAPITALIZATION" means equity capitalization
of $250 million, calculated in the same manner as Minimum Equity
Capitalization.
"UNAUDITED FINANCIAL STATEMENTS" has the meaning set forth in
Section 3.3(b) of this Agreement.
b. 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.
-10-
<PAGE> 16
SECTION 2. PURCHASE AND SALE
a. PURCHASE AND SALE OF THE COMMON SHARES. Subject to
the terms and conditions set forth herein, Seller
shall sell and issue to Investor, and Investor shall
purchase from Seller, up to an aggregate of 1,956,123
Common Shares (the "Shares") at a price of $2.45 per
Common Share, subject to adjustment as set forth in
Section 5.5 (the "Share Price").
b. USE OF PROCEEDS. The proceeds of the purchase of
Shares hereunder shall be used by the Seller to
purchase real property as approved by the Investment
Committee.
c. CLOSING.
i. The Closing shall occur on or before July 11, 1997,
(the "CLOSING DATE"), and the Investor shall purchase
the number of Shares specified in Section 2.1.
ii. At the Closing, Seller shall deliver to the Investor
the certificates evidencing the Shares purchased by
the Investor on the applicable Closing Date,
registered in the name of the Investor or its
nominee. 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 purchased by the Investor on the
applicable Closing Date.
iii. At the Closing, the Investor shall pay and deliver to
Seller the Purchase Price for the Shares being
purchased by the Investor at the Closing.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to, and agrees with, the Investor and
the Pecuniary Owner as follows:
a. 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
Partnerships of Seller (the "SELLER PARTNERSHIPS")
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
-11-
<PAGE> 17
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 the
Investor. 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.
b. CAPITAL STOCK; TITLE TO SHARES. The authorized
Capital Stock of Seller consists of 500,000,000
Common Shares, 10,000,000 of which are issued and
outstanding and 10,000,000 Preferred Shares, none of
which 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
-12-
<PAGE> 18
Subsidiary or any Seller Partnership are issued or
outstanding other than the Seller's note in the
aggregate principal amount of $5,449,618 (the "REALCO
DEBT") held by Realco. 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.
Except as contemplated by this Agreement, there are
no preemptive rights in respect of any Common Shares
or Capital Stock of any Subsidiary or any Seller
Partnership. Upon any issuance of Shares to the
Investor, such Shares will have been duly authorized,
validly issued and be validly outstanding, fully paid
and nonassessable, and the issuance of such Shares
will not be subject to preemptive rights of any other
shareholder of Seller and such Shares will be issued
in compliance with all applicable federal and state
laws and stock trading requirements. Each Buyer shall
receive good and marketable title to all Shares
acquired by such Buyer pursuant to this Agreement,
free and clear of all Encumbrances created by Seller,
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 except for a class of preferred shares of
beneficial interest which the shareholders approved
at the Annual Meeting, none of which shall be issued
and outstanding as of the First Closing Date, there
are no shares of any class of Capital Stock of Seller
having any priority in respect thereof. All of the
outstanding securities of Seller were issued in
compliance with all applicable federal and state
securities laws.
c. FINANCIAL STATEMENTS.
i. AUDITED FINANCIAL STATEMENTS. Seller has delivered to
the Investor the consolidated balance sheets of
Seller (which reflect the financial position of all
Subsidiaries and Seller Partnerships), as of December
31, 1994, 1995 and 1996, and the respective related
consolidated statements of operations, cash flows and
shareholders' 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
-13-
<PAGE> 19
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, 1996, 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 5,
1997.
ii. UNAUDITED FINANCIAL STATEMENTS. Seller has delivered
to the Investor the consolidated balance sheets of
Seller (which reflect the financial position of all
Subsidiaries and Seller Partnerships), as of March
31, 1997 and the related consolidated statements of
operations, cash flows and shareholders' equity for
the period then ended (the "UNAUDITED FINANCIAL
STATEMENTS"). The 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 March 31, 1997.
iii. NO MATERIAL ADVERSE CHANGES. Since March 31, 1997,
except as set forth in Schedule 3.3, or specifically
disclosed in any SEC Filings filed since March 31,
1997 and prior to the date of this Agreement (copies
of which have been provided to the Investor), 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:
(1) 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
(2) 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
(3) 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.
-14-
<PAGE> 20
iv. 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 March 31,
1997 in the ordinary course of business in a manner
consistent with past practice and are not material in
amount, or (ii) are set forth in Schedule 3.3 hereto.
d. SEC REPORTS. Seller has filed with the Commission 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
Commission since December 31, 1994. Such forms,
reports, statements, including registration
statements, and other material documents required to
be filed with the Commission by Seller since December
31, 1994 are collectively referred to in this
Agreement as the "SEC FILINGS." Seller has made
available to the Investor 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.
e. 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. Except for
the share ownership limitation contained therein, the
Charter Documents do not in any way prevent or
restrict the transactions contemplated hereby or
preclude the Investor acting as agent on behalf of
the Pecuniary Owner, or the Pecuniary Owner from
owning or holding the amount, value or class of
Common Shares to be purchased hereby. 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
except the shareholder consent needed to increase the
number of authorized Common Shares to allow the
issuance and sale of Shares on any Closing Date to
occur. This Agreement has been duly
-15-
<PAGE> 21
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
(collectively, "EQUITABLE REMEDIES"). 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 or violation 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 or 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.
f. LEGAL PROCEEDINGS. Except as set forth in Schedule
3.6, 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 or any action taken or to be taken
pursuant hereto or thereto, (ii) may adversely affect
the right, title or interest of the Investor to the
Shares or (iii) individually or when aggregated with
one or
-16-
<PAGE> 22
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, 1997 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.
g. COMPLIANCE WITH LAW AND PERMITS.
i. 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.
ii. 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 the
Investor 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
-17-
<PAGE> 23
review by any Governmental Entity with respect to
the Seller Permits is pending or threatened.
h. 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 December
31, 1996.
i. 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.
j. 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 Prudential Securities Incorporated.
-18-
<PAGE> 24
k. 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 the Investor. 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
-19-
<PAGE> 25
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.
l. 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.
m. PROPERTIES.
i. 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") as of the date hereof. Except as
set forth in Schedule 3.13, Seller, Subsidiary or
Seller Partnership, as applicable, owns good,
marketable 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
-20-
<PAGE> 26
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.
ii. Seller has delivered to the Investor a true, correct
and complete copy of a rent roll with respect to each
Property as of the date hereof 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 April 30, 1997 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, 1997. 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, 1997, 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
-21-
<PAGE> 27
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
any 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, any Subsidiary
or any Seller Partnership.
(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,
-22-
<PAGE> 28
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, 1997 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 any 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
-23-
<PAGE> 29
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 First Closing Date.
(k) Seller has made available (or, with respect to all Tax Returns
filed after the date hereof, will make available) to the Investor 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 First 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 the Investor all relevant
information with respect to the federal income tax net operating loss
carryovers of Seller as of December 31, 1996, 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 First 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).
-24-
<PAGE> 30
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 the Investor 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 Investor true, correct, and
complete copies of all written reports of any environmental assessment,
compliance or regulatory audit, inspection, or investigation
-25-
<PAGE> 31
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 issuance or sale and delivery of
any Shares to the Investor pursuant to this Agreement 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 the
Investor 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.
3.21 PENSION-HELD REIT. For purposes of Section 856(h)(3) of the
Code, Seller hereby represents that at any time during the shorter of (i) the
two-year period ending immediately prior to the First Closing Date or (ii) the
period during which Seller was in existence, to the best of Seller's knowledge,
no "qualified trust" has held, directly or indirectly, more than 10% of the
interests in Seller.
3.22 SHAREHOLDER APPROVAL. The Seller's shareholders approved at
the Annual Meeting all of the proposals set forth in the Notice of Annual
Meeting of Shareholders and accompanying proxy statement dated May 12, 1997.
-26-
<PAGE> 32
SECTION 4. REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants with respect to itself (except as
indicated) to, and agrees with, Seller as follows:
a. ORGANIZATION AND RELATED MATTERS. It is a limited
partnership duly organized and validly existing under
the laws of the state of its organization. It has all
necessary partnership power and partnership authority
to carry on its business as now being conducted. It
has all necessary partnership power and partnership
authority to execute, deliver and perform this
Agreement and the transactions contemplated hereby.
b. AUTHORIZATION. This Agreement has been duly executed
and delivered by it and constitutes the legally valid
and binding obligation of the Investor and the
Pecuniary Owner, enforceable in accordance with its
terms, except as such enforceability may be limited
by Equitable Remedies. The execution and delivery of
this Agreement by it 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 its
material Contracts, other than any filing required
under the Exchange Act.
c. NO CONFLICTS. The execution, delivery and performance
of this Agreement by it 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) its
organizational documents, pursuant to which it was
organized and by which it is governed, (b) any Law to
which it is subject or (c) any Contract to which it
is a party that is material to the financial
condition, results of operations or conduct of its
business.
d. NO BROKERS OR FINDERS. No agent, broker, finder or
investment or commercial banker, or other Person or
firms engaged by or acting on its behalf or on behalf
of 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 broker's or
finder's or similar fees or other commissions as a
result of this Agreement or such transactions.
e. LEGAL PROCEEDINGS. There is no Order or Action
pending against or, to its knowledge, affecting it
that individually or when aggregated with one or more
other Actions has, or if determined adversely would
have, a material adverse effect on its business,
properties, or financial condition or on its ability
to perform this Agreement.
-27-
<PAGE> 33
f. INVESTMENT REPRESENTATION. This Agreement is made
with the Investor in reliance upon such Investor's
representation to Seller, which by such Investor's
execution of this Agreement such Investor hereby
confirms that the Shares will be acquired by the
Investor as agent for and on behalf of the Pecuniary
Owner, for the Pecuniary Owner's own account, not as
nominee or agent for any other party, for investment
purposes only and not with a view to or for sale in
connection with the distribution thereof. It agrees
to execute any further certificate or other document
representing such investment intent or as to any
other matter reasonably requested by Seller to assure
compliance with applicable securities laws.
g. LEGENDS; STOP-TRANSFER ORDERS.
i. The certificates for Shares will bear legends
in substantially the following form:
THE SHARES 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 UNDER SUCH LAWS OR IS EXEMPTED FROM SUCH REGISTRATION
REQUIREMENTS.
The foregoing legend shall be removed from any such certificate at the request
of the holder thereof at such time as the shares represented thereby are
registered under the Securities Act or become eligible for resale under Rule
144 promulgated under the Securities Act.
ii. The certificates for Shares may also bear any
legend required by any applicable state blue sky law.
iii. Any certificates for Shares will also bear a
legend relating to restrictions on transfer imposed
pursuant to the percentage ownership limitation
contained in the Charter Documents.
iv. Seller may impose appropriate stop-transfer
instructions relating to the restrictions set forth
herein.
h. STATUS FOR REIT OWNERSHIP AND INCOME TESTS.
At the Closing, to the best of Investor's knowledge,
the purchase of the Common
-28-
<PAGE> 34
Shares by the Pecuniary Owner will not result in a
"qualified trust" as defined in Code Section
856(h)(3) holding more than 25% in value of the
Seller's outstanding Capital Stock. The Pecuniary
Owner is not purchasing the Common Shares, and will
not hold any or all of the Common Shares so
purchased, through any arrangement or entity that
would be deemed, for federal income tax purposes, to
be a partnership between the Pecuniary Owner and any
or all of the Other Pecuniary Owners (other than
ABKB/LaSalle Securities Private Placement Limited
Partnership I, L.P.). The Common Shares that each
Pecuniary Owner owns will not be considered to be
owned by any individual (or entity treated as an
individual under Section 856(h) of the Code), who
after application of the stock ownership rules of
Section 856(h) of the Code would own more than 9.8%
of the lesser of the number or value of any
outstanding class of Capital Stock.
i. AUTHORITY OF THE INVESTOR. The Investor is duly
authorized to enter into this Agreement and to
consummate the transactions contemplated hereby as
agent for and on behalf of the Pecuniary Owner.
SECTION 5. 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.
a. ACCESS. Seller shall, and shall cause the
Subsidiaries and Seller Partnerships to, authorize
and permit the Investor 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 the
Investor 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 the
Investor and its partners and their respective
officers, employees, accountants and counsel, as the
Investor 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
-29-
<PAGE> 35
permit, the Investor and its 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.
b. MATERIAL ADVERSE CHANGES; SEC FILINGS; REPORTS;
FINANCIAL STATEMENTS.
i. Seller shall promptly notify the Investor 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 the Investor.
ii. Seller will, and will cause the Subsidiaries
and Seller Partnerships to, furnish to the Investor
as soon as available copies of all SEC Filings, and
all material reports, renewals, filings,
certificates, statements and other documents filed
with any Governmental Entity.
c. 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 the Closing Date, 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 the Investor, which consent may not
unreasonably be withheld:
i. conduct the business of Seller, Subsidiaries
and Seller Partnerships in any manner except in the
ordinary course consistent with past practices; or
ii. purchase any real property without the
consent of the Investment Committee; or
iii. 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
First Closing Date; or
-30-
<PAGE> 36
iv. issue, sell, redeem or acquire for value, or
agree to do so, any debt obligations (other than the
Prudential Line of Credit), Common Shares or Capital
Stock; or
v. 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),
(ii) liabilities arising out of, incurred in
connection with, or related to the consummation of
the transactions contemplated by this Agreement,
(iii) payments to Realco under the Realco Debt and
(iv) purchases of real property in accordance with
Section 5.3(b); or
vi. merge (if Seller is not the surviving
entity), 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
vii. 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
viii. amend the Charter Documents or the charter or
organizational documents of the Subsidiaries or
Seller Partnerships; or
ix. 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
x. cancel, satisfy or prepay any debt,
obligation, liability or encumbrance, or waive any
claim or right of value of Seller, Subsidiaries or
Seller Partnerships except the extinguishment of debt
under the Realco Debt through the conversion of the
Realco Debt to Common Shares; or
xi. (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
-31-
<PAGE> 37
or wages or under any bonus, insurance, welfare,
severance, deferred compensation, pension,
retirement, profit sharing, share option (including,
without limitation, the granting of any share option
or share appreciation right or performance or
restricted share award), share purchase or other
employee benefit plan, (ii) except as approved by the
Compensation Committee prior to the date of this
Agreement or except as approved by the Compensation
Committee and approved by a unanimous vote of the
Seller's Board of Trust Managers, 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, share option (including,
without limitation, the granting of any share option
or share appreciation right or performance or
restricted share award), share 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
xii. 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
xiii. make any change in any significant accounting
principles or practices used by Seller, Subsidiaries
or Seller Partnerships, except as required by the
Commission; or
xiv. 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
-32-
<PAGE> 38
xv. except as provided in Section 5.3(b), 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
xvi. 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
xvii. agree to or make any commitment to take any
action prohibited by this Section 5.3.
d. NOTIFICATION OF CERTAIN MATTERS. Seller shall give
prompt notice to the Investor, and the Investor 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 the Investor 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.
e. ADJUSTMENT OF SHARE PRICE. The Share Price will be
subject to adjustment from time to time prior to the
Closing Date as follows:
(a) If Seller shall at any time prior to the Closing Date
(i) pay a dividend or make any other distribution payable in Common Shares to
holders of any class of Capital Stock of Seller, (ii) subdivide or reclassify
the outstanding Common Shares into a greater number of shares or (iii) combine
or reclassify the outstanding Common Shares into a smaller number of shares,
the Share Price in effect at the time of the record date for such dividend or
distribution or the effective date of such subdivision, combination or
reclassification will be proportionately adjusted so that the Investor will be
entitled to receive upon purchase after such time the number of Common Shares
that the Investor would have owned or been entitled to receive had such
purchase occurred immediately prior to such time. An adjustment made pursuant
to this subsection (a) will become effective immediately after the record date
in the case of a dividend or other distribution and will become effective
immediately after the effective date of any such subdivision, combination,
reclassification or change, provided that, if such dividend or distribution is
not ultimately paid or made, the Share Price shall be readjusted to be equal to
the Share Price in effect immediately prior to such record date. Such
adjustment will be made successively whenever any event listed above occurs.
(b) If Seller shall at any time prior to the Closing Date
issue rights or warrants to all holders of Common Share entitling them (for a
period commencing no earlier than the record date for the determination of
holders of Common Shares entitled to receive such rights or warrants and
expiring within 45 days after such record date) to subscribe for or purchase
Common Shares at
-33-
<PAGE> 39
a price per share less than the Current Market Price (as defined in subsection
(d) below) of Common Shares on such record date, the Share Price will be
adjusted effective as of immediately after such record date so that it shall
equal the price determined by multiplying the Share Price in effect immediately
prior thereto by a fraction, the numerator of which is the number of Common
Shares outstanding on such record date plus the number of Common Shares that
the aggregate offering price of the Common Shares so offered for subscription
or purchase or purchased would purchase at the Current Market Price per Common
Share, and the denominator of which is the number of Common Shares outstanding
on such record date plus the number of additional Common Shares which may be
purchased upon the exercise of the rights or warrants issued, provided that, if
such issuance is not ultimately made, the Share Price shall be readjusted to be
equal to the Share Price in effect immediately prior to such record date.
Common Shares owned by or held for the account of Seller shall not be deemed
outstanding for the purpose of any such computation. Such adjustment will be
made successively whenever such rights or warrants are issued.
(c) If Seller shall at any time prior to the Closing Date
distribute to all holders of Common Shares any shares of any class of Capital
Stock other than Common Shares, evidences of indebtedness or other assets
(other than cash dividends or distributions out of retained earnings), or shall
distribute to holders of Common Shares rights or warrants to subscribe to
securities (other than those referred to in subsection (b) above), then in each
such case the Share Price will be adjusted so that it equals the price
determined by multiplying the Share Price in effect immediately prior to the
date of such distribution by a fraction, the numerator of which is the Current
Market Price per Common Share on the record date mentioned below less the then
fair market value (as determined by the Board of Trust Managers, whose
determinations shall be conclusive evidences of such fair market value) of said
shares, evidences of indebtedness, assets, rights or warrants or distributions
applicable to one Common Share, and the denominator of which is such Current
Market Price. Such adjustment will become effective immediately after the
record date for the determination of the holders of Common Shares entitled to
receive such distribution, provided that, if such issuance is not ultimately
made, the Share Price shall be readjusted to be equal to the Share Price in
effect immediately prior to such record date. Such adjustment will be made
successively whenever such a distribution is made.
(d) For the purpose of computation under subsections (b)
and (c) above, the "Current Market Price" per Common Share at any date will be
deemed to be the average of the daily closing price for the Common Shares on
the New York Stock Exchange for 20 consecutive trading days commencing 30
trading days before such date.
SECTION 6. ADDITIONAL CONTINUING COVENANTS AND AGREEMENTS
a. USE OF PROCEEDS. The proceeds from the sale of the
Shares to the Investor, 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 the purchase of real property as approved
by the Investment Committee in accordance with
Section 2.2.
-34-
<PAGE> 40
b. APPOINTMENT OF TRUST MANAGER.
i. GENERAL. Effective immediately following the Closing,
Seller shall increase the number of its Trust
Managers from seven to eight, and Seller shall
appoint one individual designated by the Investor as
Agent for and on behalf of the Pecuniary Owner and
the Other Pecuniary Owners collectively to fill the
vacancy caused by the increase in the number of Trust
Managers under this Section 6.2(a). Simultaneously
with the designee of the Investor becoming a Trust
Manager of Seller, Seller and such designee shall
enter into an indemnification agreement providing for
indemnification of such designee identical in form to
the indemnification agreements entered into between
Seller and other Trust Managers. In addition, at the
first annual meeting and all subsequent annual
meetings of shareholders after the number of Trust
Managers has been increased to eight under this
Section 6.2(a), until Seller achieves the Threshold
Equity Capitalization, Seller shall nominate, and use
its best efforts to have such person elected (which
efforts shall include, without limitation, including
the Investor's nominee in management's slate for
nomination and election and solicitation of proxies
on their behalf), one designee of the Investor (which
may be a different person than the person initially
appointed as Trust Manager pursuant to the first
sentence of this Section 6.2(a) if such initial
designee shall have died, resigned, been removed or
declined to be nominated) as Trust Manager. During
such time as Seller shall have an individual
designated by the Investor serving as Trust Manager
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 eight persons, including the designee of the
Investor. Such designee of the Investor 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 the
designee of the Investor serving as a Trust Manager
pursuant to the first sentence of this Section
6.2(a), Seller agrees to promptly appoint a
replacement designee selected by the Investor 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 eight
pursuant to this Section 6.2(a).
-35-
<PAGE> 41
ii. OBSERVATION RIGHTS. In the event that the designee
selected by the Investor to serve as Trust Manager is
not, for any reason, elected by Seller's
shareholders, the Investor shall have full
observation rights with respect to Seller's Trust
Managers, including the right to obtain full and
timely notice of all meetings of the Trust Managers
and of each of its committees, to obtain copies of
all written and other materials disseminated to Trust
Managers and to designate a person to attend in
person or by telephone all meetings of the Trust
Managers or their committees. If the Investor
receives observation rights pursuant to the
provisions of this paragraph, the Investor and its
designees in respect of such rights shall each
execute a confidentiality agreement in form and
substance reasonably satisfactory to Seller.
iii. RESIGNATIONS. At such time as Seller achieves
Threshold Equity Capitalization, the Investor shall
cause its designee to not seek re-election at the
next annual meeting, or at Seller's option, to
immediately resign.
iv. QUALIFICATIONS. Each of the representatives
designated by the Investor in accordance with this
Section 6.2 shall be a Person selected by the
Investor in its sole discretion; provided, however,
that any such person may not have been involved in
any of the events described in Item 401(f)(1)-(4) of
Regulation S-K promulgated under the Exchange Act.
v. COMMITTEES. At any time that the Investor shall have
exercised its rights under this Section 6.2 to
appoint a designee as Trust Manager, Seller shall
appoint the Investor's designee on each committee of
the Trust Managers, and each such committee shall
contain no more than four members until expiration of
the latest term of office of any designee of the
Investor pursuant to Section 6.2(a) or 6.2(b).
c. ENVIRONMENTAL MATTERS. Seller will advise the
Investor 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.
d. STATUS FOR REIT OWNERSHIP AND INCOME TESTS. Following
the Closing Date, and at all subsequent times during
which the Investor or the Pecuniary Owner owns any of
the Shares, applying the stock ownership rules of
Section 856(h) of the Code, the representation set
forth in Section 4.8 will remain true and correct.
e. 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, or
approved by Seller's shareholders in accordance with
applicable state law.
-36-
<PAGE> 42
f. SELLER/BUYER REGISTRATION RIGHTS AGREEMENT. On the
Closing Date, the Investor, as agent for and on
behalf of the Pecuniary Owner and certain Other
Pecuniary Owners, and Seller shall enter into a
Registration Rights Agreement substantially in the
form of Exhibit A.
g. REIT QUALIFICATION. Seller shall take all actions
necessary to maintain Seller's qualification as a
REIT and, without the written consent of the Investor
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.
Seller covenants and agrees that (i) it will duly and
promptly notify the Investor upon becoming aware that
any "qualified trust" holds or is expected to hold,
directly or indirectly, more than 10% of the
interests in Seller, and (ii) it will provide the
Investor such information and/or verification as the
Investor shall reasonably request in order to verify
whether Seller constitutes a "pension-held REIT" as
defined under Section 856(h)(3)(C) of the Code.
h. PREEMPTIVE RIGHTS. In the event that Seller shall at
any time subsequent to the date of this Agreement
issue any Common Shares to any Person or Persons
(other than (i) Common Shares issued to Realco in
connection with the conversion of the Realco Debt to
Common Shares, (ii) Common Shares issued pursuant to
an employee share option, share purchase, share
incentive or compensation plan or (iii) Common Shares
issued to any partners in Affiliates of Realco in
connection with the merger of such Affiliates with
and into Seller) (each such issuance, a "Subsequent
Offering")), the Investor shall have the right to
purchase, on the same terms and conditions as the
other purchasers in the Subsequent Offering, Common
Shares in an amount not to exceed, in the aggregate,
such number of Common Shares as is equal to the total
number of Common Shares offered in the Subsequent
Offering times a fraction, the numerator of which is
the number of Common Shares then owned by the
Investor in the aggregate and the denominator of
which is the total number of Common Shares
outstanding immediately prior to such Subsequent
Offering. Notwithstanding the foregoing, with respect
to each Subsequent Offering by Seller in the amount
of $10 million or more, the amount of shares the
Investor may purchase in the aggregate pursuant to
such Preemptive Rights shall be reduced by 5% of the
total Common Shares outstanding (on a fully-diluted
basis) after each such Subsequent Offering. The
Investor's Preemptive Rights will immediately
terminate once Seller achieves a Minimum Equity
Capitalization. The Investor or the Pecuniary Owner,
as
-37-
<PAGE> 43
applicable, shall have the right to assign the
preemptive right to buy additional Common Shares
pursuant to this Section 6.8 to any of the Other
Pecuniary Owners or to any other client of the
Investor who can make the representation to Seller
set forth in Section 4.8.
i. DEBT. Neither Seller, any Subsidiary or any Seller
Partnership shall, without the prior written consent
of the Investor (i) incur, create, assume, guarantee
or in any way become liable for, or permit to exist,
any Debt prior to such time as the Seller achieves a
Minimum Equity Capitalization, except to the extent
the proceeds of such Debt is to be used to acquire
real property, and such acquisition occurs within 90
days of the date such Debt is incurred; or (ii) issue
or have outstanding any Preferred Shares, or any
warrants, options, conversion rights or other rights
to subscribe for, purchase or acquire any Preferred
Shares, prior to such time as the Seller achieves
Minimum Equity Capitalization.
j. FURNISH DOCUMENTS. Seller shall furnish or cause to
be furnished to the Investor within five Business
Days after Seller is required to file the same with
the Commission , copies of the periodic information,
documents and other reports which Seller is required
to file with the Commission pursuant to Section 13(a)
of the Exchange Act. If Seller ceases to be required
to file information, documents and other reports
pursuant to Section 13 of the Exchange Act, it shall
remain obligated to furnish the same information,
documents and reports otherwise required under
Section 13(a) of the Exchange Act to the Investor
within five Business Days after Seller would have
been required to file the same with the Commission;
and
i. Seller shall furnish or cause to be furnished
to the Investor, within five Business Days
after the effective date thereof, copies of
any amendment or modification to its Charter
Documents.
k. TAXES. Seller shall, and shall cause each Subsidiary
and Seller Partnership to, pay, when due, all taxes,
assessments and governmental charges or levies
imposed upon it and all claims or demands of
materialmen, mechanics, carriers, warehousemen,
landlords and any other like person or entity which,
if unpaid, might result in the creation of a lien
upon the income of Seller or its assets; provided
that items of the foregoing description need not be
paid while being contested in good faith and by
appropriate proceedings and adequate reserves with
respect thereto have been provided on the books of
Seller, such Subsidiary of such Seller Partnership,
as the case may be.
-38-
<PAGE> 44
l. ADDITIONAL INFORMATION Seller shall execute and
deliver or cause to be executed and delivered to the
Investor upon the Investor's reasonable request such
other and further instruments or documents as in the
reasonable judgment of the Investor and Seller are
necessary to conform, create, evidence, preserve or
maintain the Pecuniary Owner's rights in the Shares,
and Seller shall do all such additional acts, give
such assurances and execute such instruments as the
Investor may reasonably require to vest more
completely in and assure to the Pecuniary Owner its
rights in the Shares.
m. MSRE AND MSAM CLOSING. If MSRE and MSAM, as agent and
attorney-in-fact on behalf of certain clients, do not
purchase additional Common Shares of Seller for an
aggregate purchase price of at least $4,500,000
within seven days of the Closing Date, Seller shall
rescind the sale of Shares hereunder and promptly
repay to the Investor the full purchase price for the
Shares purchased hereby.
SECTION 7. GENERAL CONDITIONS OF PURCHASE
The obligations of the parties to effect each Closing shall be subject
to the following conditions unless waived in writing by all parties:
a. 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 applicable Closing Date.
b. APPROVALS. To the extent required by applicable Law,
all Permits and Approvals required to be obtained in
connection with each 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 applicable Closing Date.
c. ABSENCE OF LITIGATION. No Action before any
Governmental Entity pertaining to the transactions
contemplated by this Agreement shall
-39-
<PAGE> 45
have been instituted on or before the applicable
Closing Date whether or not any of the parties hereto
or its Affiliates is a party.
d. NEW YORK STOCK EXCHANGE. The Shares shall have been
approved for listing, upon official notice of
issuance, on 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.
e. SHAREHOLDER APPROVAL. Seller shall have received
Shareholder Approval.
SECTION 8. CONDITIONS TO OBLIGATIONS OF THE INVESTOR
The obligations of the Investor, as agent for and on behalf of the
Pecuniary Owner, to effect the Closing shall be subject to the following
conditions except to the extent waived in writing by the Investor:
a. ACCURACY OF SELLER'S REPRESENTATIONS AND WARRANTIES.
All representations and warranties of Seller set
forth in this Agreement shall be true and correct in
all material respects on the applicable Closing Date
as if made on and as of such Closing Date.
b. 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
applicable Closing Date, including the covenants set
forth in Section 5.
c. NO MATERIAL ADVERSE CHANGE. During the period from
December 31, 1996 to the applicable Closing Date, (i)
there shall not have been any material adverse change
or any development involving a material adverse
change in the condition (financial or otherwise) of
Seller, any Subsidiary or any Seller Partnership,
taken as a whole, or in the earnings, business,
prospects or operations of Seller, any Subsidiary or
any Seller Partnership, taken as a whole, 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 the Investor, significantly
impair the marketability or value of the Shares,
(iii) the trading in any securities of Seller shall
not have been suspended or limited by the
-40-
<PAGE> 46
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.
d. CERTIFICATION BY SELLER. The Investor shall have
received a certificate, addressed to the Investor and
dated as of the applicable Closing Date, signed by
the President of Seller, certifying, in such detail
as the Investor and its counsel reasonably may
request, that all of the conditions specified in
Section 8 have been fulfilled.
e. OPINION OF SELLER'S COUNSEL. The Investor shall have
received from counsel for Seller an opinion,
addressed to the Investor and dated as of the
applicable Closing Date, in form and substance
reasonably satisfactory to the Investor as to the
matters set forth in Schedule 8.5.
f. SCHEDULES. Seller shall have delivered to the
Investor updated Schedules, if any, to this
Agreement.
g. REALCO, MSRE AND MSAM CONSENT. Seller shall have
received all necessary consents or waivers from
Realco, MSRE and MSAM in connection with the matters
contemplated by this Agreement.
h. ADDITIONAL INFORMATION. Seller's Fourth Amended and
Restated Bylaws shall have been amended to provide
for a maximum of eight (8) Trust Managers.
i. CLOSING OF MSRE AND MSAM PURCHASE TRANSACTIONS.
Seller shall have closed on the sale of the Common
Shares to MSRE and MSAM, as agent and
attorney-in-fact on behalf of the MSAM Purchasers,
pursuant o the MSAM Purchase Agreement whereby Seller
shall have received an aggregate purchase price of at
least $12,500,00 from such purchasers from the
issuance and sale of its Common Shares.
-41-
<PAGE> 47
SECTION 9. CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to effect each Closing shall be subject to
the following conditions, except to the extent waived in writing by Seller:
a. ACCURACY OF THE INVESTOR'S REPRESENTATIONS AND
WARRANTIES. All representations and warranties of the
Investor set forth in this Agreement shall be true
and correct in all material respects on the
applicable Closing Date as if made on and as of such
Closing Date.
b. BUYERS' PERFORMANCE. The Investor 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 the Investor on or before the
applicable Closing Date.
c. CERTIFICATION. Seller shall have received a
certificate, dated as of the applicable Closing Date,
signed by a Managing Director of the Investor,
certifying, in such detail as Seller and its counsel
reasonably may request, that the conditions specified
in Section 9 have been fulfilled.
d. OPINION OF COUNSEL. Seller shall have received from
counsel to the Investors an opinion, dated as of the
applicable Closing Date, in form and substance
reasonably satisfactory to Seller as to the matters
set forth in Schedule 9.4.
e. REIT STATUS. The purchase of Shares by the Investor,
as agent for and on behalf of the Pecuniary Owner,
will not cause Seller to lose its status as a REIT
under the Code.
SECTION 10. TERMINATION OF OBLIGATIONS; SURVIVAL
a. 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:
i. MUTUAL CONSENT. By mutual consent in writing of the
Investor and Seller.
ii. MISREPRESENTATION OR MATERIAL BREACH. By the Investor
or Seller with written notice to the other parties if
there has been a misrepresentation or material breach
on the part of Seller or the Investor, 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 10
business days after receipt of notice from the
Investor or Seller of the terminating party's
intention to terminate.
-42-
<PAGE> 48
iii. ENVIRONMENTAL NONCOMPLIANCE. By the Investor in the
event of the discovery of any Release or other matter
prior to any 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.
iv. CLOSING. This Agreement shall terminate if the
Closing does not occur on or before July 11, 1997.
b. EFFECT OF TERMINATION. In the event that this
Agreement shall be terminated pursuant to Section
10.1all 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 10.1shall 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.
c. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS. (a) The representations and warranties
contained in or made pursuant to this Agreement shall
expire on the third anniversary of the Closing Date
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 12 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.
(b) All covenants and agreements of the parties hereto shall be
continuing and shall survive each Closing Date pursuant to the terms thereof.
-43-
<PAGE> 49
(c) The provisions of Section 11.1 through Section 11.5 and
Section 12.12 shall survive and remain in full force and effect with respect to
the Investor notwithstanding any termination of the Investor's appointment as
agent on behalf of the Pecuniary Owner.
SECTION 11. INDEMNIFICATION
a. INDEMNIFICATION. In partial consideration of
the commitment of the Investors as agent for and on
behalf of the Pecuniary Owner hereunder, Seller
agrees to indemnify and hold harmless the Investor
and the Pecuniary Owner and any of their respective
affiliates, directors, officers, agents and employees
and each other person, if any, controlling the
Investor or the Pecuniary Owner or any of their
respective affiliates (each an "Investor Indemnified
Person") from and against any Losses (or actions in
respect thereof) to which such Investor Indemnified
Person may become subject in connection with the
matters which are the subject of the commitment made
hereunder (including any use or proposed use of the
proceeds from the sale of the Common Shares)
including without limitation any and all Losses of
the Investor Indemnified Person as a result of, or
based upon or arising out of, directly or indirectly
any inaccuracy in, breach or nonperformance of, any
of the representations, warranties, covenants or
agreements made by Seller in, or pursuant to this
Agreement, and will reimburse any Investor
Indemnified Person for all reasonable expenses
(including the reasonable fees of counsel) as they
are incurred by any such Investor Indemnified Person
in connection with investigating, preparing or
defending any such action or claim pending or
threatened, whether or not such Investor Indemnified
Person is a party hereto. Seller shall not be
responsible for any losses, claims, damages,
liabilities or expenses resulting from such Investor
Indemnified Person's gross negligence or willful
misconduct. Seller also agrees that no Investor
Indemnified Person shall have any liability (whether
direct or indirect, in contract or tort or otherwise)
to Seller for or in connection with this Agreement
except for losses, claims, damages, liabilities or
expenses to the extent that a court of competent
jurisdiction or arbitration panel shall have finally
determined that such losses, claims, damages,
liabilities or expenses resulted from such Investor
Indemnified Persons's gross negligence or willful
misconduct. In the event that the foregoing indemnity
is unavailable or insufficient to hold Investor
Indemnified Person harmless, Seller shall contribute
to amounts paid or payable by such Investor
Indemnified Person in respect of such losses, claims,
damages, liabilities and expenses in such proportion
as appropriately reflects the relative benefits
received by, and fault of Seller, on the one hand,
and the Investor and the Pecuniary Owner on the other
hand, in connection with the matters as to which such
losses, claims, damages, liabilities or expenses
relate. The agreement of Seller in this paragraph
shall be in addition to any other liability that
Seller may otherwise have.
-44-
<PAGE> 50
b. OBLIGATIONS OF THE INVESTOR AND THE PECUNIARY OWNER.
The Investor and the Pecuniary Owner, severally and
not jointly, agree 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 and all 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 the Investor as agent for and on behalf of
the Pecuniary Owner in, or pursuant to, this
Agreement, or (b) any pending or threatened Action
brought by the Investor's or the Pecuniary Owner's
shareholders or creditors relating to, or arising out
of or in connection with, directly or indirectly, the
transactions contemplated under this Agreement;
provided, however, that the Investor or the Pecuniary
Owner, as applicable, 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 the Investor or
the Pecuniary Owner, as applicable. As a condition to
the rights of any of the Seller Indemnified Parties
under this Section 11, the Investor may require that
any such Person provide a written undertaking that
such Person will repay to the Investor or the
Pecuniary Owner, as applicable, any amount expended
by the Investor or the Pecuniary Owner, as
applicable, to indemnify, defend or hold harmless
such Person in the event and to the extent a court
determines that such Investor's or Pecuniary Owner's
indemnification or defense of such Person is
prohibited by applicable Law. The agreement of the
Investor and the Pecuniary Owner in this paragraph
shall be in addition to any other liability that the
Investor and the Pecuniary Owner may otherwise have.
c. PROCEDURE.
i. 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.
ii. 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
-45-
<PAGE> 51
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.
d. SURVIVAL. The indemnity set forth in this Section 11
shall survive each Closing or any 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
-46-
<PAGE> 52
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
Sections 11.1 or 11.2(b), forever.
e. NOTICE BY SELLER. Seller and the Investor agree to
notify in writing the other parties 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 parties), whether before or after any
Closing Date.
SECTION 12. GENERAL
a. 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.
b. 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.
c. 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.
d. 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
MARYLAND, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW
OR CONFLICT OF LAW PROVISION (WHETHER OF THE STATE OF
MARYLAND OR ANY OTHER JURISDICTION) THAT WOULD CAUSE
THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER
THAN THE STATE OF NEW YORK.
-47-
<PAGE> 53
e. 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 the Investor may assign the
commitment of any Pecuniary Owner to purchase Shares
hereunder, and the related rights and remedies of
such Pecuniary Owner, to any other client on behalf
of whom it or any of its Affiliates acts as
investment advisor, whether or not such client is
initially the Pecuniary Owner hereunder and (ii) the
Pecuniary Owner may at any time subsequent to the
date hereof appoint a successor agent to act on its
behalf in connection with the matters contemplated
herein.
f. 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.
g. 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 parties.
h. PUBLICITY AND REPORTS. Seller and the Investor 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 parties,
except to the extent that independent legal counsel
to Seller or the Investor, as the case may be, shall
advise the other parties 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).
i. 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
-48-
<PAGE> 54
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) as 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 parties. Notwithstanding the
foregoing, the Investor shall be entitled to disclose
information relating to this Agreement and the
transactions contemplated hereby to any client on
behalf of whom it or any of its Affiliates acts as
investment advisor, in connection with a contemplated
investment by such client in Seller as described
herein. 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
parties all documents (and reproductions thereof)
received by it or its representatives from such other
parties (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.
j. 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.
k. 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 the Investor, addressed to:
ABKB/LaSalle Securities Limited Partnership
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Stanley J. Kraska, Jr.
Telecopy: (410) 347-0612
With a copy to:
Elizabeth Grieb, Esquire
Piper & Marbury L.L.P.
36 S. Charles Street
Baltimore, Maryland 21201
Telecopy: (410) 576-1710
-49-
<PAGE> 55
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
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.
l. EXPENSES. Except as set forth in the next sentence,
each of the parties hereto shall pay its 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
its respective financial advisers, accountants and
counsel. Seller shall reimburse the Investors for
all legal fees incurred by the Investor relating to
the transactions contemplated by this Agreement and
the Registration Rights Agreement up to a maximum of
$25,000.
m. 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. Each of
the parties hereto shall be entitled to seek any
equitable remedy to the extent such remedy is
available under applicable Law.
n. REPRESENTATION BY COUNSEL; INTERPRETATION. Each of
the parties hereto acknowledges 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 the parties
-50-
<PAGE> 56
hereto, and no rule of strict construction shall be
applied against any party to this Agreement.
o. SEVERABILITY. If any provision of this 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 Agreement would
not be materially and adversely affected thereby,
such provision shall be fully separable, and this
Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never
comprised a part thereof, and the remaining
provisions of this 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 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 or any arbitrator to whom disputes relating
to this Agreement are submitted to reform the
otherwise illegal, invalid or unenforceable provision
in accordance with this Section 12.15.
p. ARBITRATION. In the event of a dispute hereunder
which cannot be resolved by the parties, such dispute
shall be settled by arbitration in accordance with
the Commercial Arbitration Rules of the American
Arbitration Association and judgment on the award
rendered by the arbitration panel may be entered in
any court or tribunal of competent jurisdiction. Any
arbitration occurring under this Section 12.16 shall
be held in Baltimore, Maryland in the first instance,
in Dallas, Texas in the second instance, and
continuing in that order with respect to each dispute
occurring hereunder.
q. AGENTS. (a) Seller acknowledges and agrees that the
Investor is acting as agent for and on behalf of the
Pecuniary Owner and that the Investor shall not have
any liability to Seller, and shall not be obligated
to purchase securities hereunder with respect to
which the Pecuniary Owner was obligated to but did
not purchase.
(b) In the event that the Investor shall no longer act as agent
for and on behalf of the Pecuniary Owner in connection with the matters
contemplated by this Agreement, then (i) any agent(s) appointed by the
Pecuniary Owner as successor agent(s) to the Investor shall be entitled to, and
to exercise on behalf of the Pecuniary Owner, all of the rights and remedies
provided for herein with respect to the Investor and (ii) at any such time as
no successor agent(s) shall have been appointed by the Pecuniary Owner, the
Pecuniary Owner shall be entitled to exercise all of the rights and remedies
provided for herein in its individual capacity, including the right to obtain,
upon request, copies of all documents and notices as specified herein. In the
event that the Investor shall no longer act as agent on behalf of the Pecuniary
Owner hereunder, all consents or waivers of the
-51-
<PAGE> 57
Investor necessary to effect any action hereunder shall be required to be given
by any successor agent(s) appointed by the Pecuniary Owner or, if no
successor(s) has been appointed, by the Pecuniary Owner, prior to the
consummation of such action.
(c) Until such time as Seller shall have received a written notice
from the Pecuniary Owner that the Investor is no longer acting as the Pecuniary
Owner's agent hereunder, Seller shall be entitled to rely on any instructions
and any notices received from the Investor on behalf of the Pecuniary Owner as
if received from the Pecuniary Owner directly.
"INVESTOR"
ABKB/LASALLE SECURITIES LIMITED
PARTNERSHIP, as Agent and for and
on behalf of the Pecuniary Owner
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
"SELLER"
AMERICAN INDUSTRIAL PROPERTIES REIT
-------------------------------------
Charles W. Wolcott
President and Chief Executive Officer
-52-
<PAGE> 1
EXHIBIT 10.9
COMMON SHARE PURCHASE AGREEMENT
dated as of July 3, 1997
Between
AMERICAN INDUSTRIAL PROPERTIES REIT
and
LASALLE ADVISORS LIMITED PARTNERSHIP
as Agent for and for the benefit of a
particular client
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . -1-
1.1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
1.2 RULES OF CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
SECTION 2. PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -10-
2.1 PURCHASE AND SALE OF THE COMMON SHARES . . . . . . . . . . . . . . . . . . -10-
2.2 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
2.3 CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . . . . . . . . . -11-
3.1 ORGANIZATION AND RELATED MATTERS . . . . . . . . . . . . . . . . . . . . . -11-
3.2 CAPITAL STOCK; TITLE TO SHARES. . . . . . . . . . . . . . . . . . . . . . -12-
3.3 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
3.4 SEC REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -14-
3.5 AUTHORIZATION; NO CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . -14-
3.6 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
3.7 COMPLIANCE WITH LAW AND PERMITS . . . . . . . . . . . . . . . . . . . . . -15-
3.8 DIVIDENDS AND OTHER DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . -16-
3.9 CERTAIN INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.10 NO BROKERS OR FINDERS . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
3.11 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
3.12 LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
3.13 PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
3.14 TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
3.15 MATERIAL CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
3.16 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
3.17 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
3.18 TRUST RECORDS; ACCOUNTING RECORDS . . . . . . . . . . . . . . . . . . . . -23-
3.19 NEW YORK STOCK EXCHANGE LISTING . . . . . . . . . . . . . . . . . . . . . -23-
3.20 DISCLOSURE OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
3.21 PENSION-HELD REIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
3.22 SHAREHOLDER APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
SECTION 4. REPRESENTATIONS AND WARRANTIES OF INVESTOR . . . . . . . . . . . . . . . . . . -24-
4.1 ORGANIZATION AND RELATED MATTERS . . . . . . . . . . . . . . . . . . . . . -24-
4.2 AUTHORIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.3 NO CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.4 NO BROKERS OR FINDERS . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.5 LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
4.6 INVESTMENT REPRESENTATION . . . . . . . . . . . . . . . . . . . . . . . . -25-
4.7 LEGENDS; STOP-TRANSFER ORDERS . . . . . . . . . . . . . . . . . . . . . . -25-
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
4.8 STATUS FOR REIT OWNERSHIP AND INCOME TESTS . . . . . . . . . . . . . . . . -25-
4.9 AUTHORITY OF THE INVESTOR . . . . . . . . . . . . . . . . . . . . . . . . -26-
SECTION 5. COVENANTS WITH RESPECT TO CONDUCT OF SELLER PRIOR TO CLOSING . . . . . . -26-
5.1 ACCESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
5.2 MATERIAL ADVERSE CHANGES; SEC FILINGS; REPORTS; FINANCIAL STATEMENTS . . . -26-
5.3 CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
5.4 NOTIFICATION OF CERTAIN MATTERS . . . . . . . . . . . . . . . . . . . . . -29-
5.5 ADJUSTMENT OF SHARE PRICE . . . . . . . . . . . . . . . . . . . . . . . . -29-
SECTION 6. ADDITIONAL CONTINUING COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . -30-
6.1 USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
6.2 APPOINTMENT OF TRUST MANAGER . . . . . . . . . . . . . . . . . . . . . . . -30-
6.3 ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.4 STATUS FOR REIT OWNERSHIP AND INCOME TESTS . . . . . . . . . . . . . . . . -32-
6.5 PROHIBITED TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.6 SELLER/BUYER REGISTRATION RIGHTS AGREEMENT . . . . . . . . . . . . . . . . -32-
6.7 REIT QUALIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.8 PREEMPTIVE RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
6.9 DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
6.10 FURNISH DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
6.11 TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
6.12 ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
6.13 MSRE AND MSAM CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
SECTION 7. GENERAL CONDITIONS OF PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.1 NO ORDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.2 APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.3 ABSENCE OF LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.4 NEW YORK STOCK EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . . -34-
7.5 SHAREHOLDER APPROVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
SECTION 8. CONDITIONS TO OBLIGATIONS OF THE INVESTOR . . . . . . . . . . . . . . . . . . . -34-
8.1 ACCURACY OF SELLER'S REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . -35-
8.2 PERFORMANCE BY SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.3 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.4 CERTIFICATION BY SELLER . . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.5 OPINION OF SELLER'S COUNSEL . . . . . . . . . . . . . . . . . . . . . . . -35-
8.6 SCHEDULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
8.7 REALCO, MSRE AND MSAM CONSENT . . . . . . . . . . . . . . . . . . . . . . -35-
8.8 ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
8.9 CLOSING OF MSRE AND MSAM PURCHASE TRANSACTIONS . . . . . . . . . . . . . . -36-
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
SECTION 9. CONDITIONS TO OBLIGATIONS OF SELLER . . . . . . . . . . . . . . . . . . . . . . -36-
9.1 ACCURACY OF THE INVESTOR'S REPRESENTATIONS AND WARRANTIES . . . . . . . . -36-
9.2 BUYERS' PERFORMANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
9.3 CERTIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
9.4 OPINION OF COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
9.5 REIT STATUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
SECTION 10. TERMINATION OF OBLIGATIONS; SURVIVAL . . . . . . . . . . . . . . . . . . . . . -36-
10.1 TERMINATION OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . -36-
10.2 EFFECT OF TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
10.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . -37-
SECTION 11. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
11.1 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
11.2 OBLIGATIONS OF THE INVESTOR AND THE PECUNIARY OWNER. . . . . . . . . . . -38-
11.3 PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -39-
11.4 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
11.5 NOTICE BY SELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
SECTION 12. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
12.1 AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
12.2 SCHEDULES; EXHIBITS; INTEGRATION . . . . . . . . . . . . . . . . . . . . . -40-
12.3 BEST EFFORTS; FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . -40-
12.4 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.5 NO ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.6 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.7 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.8 PUBLICITY AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.9 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -41-
12.10 PARTIES IN INTEREST . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
12.11 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
12.12 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
12.13 REMEDIES; WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
12.14 REPRESENTATION BY COUNSEL; INTERPRETATION . . . . . . . . . . . . . . . . -43-
12.15 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
12.16 ARBITRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
12.17 AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
</TABLE>
EXHIBITS
EXHIBIT A Registration Rights Agreement
-iii-
<PAGE> 5
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 8.5 List of Opinions of Seller's Counsel
SCHEDULE 9.4 List of Opinions of Investor's Counsel
-iv-
<PAGE> 6
COMMON SHARE PURCHASE AGREEMENT
THIS COMMON SHARE PURCHASE AGREEMENT (this "AGREEMENT") is made and
entered into as of July 3, 1997, by and among AMERICAN INDUSTRIAL PROPERTIES
REIT, a Texas real estate investment trust ("SELLER"), and LASALLE ADVISORS
LIMITED PARTNERSHIP, a registered investment advisor (the "Investor"), as
agent for and for the benefit of a particular client.
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 Investor, and Investor desires to
purchase from Seller, the number of Common Shares having an aggregate purchase
price as specified herein (the "Shares") upon the terms and subject to the
conditions set forth in this Agreement.
C. The proceeds from the sale of the 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 1. DEFINITIONS AND RULES OF CONSTRUCTION
a. 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 Common Share Purchase Agreement, by and
between Seller and the Investor, as agent for and for the benefit of a
particular client, as amended from time to time pursuant to the terms of this
Agreement, together with all Exhibits and all Schedules attached hereto.
-1-
<PAGE> 7
"ANNUAL MEETING" shall mean the Seller's annual meeting that
was held on June 30, 1997.
"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.
"BANKRUPTCY CODE" means Title 11 of the United States Code
entitled "Bankruptcy," as now and hereafter in effect, and any successor
statute, as well as any existing or future law of any jurisdiction, foreign or
domestic, relating to bankruptcy, insolvency, reorganization, conservatorship
or relief of debtors.
"BUSINESS DAY" means a day other than a Saturday, a Sunday or
a day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"CAPITALIZED LEASE" means any lease of property, real or
personal, the obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of the lessee.
"CAPITALIZED LEASE OBLIGATION" means, as to any Person, the
obligation of such Person to pay rent or other amounts under a Capitalized
Lease and, for purposes of this Agreement, the amount of such obligation shall
be the capitalized amount thereof, determined in accordance with GAAP.
"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
-2-
<PAGE> 8
or other equity interests, or any other rights, warrants or options to acquire
any of the foregoing securities.
"CHARTER DOCUMENTS" means Seller's Third 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 each 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.
"COMMISSION" means the United States Securities and Exchange
Commission or any successor entity.
"COMMON SHARES" means common shares of beneficial interest,
par value $.10 per share, of Seller.
"CONTRACT" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, lease, license or understanding,
whether or not in writing.
"CURRENTLY OUTSTANDING SHARES" has the meaning set forth in
Section 2.4 of this Agreement.
"DEBT" means, with respect to any Person, without duplication,
and without regard to whether it is contingent or direct, (a) all indebtedness
of such Person for borrowed money, (b) any obligation incurred for all or any
part of the purchase price of property or services, other than accounts
payable and accrued expenses included in current liabilities in accordance with
GAAP and incurred in respect of property or services purchased in the ordinary
course of business, (c) indebtedness or obligations evidenced by bonds, notes
or similar written instruments, (d) all reimbursement obligations of such
Person (whether contingent or otherwise) in respect of letters of credit,
banker's acceptances, surety or other bonds and similar instruments, (e) any
obligation (whether or not such Person has assumed or becomes liable for the
payment of such obligation) secured by a lien on any property of such Person,
(f) all Capitalized Lease Obligations of such Person and (g) all Guarantees by
such Person of obligations of any other Person of the types referred to in the
foregoing clauses (a) through (f), inclusive, excluding, (i) the payment of
commissions to Prudential Securities Incorporated in connection with the
transactions contemplated herein and approved at the Annual Meeting, and (ii) a
$25 million line of credit from Prudential Securities Incorporated or its
Affiliates (the "Prudential Line of Credit").
-3-
<PAGE> 9
"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.
-4-
<PAGE> 10
"ENVIRONMENTAL PERMITS" has the meaning set forth in Section
3.17(a) of this Agreement.
"EQUITABLE REMEDIES" has the meaning set forth in Section 3.5
of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"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.
"GUARANTEE" means, with respect to any Person, any guarantee
or other contingent liability (other than any endorsement for collection or
deposit in the ordinary course of business and performance bonds, indemnities
and similar obligations not guaranteeing or otherwise insuring payment of any
Debt or other financial obligation), direct or indirect, of such Person with
respect to any Debt or other obligation of another Person (including
obligations under leases), through an agreement or otherwise, including (a) any
other endorsement or discount with recourse or undertaking substantially
equivalent to or having economic effect similar to a guarantee in respect of
any such Debt or other obligations and (b) any agreement (i) to purchase, or to
advance or supply funds for the payment or purchase of, any such obligations,
(ii) to purchase, sell or lease property, products, materials or supplies, or
transportation or services, in respect of enabling such other Person to pay any
such obligation or to assure the owner thereof against loss regardless of the
delivery or nondelivery of the property, products, materials or supplies or
transportation or services or (iii) to make any loan, advance or capital
contribution to or other investment in, or to otherwise provide funds to or
for, such other Person in respect of enabling such Person to satisfy any
obligation (including any liability for a dividend, stock liquidation payment
or expense) or to assure a minimum equity, working capital or other balance
sheet condition in respect of any such obligation. The amount of any Guarantee
shall be equal to the outstanding amount of the obligations of such other
Person directly or indirectly guaranteed.
"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
-5-
<PAGE> 11
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 PERSON" shall mean each Investor Indemnified
Person and each Seller Indemnified Party.
"INDEMNIFYING PARTY" has the meaning set forth in Section
11.3(a) of this Agreement.
"INITIAL REIT YEAR" has the meaning set forth in
Section 3.14(c) of this Agreement.
"INVESTMENT COMMITTEE" means the investment committee of the
Seller's Board of Trust Managers which after the Annual Meeting shall consist
of one Trust Manager designee of Investor, one Trust Manager designee of
Realco, one Trust Manager designee of MSAM and one independent Trust Manager.
"INVESTOR" means LaSalle Advisors Limited Partnership, a
registered investment advisor.
"INVESTOR INDEMNIFIED PERSON" has the meaning set forth in
Section 11.1 of this Agreement.
-6-
<PAGE> 12
"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, 1996 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, 1996 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.
"MINIMUM EQUITY CAPITALIZATION" means $150 million as
calculated using the average closing price of the Common Shares on the New York
Stock Exchange for the 10 trading days immediately preceding the applicable
date of determination multiplied by the current number of issued and
outstanding Common Shares and Common Share equivalents; provided, however, it
shall not in any event include operating partnership units in excess of $50
million.
"MSAM" means Morgan Stanley Asset Management, Inc., a Delaware
corporation.
"MSAM PURCHASE AGREEMENT" means that certain Common Share
Purchase Agreement dated as of June 20, 1997, by and among Seller, MSRE and
MSAM pursuant to which MSRE and MSAM, as agent and attorney-in-fact on behalf
of certain clients, have agreed to
-7-
<PAGE> 13
purchase up to $20 million of Common Shares of Seller on terms and conditions
substantially similar to the terms and conditions contained herein.
"MSAM PURCHASERS" means the clients of MSAM listed on Exhibit
A to the MSAM Purchase Agreement.
"MSRE" means MS Real Estate Special Situations Inc., a
Delaware corporation.
"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.
"OTHER PECUNIARY OWNERS" means the other pecuniary owners for
whom the Investor is acting as agent for and on behalf of in connection with
the purchase of Common Shares of the Seller pursuant to Common Share Purchase
Agreements dated the date hereof similar to this Agreement and who, along with
the Pecuniary Owner, are purchasing Common Shares having an aggregate purchase
price of up to $15 million.
"PECUNIARY OWNER" means the client of Investor for whom
Investor is acting as Agent for and for the benefit of, in connection with the
purchase of the Common Shares pursuant to the Agreement.
"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 individual, corporation, partnership,
limited liability company, joint venture, an unincorporated organization,
government or any department or agency thereof, estate, trust, association, or
private foundation within the meaning of Section 509(a) of the Code, or joint
stock company.
"PREEMPTIVE RIGHTS" has the meaning set forth in Section 6.8
of this Agreement.
"PREFERRED SHARES" means any class of capital stock of a
Person which is entitled to a preference or priority over any other class of
capital stock of such Person with respect to any distribution of such Person's
assets, whether with respect to dividends, or upon liquidation or dissolution,
or both.
"PROPERTIES" means the real property owned or leased by
Seller, Subsidiaries and Seller Partnerships listed on Schedule 3.13 hereto.
-8-
<PAGE> 14
"PURCHASE PRICE" means, with respect to the Closing Date, the
aggregate price paid for the Common Shares purchased by Investor on the Closing
Date.
"REALCO" means USAA Real Estate Company, a Delaware
corporation.
"REALCO DEBT" has the meaning set forth in Section 3.2 of this
Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the registration rights
agreement among Seller, and Investor, as agent for and on behalf of the
Pecuniary Owner and certain Other Pecuniary Owners, to be executed
contemporaneously with the execution of this Agreement.
"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 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.
"SHARE PRICE" has the meaning set forth in Section 2.1 of this
Agreement.
"SHAREHOLDER APPROVAL" means the approval by Seller's
shareholders at the Annual Meeting of the proposal to approve the sale to
Investor of Common Shares having an aggregate
-9-
<PAGE> 15
purchase price of up to $15 million, and the authorization of the issuance of
a sufficient number of Common Shares to allow such sale to occur.
"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.
"THRESHOLD EQUITY CAPITALIZATION" means equity capitalization
of $250 million, calculated in the same manner as Minimum Equity
Capitalization.
"UNAUDITED FINANCIAL STATEMENTS" has the meaning set forth in
Section 3.3(b) of this Agreement.
b. 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.
-10-
<PAGE> 16
SECTION 2. PURCHASE AND SALE
a. PURCHASE AND SALE OF THE COMMON SHARES. Subject
to the terms and conditions set forth herein,
Seller shall sell and issue to Investor, and
Investor shall purchase from Seller, up to an
aggregate of 2,210,204 Common Shares (the
"Shares") at a price of $2.45 per Common Share,
subject to adjustment as set forth in Section 5.5
(the "Share Price").
b. USE OF PROCEEDS. The proceeds of the purchase of
Shares hereunder shall be used by the Seller to
purchase real property as approved by the
Investment Committee.
c. CLOSING.
i. The Closing shall occur on or before July 11,
1997, (the "CLOSING DATE"), and the Investor
shall purchase the number of Shares specified in
Section 2.1.
ii. At the Closing, Seller shall deliver to the
Investor the certificates evidencing the Shares
purchased by the Investor on the applicable
Closing Date, registered in the name of the
Investor or its nominee. 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
purchased by the Investor on the applicable
Closing Date.
iii. At the Closing, the Investor shall pay and
deliver to Seller the Purchase Price for the
Shares being purchased by the Investor at the
Closing.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to, and agrees with, the Investor and
the Pecuniary Owner as follows:
a. 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 Partnerships of Seller (the "SELLER
PARTNERSHIPS") 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
-11-
<PAGE> 17
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 the Investor. 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.
b. CAPITAL STOCK; TITLE TO SHARES. The authorized
Capital Stock of Seller consists of 500,000,000
Common Shares, 10,000,000 of which are issued and
outstanding and 10,000,000 Preferred Shares, none
of which 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
-12-
<PAGE> 18
Subsidiary or any Seller Partnership are issued
or outstanding other than the Seller's note in
the aggregate principal amount of $5,449,618 (the
"REALCO DEBT") held by Realco. 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. Except as
contemplated by this Agreement, there are no
preemptive rights in respect of any Common Shares
or Capital Stock of any Subsidiary or any Seller
Partnership. Upon any issuance of Shares to the
Investor, such Shares will have been duly
authorized, validly issued and be validly
outstanding, fully paid and nonassessable, and
the issuance of such Shares will not be subject
to preemptive rights of any other shareholder of
Seller and such Shares will be issued in
compliance with all applicable federal and state
laws and stock trading requirements. Each Buyer
shall receive good and marketable title to all
Shares acquired by such Buyer pursuant to this
Agreement, free and clear of all Encumbrances
created by Seller, 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 except for a class of preferred
shares of beneficial interest which the
shareholders approved at the Annual Meeting, none
of which shall be issued and outstanding as of
the First Closing Date, there are no shares of
any class of Capital Stock of Seller having any
priority in respect thereof. All of the
outstanding securities of Seller were issued in
compliance with all applicable federal and state
securities laws.
c. FINANCIAL STATEMENTS.
i. AUDITED FINANCIAL STATEMENTS. Seller has
delivered to the Investor the consolidated
balance sheets of Seller (which reflect the
financial position of all Subsidiaries and Seller
Partnerships), as of December 31, 1994, 1995 and
1996, and the respective related consolidated
statements of operations, cash flows and
shareholders' 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
-13-
<PAGE> 19
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, 1996, 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 5, 1997.
ii. UNAUDITED FINANCIAL STATEMENTS. Seller has
delivered to the Investor the consolidated
balance sheets of Seller (which reflect the
financial position of all Subsidiaries and Seller
Partnerships), as of March 31, 1997 and the
related consolidated statements of operations,
cash flows and shareholders' equity for the
period then ended (the "UNAUDITED FINANCIAL
STATEMENTS"). The 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 March
31, 1997.
iii. NO MATERIAL ADVERSE CHANGES. Since March 31,
1997, except as set forth in Schedule 3.3, or
specifically disclosed in any SEC Filings filed
since March 31, 1997 and prior to the date of
this Agreement (copies of which have been
provided to the Investor), 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:
(1) 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
(2) 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
(3) 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.
-14-
<PAGE> 20
iv. 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 March 31, 1997 in
the ordinary course of business in a manner
consistent with past practice and are not
material in amount, or (ii) are set forth in
Schedule 3.3 hereto.
d. SEC REPORTS. Seller has filed with the
Commission 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 Commission
since December 31, 1994. Such forms, reports,
statements, including registration statements,
and other material documents required to be filed
with the Commission by Seller since December 31,
1994 are collectively referred to in this
Agreement as the "SEC FILINGS." Seller has made
available to the Investor 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.
e. 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. Except for the share
ownership limitation contained therein, the
Charter Documents do not in any way prevent or
restrict the transactions contemplated hereby or
preclude the Investor acting as agent on behalf
of the Pecuniary Owner, or the Pecuniary Owner
from owning or holding the amount, value or class
of Common Shares to be purchased hereby. 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 except the shareholder
consent needed to increase the number of
authorized Common Shares to allow the issuance
and sale of Shares on any Closing Date to occur.
This Agreement has been duly
-15-
<PAGE> 21
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 (collectively,
"EQUITABLE REMEDIES"). 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 or violation 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 or 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.
f. LEGAL PROCEEDINGS. Except as set forth
in Schedule 3.6, 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 or any action taken
or to be taken pursuant hereto or thereto, (ii)
may adversely affect the right, title or interest
of the Investor to the Shares or (iii)
individually or when aggregated with one or
-16-
<PAGE> 22
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,
1997 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.
g. COMPLIANCE WITH LAW AND PERMITS.
i. 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.
ii. 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 the Investor 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
-17-
<PAGE> 23
review by any Governmental Entity with respect to
the Seller Permits is pending or threatened.
h. 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 December 31, 1996.
i. 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.
j. 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 Prudential Securities Incorporated.
-18-
<PAGE> 24
k. 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 the Investor. 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
-19-
<PAGE> 25
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.
l. 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.
m. PROPERTIES.
i. 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") as
of the date hereof. Except as set forth in
Schedule 3.13, Seller, Subsidiary or Seller
Partnership, as applicable, owns good, marketable
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
-20-
<PAGE> 26
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.
ii. Seller has delivered to the Investor a
true, correct and complete copy of a rent roll
with respect to each Property as of the date
hereof 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 April
30, 1997 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, 1997. 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, 1997, 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
-21-
<PAGE> 27
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
any 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, any Subsidiary
or any Seller Partnership.
(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,
-22-
<PAGE> 28
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, 1997 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 any 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
-23-
<PAGE> 29
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 First Closing
Date.
(k) Seller has made available (or, with respect to all Tax
Returns filed after the date hereof, will make available) to the Investor
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 First 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 the Investor all relevant
information with respect to the federal income tax net operating loss
carryovers of Seller as of December 31, 1996, 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 First 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
-24-
<PAGE> 30
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 the Investor 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 Investor true, correct, and
complete copies of all written reports of any environmental assessment,
compliance or regulatory audit, inspection, or investigation
-25-
<PAGE> 31
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 issuance or sale and
delivery of any Shares to the Investor pursuant to this Agreement 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 the
Investor 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.
3.21 PENSION-HELD REIT. For purposes of Section 856(h)(3) of the
Code, Seller hereby represents that at any time during the shorter of (i) the
two-year period ending immediately prior to the First Closing Date or (ii) the
period during which Seller was in existence, to the best of Seller's knowledge,
no "qualified trust" has held, directly or indirectly, more than 10% of the
interests in Seller.
3.22 SHAREHOLDER APPROVAL. The Seller's shareholders approved at
the Annual Meeting all of the proposals set forth in the Notice of Annual
Meeting of Shareholders and accompanying proxy statement dated May 12, 1997.
-26-
<PAGE> 32
SECTION 4. REPRESENTATIONS AND WARRANTIES OF INVESTOR
The Investor represents and warrants with respect to itself (except as
indicated) to, and agrees with, Seller as follows:
a. ORGANIZATION AND RELATED MATTERS. It is a limited
partnership duly organized and validly existing under the
laws of the state of its organization. It has all necessary
partnership power and partnership authority to carry on its
business as now being conducted. It has all necessary
partnership power and partnership authority to execute,
deliver and perform this Agreement and the transactions
contemplated hereby.
b. AUTHORIZATION. This Agreement has been duly
executed and delivered by it and constitutes the legally
valid and binding obligation of the Investor and the
Pecuniary Owner, enforceable in accordance with its terms,
except as such enforceability may be limited by Equitable
Remedies. The execution and delivery of this Agreement by
it 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 its material Contracts, other than any filing required
under the Exchange Act.
c. NO CONFLICTS. The execution, delivery and
performance of this Agreement by it 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) its organizational
documents, pursuant to which it was organized and by which
it is governed, (b) any Law to which it is subject or (c)
any Contract to which it is a party that is material to the
financial condition, results of operations or conduct of
its business.
d. NO BROKERS OR FINDERS. No agent, broker, finder or
investment or commercial banker, or other Person or firms
engaged by or acting on its behalf or on behalf of 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 broker's or finder's or similar fees or
other commissions as a result of this Agreement or such
transactions.
e. LEGAL PROCEEDINGS. There is no Order or Action
pending against or, to its knowledge, affecting it that
individually or when aggregated with one or more other
Actions has, or if determined adversely would have, a
material adverse effect on its business, properties, or
financial condition or on its ability to perform this
Agreement.
-27-
<PAGE> 33
f. INVESTMENT REPRESENTATION. This Agreement is made
with the Investor in reliance upon such Investor's
representation to Seller, which by such Investor's
execution of this Agreement such Investor hereby confirms
that the Shares will be acquired by the Investor as agent
for and on behalf of the Pecuniary Owner, for the Pecuniary
Owner's own account, not as nominee or agent for any other
party, for investment purposes only and not with a view to
or for sale in connection with the distribution thereof. It
agrees to execute any further certificate or other document
representing such investment intent or as to any other
matter reasonably requested by Seller to assure compliance
with applicable securities laws.
g. LEGENDS; STOP-TRANSFER ORDERS.
i. The certificates for Shares will bear legends in
substantially the following form:
THE SHARES 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 UNDER SUCH LAWS OR IS EXEMPTED
FROM SUCH REGISTRATION REQUIREMENTS.
The foregoing legend shall be removed from any such certificate at the request
of the holder thereof at such time as the shares represented thereby are
registered under the Securities Act or become eligible for resale under Rule
144 promulgated under the Securities Act.
ii. The certificates for Shares may also bear any
legend required by any applicable state blue sky law.
iii. Any certificates for Shares will also bear a
legend relating to restrictions on transfer imposed
pursuant to the percentage ownership limitation contained
in the Charter Documents.
iv. Seller may impose appropriate stop-transfer
instructions relating to the restrictions set forth herein.
h. STATUS FOR REIT OWNERSHIP AND INCOME TESTS. At
the Closing, to the best of Investor's knowledge, the
purchase of the Common
-28-
<PAGE> 34
Shares by the Pecuniary Owner will not result in a
"qualified trust" as defined in Code Section 856(h)(3)
holding more than 25% in value of the Seller's outstanding
Capital Stock. The Pecuniary Owner is not purchasing the
Common Shares, and will not hold any or all of the Common
Shares so purchased, through any arrangement or entity that
would be deemed, for federal income tax purposes, to be a
partnership between the Pecuniary Owner and any or all of
the Other Pecuniary Owners. The Common Shares that each
Pecuniary Owner owns will not be considered to be owned by
any individual (or entity treated as an individual under
Section 856(h) of the Code), who after application of the
stock ownership rules of Section 856(h) of the Code would
own more than 9.8% of the lesser of the number or value of
any outstanding class of Capital Stock.
i. AUTHORITY OF THE INVESTOR. The Investor is duly
authorized to enter into this Agreement and to consummate
the transactions contemplated hereby as agent for and on
behalf of the Pecuniary Owner.
SECTION 5. 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.
a. ACCESS. Seller shall, and shall cause the
Subsidiaries and Seller Partnerships to, authorize and
permit the Investor 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 the Investor 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 the Investor and its partners and their respective
officers, employees, accountants and counsel, as the
Investor 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, the
Investor and its officers, directors, agents, attorneys,
accountants, and representatives, to audit such books and
records, to meet
-29-
<PAGE> 35
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.
b. MATERIAL ADVERSE CHANGES; SEC FILINGS; REPORTS;
FINANCIAL STATEMENTS.
i. Seller shall promptly notify the Investor 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 the
Investor.
ii. Seller will, and will cause the Subsidiaries and
Seller Partnerships to, furnish to the Investor as soon as
available copies of all SEC Filings, and all material
reports, renewals, filings, certificates, statements and
other documents filed with any Governmental Entity.
c. 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 the Closing Date, 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 the Investor,
which consent may not unreasonably be withheld:
i. conduct the business of Seller, Subsidiaries and
Seller Partnerships in any manner except in the ordinary
course consistent with past practices; or
ii. purchase any real property without the consent of
the Investment Committee; or
iii. 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
First Closing Date; or
iv. issue, sell, redeem or acquire for value, or
agree to do so, any debt obligations (other than the
Prudential Line of Credit), Common Shares or Capital Stock;
or
-30-
<PAGE> 36
v. 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), (ii) liabilities
arising out of, incurred in connection with, or related to
the consummation of the transactions contemplated by this
Agreement, (iii) payments to Realco under the Realco Debt
and (iv) purchases of real property in accordance with
Section 5.3(b); or
vi. merge (if Seller is not the surviving entity),
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
vii. 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
viii. amend the Charter Documents or the charter or
organizational documents of the Subsidiaries or Seller
Partnerships; or
ix. 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
x. cancel, satisfy or prepay any debt, obligation,
liability or encumbrance, or waive any claim or right of
value of Seller, Subsidiaries or Seller Partnerships except
the extinguishment of debt under the Realco Debt through
the conversion of the Realco Debt to Common Shares; or
xi. (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, share option
(including, without limitation, the granting of any share
option or share appreciation right or performance or
restricted share award), share purchase or other
-31-
<PAGE> 37
employee benefit plan, (ii) except as approved by the
Compensation Committee prior to the date of this Agreement
or except as approved by the Compensation Committee and
approved by a unanimous vote of the Seller's Board of Trust
Managers, 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,
share option (including, without limitation, the granting
of any share option or share appreciation right or
performance or restricted share award), share 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
xii. 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
xiii. make any change in any significant accounting
principles or practices used by Seller, Subsidiaries or
Seller Partnerships, except as required by the Commission;
or
xiv. 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
xv. except as provided in Section 5.3(b), 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
-32-
<PAGE> 38
xvi. 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
xvii. agree to or make any commitment to take any action
prohibited by this Section 5.3.
d. NOTIFICATION OF CERTAIN MATTERS. Seller shall give
prompt notice to the Investor, and the Investor 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 the Investor 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.
e. ADJUSTMENT OF SHARE PRICE. The Share Price will
be subject to adjustment from time to time prior to the
Closing Date as follows:
(a) If Seller shall at any time prior to the Closing Date (i)
pay a dividend or make any other distribution payable in Common Shares to
holders of any class of Capital Stock of Seller, (ii) subdivide or reclassify
the outstanding Common Shares into a greater number of shares or (iii) combine
or reclassify the outstanding Common Shares into a smaller number of shares,
the Share Price in effect at the time of the record date for such dividend or
distribution or the effective date of such subdivision, combination or
reclassification will be proportionately adjusted so that the Investor will be
entitled to receive upon purchase after such time the number of Common Shares
that the Investor would have owned or been entitled to receive had such
purchase occurred immediately prior to such time. An adjustment made pursuant
to this subsection (a) will become effective immediately after the record date
in the case of a dividend or other distribution and will become effective
immediately after the effective date of any such subdivision, combination,
reclassification or change, provided that, if such dividend or distribution is
not ultimately paid or made, the Share Price shall be readjusted to be equal to
the Share Price in effect immediately prior to such record date. Such
adjustment will be made successively whenever any event listed above occurs.
(b) If Seller shall at any time prior to the Closing Date issue
rights or warrants to all holders of Common Share entitling them (for a period
commencing no earlier than the record date for the determination of holders of
Common Shares entitled to receive such rights or warrants and expiring within
45 days after such record date) to subscribe for or purchase Common Shares at a
price per share less than the Current Market Price (as defined in subsection
(d) below) of Common Shares on such record date, the Share Price will be
adjusted effective as of immediately after such record date so that it shall
equal the price determined by multiplying the Share Price in effect immediately
prior thereto by a fraction, the numerator of which is the number of Common
Shares
-33-
<PAGE> 39
outstanding on such record date plus the number of Common Shares that the
aggregate offering price of the Common Shares so offered for subscription or
purchase or purchased would purchase at the Current Market Price per Common
Share, and the denominator of which is the number of Common Shares outstanding
on such record date plus the number of additional Common Shares which may be
purchased upon the exercise of the rights or warrants issued, provided that,
if such issuance is not ultimately made, the Share Price shall be readjusted to
be equal to the Share Price in effect immediately prior to such record date.
Common Shares owned by or held for the account of Seller shall not be deemed
outstanding for the purpose of any such computation. Such adjustment will be
made successively whenever such rights or warrants are issued.
(c) If Seller shall at any time prior to the Closing Date
distribute to all holders of Common Shares any shares of any class of Capital
Stock other than Common Shares, evidences of indebtedness or other assets
(other than cash dividends or distributions out of retained earnings), or shall
distribute to holders of Common Shares rights or warrants to subscribe to
securities (other than those referred to in subsection (b) above), then in each
such case the Share Price will be adjusted so that it equals the price
determined by multiplying the Share Price in effect immediately prior to the
date of such distribution by a fraction, the numerator of which is the Current
Market Price per Common Share on the record date mentioned below less the then
fair market value (as determined by the Board of Trust Managers, whose
determinations shall be conclusive evidences of such fair market value) of said
shares, evidences of indebtedness, assets, rights or warrants or distributions
applicable to one Common Share, and the denominator of which is such Current
Market Price. Such adjustment will become effective immediately after the
record date for the determination of the holders of Common Shares entitled to
receive such distribution, provided that, if such issuance is not ultimately
made, the Share Price shall be readjusted to be equal to the Share Price in
effect immediately prior to such record date. Such adjustment will be made
successively whenever such a distribution is made.
(d) For the purpose of computation under subsections (b) and
(c) above, the "Current Market Price" per Common Share at any date will be
deemed to be the average of the daily closing price for the Common Shares on
the New York Stock Exchange for 20 consecutive trading days commencing 30
trading days before such date.
SECTION 6. ADDITIONAL CONTINUING COVENANTS AND AGREEMENTS
a. USE OF PROCEEDS. The proceeds from the sale of
the Shares to the Investor, 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 the purchase of
real property as approved by the Investment Committee in
accordance with Section 2.2.
-34-
<PAGE> 40
b. APPOINTMENT OF TRUST MANAGER.
i. GENERAL. Effective immediately following the
Closing, Seller shall increase the number of its Trust
Managers from seven to eight, and Seller shall appoint one
individual designated by the Investor as Agent for and on
behalf of the Pecuniary Owner and the Other Pecuniary
Owners collectively to fill the vacancy caused by the
increase in the number of Trust Managers under this Section
6.2(a). Simultaneously with the designee of the Investor
becoming a Trust Manager of Seller, Seller and such
designee shall enter into an indemnification agreement
providing for indemnification of such designee identical in
form to the indemnification agreements entered into between
Seller and other Trust Managers. In addition, at the first
annual meeting and all subsequent annual meetings of
shareholders after the number of Trust Managers has been
increased to eight under this Section 6.2(a), until Seller
achieves the Threshold Equity Capitalization, Seller shall
nominate, and use its best efforts to have such person
elected (which efforts shall include, without limitation,
including the Investor's nominee in management's slate for
nomination and election and solicitation of proxies on
their behalf), one designee of the Investor (which may be a
different person than the person initially appointed as
Trust Manager pursuant to the first sentence of this
Section 6.2(a) if such initial designee shall have died,
resigned, been removed or declined to be nominated) as
Trust Manager. During such time as Seller shall have an
individual designated by the Investor serving as Trust
Manager 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 eight
persons, including the designee of the Investor. Such
designee of the Investor 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 the designee
of the Investor serving as a Trust Manager pursuant to the
first sentence of this Section 6.2(a), Seller agrees to
promptly appoint a replacement designee selected by the
Investor 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 eight
pursuant to this Section 6.2(a).
ii. OBSERVATION RIGHTS. In the event that the
designee selected by the Investor to serve as Trust Manager
is not, for any reason, elected by Seller's shareholders,
the Investor shall have full observation rights with
respect to Seller's Trust Managers, including the right to
obtain full and timely notice of all meetings of the Trust
Managers and of each of its
-35-
<PAGE> 41
committees, to obtain copies of all written and other
materials disseminated to Trust Managers and to designate a
person to attend in person or by telephone all meetings of
the Trust Managers or their committees. If the Investor
receives observation rights pursuant to the provisions of
this paragraph, the Investor and its designees in respect
of such rights shall each execute a confidentiality
agreement in form and substance reasonably satisfactory to
Seller.
iii. RESIGNATIONS. At such time as Seller achieves
Threshold Equity Capitalization, the Investor shall cause
its designee to not seek re-election at the next annual
meeting, or at Seller's option, to immediately resign.
iv. QUALIFICATIONS. Each of the representatives
designated by the Investor in accordance with this Section
6.2 shall be a Person selected by the Investor in its sole
discretion; provided, however, that any such person may not
have been involved in any of the events described in Item
401(f)(1)-(4) of Regulation S-K promulgated under the
Exchange Act.
v. COMMITTEES. At any time that the Investor shall
have exercised its rights under this Section 6.2 to
appoint a designee as Trust Manager, Seller shall appoint
the Investor's designee on each committee of the Trust
Managers, and each such committee shall contain no more
than four members until expiration of the latest term of
office of any designee of the Investor pursuant to Section
6.2(a) or 6.2(b).
c. ENVIRONMENTAL MATTERS. Seller will advise the
Investor 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.
d. STATUS FOR REIT OWNERSHIP AND INCOME TESTS.
Following the Closing Date, and at all subsequent times
during which the Investor or the Pecuniary Owner owns any
of the Shares, applying the stock ownership rules of
Section 856(h) of the Code, the representation set forth in
Section 4.8 will remain true and correct.
e. 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, or
approved by Seller's shareholders in accordance with
applicable state law.
-36-
<PAGE> 42
f. SELLER/BUYER REGISTRATION RIGHTS AGREEMENT. On the
Closing Date, the Investor, as agent for and on behalf of
the Pecuniary Owner and certain Other Pecuniary Owners, and
Seller shall enter into a Registration Rights Agreement
substantially in the form of Exhibit A.
g. REIT QUALIFICATION. Seller shall take all actions
necessary to maintain Seller's qualification as a REIT and,
without the written consent of the Investor 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. Seller covenants and agrees that
(i) it will duly and promptly notify the Investor upon
becoming aware that any "qualified trust" holds or is
expected to hold, directly or indirectly, more than 10% of
the interests in Seller, and (ii) it will provide the
Investor such information and/or verification as the
Investor shall reasonably request in order to verify
whether Seller constitutes a "pension-held REIT" as defined
under Section 856(h)(3)(C) of the Code.
h. PREEMPTIVE RIGHTS. In the event that Seller shall
at any time subsequent to the date of this Agreement issue
any Common Shares to any Person or Persons (other than (i)
Common Shares issued to Realco in connection with the
conversion of the Realco Debt to Common Shares, (ii) Common
Shares issued pursuant to an employee share option, share
purchase, share incentive or compensation plan or (iii)
Common Shares issued to any partners in Affiliates of
Realco in connection with the merger of such Affiliates
with and into Seller) (each such issuance, a "Subsequent
Offering")), the Investor shall have the right to purchase,
on the same terms and conditions as the other purchasers in
the Subsequent Offering, Common Shares in an amount not to
exceed, in the aggregate, such number of Common Shares as
is equal to the total number of Common Shares offered in
the Subsequent Offering times a fraction, the numerator of
which is the number of Common Shares then owned by the
Investor in the aggregate and the denominator of which is
the total number of Common Shares outstanding immediately
prior to such Subsequent Offering. Notwithstanding the
foregoing, with respect to each Subsequent Offering by
Seller in the amount of $10 million or more, the amount of
shares the Investor may purchase in the aggregate pursuant
to such Preemptive Rights shall be reduced by 5% of the
total Common Shares outstanding (on a fully-diluted basis)
after each such Subsequent Offering. The Investor's
Preemptive Rights will immediately terminate once Seller
achieves a Minimum Equity Capitalization. The Investor or
the Pecuniary Owner, as applicable, shall have the right to
assign the preemptive right to buy additional Common Shares
pursuant to this Section 6.8 to any of the Other
-37-
<PAGE> 43
Pecuniary Owners or to any other client of the Investor who
can make the representation to Seller set forth in Section
4.8.
i. DEBT. Neither Seller, any Subsidiary or any Seller
Partnership shall, without the prior written consent of the
Investor (i) incur, create, assume, guarantee or in any way
become liable for, or permit to exist, any Debt prior to
such time as the Seller achieves a Minimum Equity
Capitalization, except to the extent the proceeds of such
Debt is to be used to acquire real property, and such
acquisition occurs within 90 days of the date such Debt is
incurred; or (ii) issue or have outstanding any Preferred
Shares, or any warrants, options, conversion rights or
other rights to subscribe for, purchase or acquire any
Preferred Shares, prior to such time as the Seller achieves
Minimum Equity Capitalization.
j. FURNISH DOCUMENTS. Seller shall furnish or cause
to be furnished to the Investor within five Business Days
after Seller is required to file the same with the
Commission , copies of the periodic information, documents
and other reports which Seller is required to file with the
Commission pursuant to Section 13(a) of the Exchange Act.
If Seller ceases to be required to file information,
documents and other reports pursuant to Section 13 of the
Exchange Act, it shall remain obligated to furnish the same
information, documents and reports otherwise required under
Section 13(a) of the Exchange Act to the Investor within
five Business Days after Seller would have been required to
file the same with the Commission; and
i. Seller shall furnish or cause to be furnished to
the Investor, within five Business Days after the
effective date thereof, copies of any amendment
or modification to its Charter Documents.
k. TAXES. Seller shall, and shall cause each
Subsidiary and Seller Partnership to, pay, when due, all
taxes, assessments and governmental charges or levies
imposed upon it and all claims or demands of materialmen,
mechanics, carriers, warehousemen, landlords and any other
like person or entity which, if unpaid, might result in the
creation of a lien upon the income of Seller or its assets;
provided that items of the foregoing description need not
be paid while being contested in good faith and by
appropriate proceedings and adequate reserves with respect
thereto have been provided on the books of Seller, such
Subsidiary of such Seller Partnership, as the case may be.
-38-
<PAGE> 44
l. ADDITIONAL INFORMATION Seller shall execute and
deliver or cause to be executed and delivered to the
Investor upon the Investor's reasonable request such other
and further instruments or documents as in the reasonable
judgment of the Investor and Seller are necessary to
conform, create, evidence, preserve or maintain the
Pecuniary Owner's rights in the Shares, and Seller shall do
all such additional acts, give such assurances and execute
such instruments as the Investor may reasonably require to
vest more completely in and assure to the Pecuniary Owner
its rights in the Shares.
m. MSRE AND MSAM CLOSING. If MSRE and MSAM, as agent
and attorney-in-fact on behalf of certain clients, do not
purchase additional Common Shares of Seller for an
aggregate purchase price of at least $4,500,000 within
seven days of the Closing Date, Seller shall rescind the
sale of Shares hereunder and promptly repay to the Investor
the full purchase price for the Shares purchased hereby.
SECTION 7. GENERAL CONDITIONS OF PURCHASE
The obligations of the parties to effect each Closing shall be subject
to the following conditions unless waived in writing by all parties:
a. 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 applicable Closing Date.
b. APPROVALS. To the extent required by applicable
Law, all Permits and Approvals required to be obtained in
connection with each 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 applicable Closing Date.
c. 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 applicable Closing Date whether or not any
of the parties hereto or its Affiliates is a party.
-39-
<PAGE> 45
d. NEW YORK STOCK EXCHANGE. The Shares shall have
been approved for listing, upon official notice of
issuance, on 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.
e. SHAREHOLDER APPROVAL. Seller shall have received
Shareholder Approval.
SECTION 8. CONDITIONS TO OBLIGATIONS OF THE INVESTOR
The obligations of the Investor, as agent for and on behalf of the
Pecuniary Owner, to effect the Closing shall be subject to the following
conditions except to the extent waived in writing by the Investor:
a. ACCURACY OF SELLER'S REPRESENTATIONS AND
WARRANTIES. All representations and warranties of Seller
set forth in this Agreement shall be true and correct in
all material respects on the applicable Closing Date as if
made on and as of such Closing Date.
b. 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 applicable Closing Date, including
the covenants set forth in Section 5.
c. NO MATERIAL ADVERSE CHANGE. During the period
from December 31, 1996 to the applicable Closing Date, (i)
there shall not have been any material adverse change or
any development involving a material adverse change in the
condition (financial or otherwise) of Seller, any
Subsidiary or any Seller Partnership, taken as a whole, or
in the earnings, business, prospects or operations of
Seller, any Subsidiary or any Seller Partnership, taken as
a whole, 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 the Investor, significantly impair the
marketability or value of the Shares, (iii) the trading in
any securities of Seller 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
-40-
<PAGE> 46
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.
d. CERTIFICATION BY SELLER. The Investor shall have
received a certificate, addressed to the Investor and dated
as of the applicable Closing Date, signed by the President
of Seller, certifying, in such detail as the Investor and
its counsel reasonably may request, that all of the
conditions specified in Section 8 have been fulfilled.
e. OPINION OF SELLER'S COUNSEL. The Investor shall
have received from counsel for Seller an opinion, addressed
to the Investor and dated as of the applicable Closing
Date, in form and substance reasonably satisfactory to the
Investor as to the matters set forth in Schedule 8.5.
f. SCHEDULES. Seller shall have delivered to the
Investor updated Schedules, if any, to this Agreement.
g. REALCO, MSRE AND MSAM CONSENT. Seller shall have
received all necessary consents or waivers from Realco,
MSRE and MSAM in connection with the matters contemplated
by this Agreement.
h. ADDITIONAL INFORMATION. Seller's Fourth Amended
and Restated Bylaws shall have been amended to provide for
a maximum of eight (8) Trust Managers.
i. CLOSING OF MSRE AND MSAM PURCHASE TRANSACTIONS.
Seller shall have closed on the sale of the Common Shares
to MSRE and MSAM, as agent and attorney-in-fact on behalf
of the MSAM Purchasers, pursuant o the MSAM Purchase
Agreement whereby Seller shall have received an aggregate
purchase price of at least $12,500,00 from such purchasers
from the issuance and sale of its Common Shares.
SECTION 9. CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to effect each Closing shall be subject to
the following conditions, except to the extent waived in writing by Seller:
-41-
<PAGE> 47
a. ACCURACY OF THE INVESTOR'S REPRESENTATIONS AND
WARRANTIES. All representations and warranties of the
Investor set forth in this Agreement shall be true and
correct in all material respects on the applicable Closing
Date as if made on and as of such Closing Date.
b. BUYERS' PERFORMANCE. The Investor 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 the Investor on or before the applicable Closing Date.
c. CERTIFICATION. Seller shall have received a
certificate, dated as of the applicable Closing Date,
signed by a Managing Director of the Investor, certifying,
in such detail as Seller and its counsel reasonably may
request, that the conditions specified in Section 9 have
been fulfilled.
d. OPINION OF COUNSEL. Seller shall have received
from counsel to the Investors an opinion, dated as of the
applicable Closing Date, in form and substance reasonably
satisfactory to Seller as to the matters set forth in
Schedule 9.4.
e. REIT STATUS. The purchase of Shares by the
Investor, as agent for and on behalf of the Pecuniary
Owner, will not cause Seller to lose its status as a REIT
under the Code.
SECTION 10. TERMINATION OF OBLIGATIONS; SURVIVAL
a. 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:
i. MUTUAL CONSENT. By mutual consent in writing of
the Investor and Seller.
ii. MISREPRESENTATION OR MATERIAL BREACH. By the
Investor or Seller with written notice to the other parties
if there has been a misrepresentation or material breach on
the part of Seller or the Investor, 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 10 business days after receipt of
notice from the Investor or Seller of the terminating
party's intention to terminate.
iii. ENVIRONMENTAL NONCOMPLIANCE. By the Investor in
the event of the discovery of any Release or other matter
prior to any Closing Date
-42-
<PAGE> 48
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.
iv. CLOSING. This Agreement shall terminate if the
Closing does not occur on or before July 11, 1997.
b. 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.
c. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS. (a) The representations and warranties contained
in or made pursuant to this Agreement shall expire on the
third anniversary of the Closing Date 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 12 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.
(b) All covenants and agreements of the parties hereto shall be
continuing and shall survive each Closing Date pursuant to the terms thereof.
(c) The provisions of Section 11.1 through Section 11.5 and
Section 12.12 shall survive and remain in full force and effect with respect to
the Investor notwithstanding any termination of the Investor's appointment as
agent on behalf of the Pecuniary Owner.
-43-
<PAGE> 49
SECTION 11. INDEMNIFICATION
a. INDEMNIFICATION. In partial consideration of the
commitment of the Investors as agent for and on behalf of
the Pecuniary Owner hereunder, Seller agrees to indemnify
and hold harmless the Investor and the Pecuniary Owner and
any of their respective affiliates, directors, officers,
agents and employees and each other person, if any,
controlling the Investor or the Pecuniary Owner or any of
their respective affiliates (each an "Investor Indemnified
Person") from and against any Losses (or actions in respect
thereof) to which such Investor Indemnified Person may
become subject in connection with the matters which are the
subject of the commitment made hereunder (including any use
or proposed use of the proceeds from the sale of the Common
Shares) including without limitation any and all Losses of
the Investor Indemnified Person as a result of, or based
upon or arising out of, directly or indirectly any
inaccuracy in, breach or nonperformance of, any of the
representations, warranties, covenants or agreements made
by Seller in, or pursuant to this Agreement, and will
reimburse any Investor Indemnified Person for all
reasonable expenses (including the reasonable fees of
counsel) as they are incurred by any such Investor
Indemnified Person in connection with investigating,
preparing or defending any such action or claim pending or
threatened, whether or not such Investor Indemnified Person
is a party hereto. Seller shall not be responsible for any
losses, claims, damages, liabilities or expenses resulting
from such Investor Indemnified Person's gross negligence or
willful misconduct. Seller also agrees that no Investor
Indemnified Person shall have any liability (whether direct
or indirect, in contract or tort or otherwise) to Seller
for or in connection with this Agreement except for losses,
claims, damages, liabilities or expenses to the extent that
a court of competent jurisdiction or arbitration panel
shall have finally determined that such losses, claims,
damages, liabilities or expenses resulted from such
Investor Indemnified Persons's gross negligence or willful
misconduct. In the event that the foregoing indemnity is
unavailable or insufficient to hold Investor Indemnified
Person harmless, Seller shall contribute to amounts paid or
payable by such Investor Indemnified Person in respect of
such losses, claims, damages, liabilities and expenses in
such proportion as appropriately reflects the relative
benefits received by, and fault of Seller, on the one hand,
and the Investor and the Pecuniary Owner on the other hand,
in connection with the matters as to which such losses,
claims, damages, liabilities or expenses relate. The
agreement of Seller in this paragraph shall be in addition
to any other liability that Seller may otherwise have.
-44-
<PAGE> 50
b. OBLIGATIONS OF THE INVESTOR AND THE PECUNIARY
OWNER. The Investor and the Pecuniary Owner, severally and
not jointly, agree 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 and all 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 the Investor as agent for
and on behalf of the Pecuniary Owner in, or pursuant to,
this Agreement, or (b) any pending or threatened Action
brought by the Investor's or the Pecuniary Owner's
shareholders or creditors relating to, or arising out of or
in connection with, directly or indirectly, the
transactions contemplated under this Agreement; provided,
however, that the Investor or the Pecuniary Owner, as
applicable, 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 the Investor or
the Pecuniary Owner, as applicable. As a condition to the
rights of any of the Seller Indemnified Parties under this
Section 11, the Investor may require that any such Person
provide a written undertaking that such Person will repay
to the Investor or the Pecuniary Owner, as applicable, any
amount expended by the Investor or the Pecuniary Owner, as
applicable, to indemnify, defend or hold harmless such
Person in the event and to the extent a court determines
that such Investor's or Pecuniary Owner's indemnification
or defense of such Person is prohibited by applicable Law.
The agreement of the Investor and the Pecuniary Owner in
this paragraph shall be in addition to any other liability
that the Investor and the Pecuniary Owner may otherwise
have.
c. PROCEDURE.
i. 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.
ii. 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
-45-
<PAGE> 51
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.
d. SURVIVAL. The indemnity set forth in this Section
11 shall survive each Closing or any 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 Sections
11.1 or 11.2(b), forever.
-46-
<PAGE> 52
e. NOTICE BY SELLER. Seller and the Investor agree
to notify in writing the other parties 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 parties),
whether before or after any Closing Date.
SECTION 12. GENERAL
a. 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.
b. 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.
c. 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.
d. 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 MARYLAND, WITHOUT GIVING
EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION
(WHETHER OF THE STATE OF MARYLAND OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS
OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.
-47-
<PAGE> 53
e. 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 the Investor may assign the commitment of any
Pecuniary Owner to purchase Shares hereunder, and the
related rights and remedies of such Pecuniary Owner, to any
other client on behalf of whom it or any of its Affiliates
acts as investment advisor, whether or not such client is
initially the Pecuniary Owner hereunder and (ii) the
Pecuniary Owner may at any time subsequent to the date
hereof appoint a successor agent to act on its behalf in
connection with the matters contemplated herein.
f. 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.
g. 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 parties.
h. PUBLICITY AND REPORTS. Seller and the Investor
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 parties, except to the extent that
independent legal counsel to Seller or the Investor, as the
case may be, shall advise the other parties 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).
i. 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) as may otherwise be required by Law to be
-48-
<PAGE> 54
disclosed or (c) to the extent such duty as to
confidentiality is waived in writing by the other parties.
Notwithstanding the foregoing, the Investor shall be
entitled to disclose information relating to this Agreement
and the transactions contemplated hereby to any client on
behalf of whom it or any of its Affiliates acts as
investment advisor, in connection with a contemplated
investment by such client in Seller as described herein. 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 parties all documents (and
reproductions thereof) received by it or its
representatives from such other parties (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.
j. 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.
k. 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 the Investor, addressed to:
LaSalle Advisors Limited Partnership
100 East Pratt Street
Baltimore, Maryland 21202
Attention: Stanley J. Kraska, Jr.
Telecopy: (410) 347-0612
With a copy to:
Elizabeth Grieb, Esquire
Piper & Marbury L.L.P.
36 S. Charles Street
Baltimore, Maryland 21201
Telecopy: (410) 576-1710
-49-
<PAGE> 55
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
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.
l. EXPENSES. Except as set forth in the next
sentence, each of the parties hereto shall pay its 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 its respective
financial advisers, accountants and counsel. Seller shall
reimburse the Investors for all legal fees incurred by the
Investor relating to the transactions contemplated by this
Agreement and the Registration Rights Agreement up to a
maximum of $25,000.
m. 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.
Each of the parties hereto shall be entitled to seek any
equitable remedy to the extent such remedy is available
under applicable Law.
n. REPRESENTATION BY COUNSEL; INTERPRETATION. Each
of the parties hereto acknowledges 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 the parties
hereto, and no rule of strict construction shall be applied
against any party to this Agreement.
-50-
<PAGE> 56
o. SEVERABILITY. If any provision of this 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 Agreement would not be materially
and adversely affected thereby, such provision shall be
fully separable, and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable
provision had never comprised a part thereof, and the
remaining provisions of this 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 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 or any arbitrator to whom disputes
relating to this Agreement are submitted to reform the
otherwise illegal, invalid or unenforceable provision in
accordance with this Section 12.15.
p. ARBITRATION. In the event of a dispute hereunder
which cannot be resolved by the parties, such dispute shall
be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association
and judgment on the award rendered by the arbitration panel
may be entered in any court or tribunal of competent
jurisdiction. Any arbitration occurring under this Section
12.16 shall be held in Baltimore, Maryland in the first
instance, in Dallas, Texas in the second instance, and
continuing in that order with respect to each dispute
occurring hereunder.
q. AGENTS. (a) Seller acknowledges and agrees that
the Investor is acting as agent for and on behalf of the
Pecuniary Owner and that the Investor shall not have any
liability to Seller, and shall not be obligated to purchase
securities hereunder with respect to which the Pecuniary
Owner was obligated to but did not purchase.
(b) In the event that the Investor shall no longer act as agent for
and on behalf of the Pecuniary Owner in connection with the matters
contemplated by this Agreement, then (i) any agent(s) appointed by the
Pecuniary Owner as successor agent(s) to the Investor shall be entitled to, and
to exercise on behalf of the Pecuniary Owner, all of the rights and remedies
provided for herein with respect to the Investor and (ii) at any such time as
no successor agent(s) shall have been appointed by the Pecuniary Owner, the
Pecuniary Owner shall be entitled to exercise all of the rights and remedies
provided for herein in its individual capacity, including the right to obtain,
upon request, copies of all documents and notices as specified herein. In the
event that the Investor shall no longer act as agent on behalf of the Pecuniary
Owner hereunder, all consents or waivers of the Investor necessary to effect
any action hereunder shall be required to be given by any successor agent(s)
appointed by the Pecuniary Owner or, if no successor(s) has been appointed, by
the Pecuniary Owner, prior to the consummation of such action.
-51-
<PAGE> 57
(c) Until such time as Seller shall have received a written notice
from the Pecuniary Owner that the Investor is no longer acting as the Pecuniary
Owner's agent hereunder, Seller shall be entitled to rely on any instructions
and any notices received from the Investor on behalf of the Pecuniary Owner as
if received from the Pecuniary Owner directly.
"INVESTOR"
LASALLE ADVISORS LIMITED PARTNERSHIP,
as Agent and for and on behalf of
the Pecuniary Owner
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
"SELLER"
AMERICAN INDUSTRIAL PROPERTIES REIT
--------------------------------------
Charles W. Wolcott
President and Chief Executive Officer
-52-
<PAGE> 1
EXHIBIT 10.10
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "AGREEMENT") is made
and entered into as of July 10, 1997, by and among American Industrial
Properties REIT, a Texas real estate investment trust (the "COMPANY"), and
LaSalle Advisors Limited Partnership, a registered investment advisor (the
"Investor"), acting as agent for and on behalf of certain clients (the
"Pecuniary Owners").
WITNESSETH:
WHEREAS, pursuant to certain Common Share Purchase Agreements,
each dated as of July 3, 1997, among the Company and the Investor, as agent for
and on behalf of each of the Pecuniary Owners (the "PURCHASE AGREEMENTS"), the
Investor, agreed that it may purchase up to 6,122,449 Common Shares (the
"SHARES") of the Company as agent for and on behalf of the Pecuniary Owners;
and
WHEREAS, pursuant to the terms of the Purchase Agreements, the
Company and the Investor agreed that the Company would grant certain
registration rights to the Investor 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 Purchase
Agreements.
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.
Preemptive Rights: As defined in the Purchase Agreements.
<PAGE> 2
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.
Purchase Agreements: As defined in the Recitals to this
Agreement.
Purchasers: See Section 2(b) hereof.
Registrable Securities: (a) The Shares, (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 and (c) any additional
Common Shares of the Company purchased by the Investor (as agent for and on
behalf of the Pecuniary Owners or on behalf of any other client of the Investor
that was assigned preemptive rights under the Purchase Agreements) pursuant to
the exercise of Preemptive Rights. 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 l44 (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.
Shares: As defined in the Recitals to this Agreement.
Shelf Registration: See Section 2(a) hereof.
Underwritten Registration or Underwritten Offering: A
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
<PAGE> 3
2. Registration Rights.
(a) Shelf Registration. Upon the written request of the
Investor, holding, in the aggregate not less than (i) 25% of the aggregate
Registrable Securities outstanding, (ii) Registerable Securities having a fair
market value of at least $2 million whichever is less, that the Company effect
the registration under the Securities Act of such Registrable Securities
pursuant to a "shelf" registration statement, the Company will file such 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"), which Shelf Registration will cover (1) the Registrable
Securities that the Company has been so requested to register by the Investor,
and (2) all other Registrable Securities that the Company has been requested to
register by any other Pecuniary Owners by written request given to the Company
within 15 days after the Company's giving of written notice of the requesting
Investor's requested registration. Pursuant to this Section 2(a), the Investor,
upon execution hereof, is making a written request of the Company to file a
shelf registration statement on its behalf to register certain Registrable
Securities and the Company acknowledges that this provision shall constitute
the written request required hereby to initiate the filing of the shelf
registration statement pursuant to this Section 2(a). Investor agrees, during
the 10 day period following execution of this Agreement, to consider
withdrawing its request for registration in the preceding sentence. The Company
shall not be required to commence preparation of such shelf registration
statement until after expiration of such 10 day period. If the Investor does
not withdraw its request, the Company shall commence preparation of the shelf
registration statement.
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 the Investor holding in the aggregate in excess of 50% of
the Registrable Securities covered by the Shelf Registration or any underwriter
of the Registrable Securities.
If the Investor holding in the aggregate in excess of 50% of the
Registrable Securities covered by the Shelf Registration so elects, the
offering of Registrable Securities pursuant to such registration shall be in
the form of an Underwritten Offering.
<PAGE> 4
(b) Demand Registration. At any time during the five year
period following the Closing Date, the Investor, holding in the aggregate not
less than (i) 25% of the aggregate Registrable Securities outstanding or (ii)
Registrable Securities having a fair market value of at least $2 million,
whichever is less, may make a written request (the "DEMAND NOTICE") for
registration under the Securities Act (a "DEMAND REGISTRATION") of such
Registrable Securities. 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. Following receipt of a Demand Notice from the
Investor, the Company promptly will file a registration statement on any
appropriate form which will cover the Registrable Securities that the Company
has been so requested to register by the Investor.
Unless the Investor shall consent in writing, no party (including the
Company) other than a Pecuniary Owner, USAA Real Estate Company ("Realco"), MS
Real Estate Special Situations Inc. ("MRSE") or certain clients of Morgan
Stanley Asset Management Inc. who have purchased Common Shares of the Company
(such clients together with MRSE, the "Purchasers") 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). The
Investor, holding in excess of 50% of the Registrable Securities covered by a
Demand Registration may at any time prior to the effective date of the
Registration Statement relating to such registration revoke a Demand Notice by
providing a written notice to the Company (in which case such Demand
Registration shall not count as one of the three Demand Registrations).
If the Investor, holding in the aggregate in excess of 50% of the
Registrable Securities covered by the Demand Registration so elects, the
offering of Registrable Securities pursuant to such registration shall be in
the form of an Underwritten Offering. If the managing underwriter or
underwriters of such offering advise the Company and the Investor in writing
that in their opinion the number of shares of Registrable Securities and shares
of Realco or the Purchasers, if any, 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 and shares of Realco or the Purchasers, if any,
requested to be included, which in the opinion of such managing underwriter or
underwriters can be sold without any such material adverse effect; provided,
however, that no Registrable Securities or shares of Realco or the Purchasers,
if any, 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. If more than 5% of the amount of Registrable Securities proposed
to be registered hereunder are required to be excluded pursuant to this
paragraph, the number of Registrable Securities of the Investor and the number
of shares of Realco or each Purchaser, if any, to be included in such
Registration shall be reduced pro rata (according to the total number of
Registrable Securities or shares, as the case may be, beneficially
<PAGE> 5
owned by each such holder), to the extent necessary to reduce the total amount
necessary to be included in the Offering to the amount recommended by such
managing underwriter or underwriters.
No registration pursuant to a request or requests referred to in this
subsection 2(b) shall be deemed to be a Shelf Registration.
(c) 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
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 the Investor as soon as practicable (but in no event less than thirty
days before the anticipated filing date), and such notice shall (i) offer the
Investor 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). The Investor 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 the Investor that
either because of (i) the kind of securities which the Investor, the Company,
or any other Persons intend to include in such offering or (ii) the size of the
offering which the Investor, 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 the Investor 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 each such
holder) 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
<PAGE> 6
Registrable Securities will be excluded from such offering. Notwithstanding the
foregoing, if the Investor exercises an incidental registration in connection
with Realco's or the Purchasers' demand registration rights, then the managing
underwriter's cutback provision under such demand registration right shall
govern with respect to the Investor and not the managing underwriter's cutback
provision in this Section 2(c).
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.
(a) Restrictions on Public Sale by Holder of Registrable
Securities. The Investor 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 the Registration Statement relating to such Underwritten Offering,
including a sale pursuant to Rule 144 under the Securities Act (except as part
of such Underwritten Offering), during the 10-day period prior to the filing of
such Registration Statement, 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.
(b) 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 an Underwritten Offering, and during the 90-day
period beginning on the effective date of such Registration Statement (except
as part of such registration statement (x) where the Investor participating in
such registration statement consents, (y) where the Investor 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 the Investor is not simultaneously participating
in a registration statement pursuant to Section 2(b) hereof), or (z) with
respect to Realco or the Purchasers, if such parties are participating in a
Demand Registration 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:
(a) 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
<PAGE> 7
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 the Investor and the underwriters, if any, copies of all such
documents proposed to be filed, which documents will be subject to the review
of the Investor and the underwriters, if any, 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 the
Investor holding in the aggregate in excess of 50% of the Registrable
Securities covered by such Registration Statement or the underwriters, if any,
shall reasonably object (except in the case of a filing pursuant to Section
2(c) hereof);
(b) 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 included in
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 included in 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 the Investor 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(1) hereof, if applicable;
(c) notify the Investor and the managing underwriters, if
any, promptly, and (if requested by any such Person) confirm such advice in
writing, (l) 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;
<PAGE> 8
(d) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of the Registration Statement at the
earliest possible moment;
(e) if reasonably requested by the managing underwriter
or underwriters or by the Investor holding in the aggregate in excess of 50% of
the Registrable Securities covered by the Registration Statement, promptly
incorporate in a Prospectus supplement or post-effective amendment such
information as the managing underwriters and the Investor 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;
(f) furnish to the Investor 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 the Investor 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 the Investor 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 the Investor, 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 the Investor 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 the Investor 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 the
Investor or the underwriters, if any, to consummate the disposition of such
Registrable Securities;
<PAGE> 9
(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 the Investor and each Pecuniary Owner,
as applicable, 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 Investor and the managing underwriters, if any, covering
the matters customarily covered in opinions requested in Underwritten Offerings
and such other matters as may be reasonably requested by the Investor and the
underwriters, if any; (3) obtain "cold comfort" letters and updates thereof
from the Company's independent certified public accountants addressed to the
Investor 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) deliver such
documents and certificates as may be reasonably requested by the Investor 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
the Investor, any underwriter participating in any disposition pursuant to such
registration, and any attorney or accountant retained by the Investor 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 the
Company designates 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
<PAGE> 10
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 the Investor 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 the Investor or each Pecuniary Owner, as
applicable, 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.
The Investor agrees by acquisition of the Registrable Securities that,
upon receipt of any notice from the Company of the happening of any event of
the kind described in Section 4(1) hereof, the Investor will forthwith
discontinue disposition of Registrable Securities until the Investor's receipt
of the copies of the supplemented or amended Prospectus contemplated by Section
4(1) 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, the Investor will deliver to
the Company (at the Company's expense), all copies, other than permanent file
copies then in the Investor'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 the Investor shall receive copies of the
supplemented or amended prospectus contemplated by Section 4(1) 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 reasonable fees and disbursements of
counsel for the underwriters or the Investor 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 and the Investor 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
<PAGE> 11
Company shall also reimburse the Investor for the fees and expenses of counsel
incurred in connection with the transactions contemplated in the Purchase
Agreement and the preparation of this Agreement, up to a maximum aggregate
amount of $25,000. 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 the
Investor, except as expressly provided herein.
6. Indemnification: Contribution.
(a) Indemnification by Company. The Company agrees to
indemnify and hold harmless the Investor and each Pecuniary Owner and their
respective partners, officers, directors, employees and agents, and each Person
who controls any such Persons (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 the Investor or such Pecuniary Owner, as the case may be, 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 the Investor, and each Pecuniary Owner, if
requested.
(b) Indemnification By Holder of Registrable Securities.
The Investor and each Pecuniary Owner, severally and not jointly, 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 the Investor, as agent for and on behalf of each Pecuniary Owner, to
the Company specifically for inclusion in such Registration Statement or
Prospectus. In no event shall the liability of the Investor or any Pecuniary
Owner hereunder be greater in amount than the dollar amount of the proceeds
received by such Person 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.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder will (i) give prompt notice to the
indemnifying party of any claim with
<PAGE> 12
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.
(d) 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 neither the Investor nor any Pecuniary Owner shall be required
to contribute an amount greater than the dollar amount of the proceeds received
by such Person 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 the Investor and each Pecuniary Owner 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 the
Investor, make publicly available other information so long as necessary to
permit sales pursuant
<PAGE> 13
to Rule 144 under the Securities Act), and it will take such further action as
the Investor may reasonably request, all to the extent required from time to
time to enable the Investor 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 the Investor, the Company will deliver to the Investor a written
statement as to whether it has complied with such information and requirements.
8. Participation in Underwritten Registrations.
(a) If any of the Registrable Securities covered by the
Shelf Registration are to be sold in an Underwritten Offering (excluding under
Section 2(c)), the investment banker or investment bankers and manager or
managers that will administer the offering will be selected by the Investor
holding in the aggregate in excess of 50% of the Registrable Securities covered
thereby; provided that such investment bankers and managers must be reasonably
satisfactory to the Company.
(b) 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.
(a) 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.
(b) Third Party 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 the
Investor hereunder without the written consent of the Investor. The Company has
not previously entered into any agreement with respect to its securities
granting any registration rights to any Person, other than the Registration
Rights Agreement, dated as of December 19, 1996, between the Company and Realco
and the Registration Rights Agreement dated as of July 8, 1997, between the
Company and the Purchasers. The Company hereby represents and warrants to the
Investor that it has obtained all necessary consents or waivers of Realco and
the Purchasers in connection with the execution of this Agreement and the
consummation of the transactions contemplated hereby.
<PAGE> 14
(c) Investor as Agent. (i) The Company
acknowledges and agrees that each of the Pecuniary Owners has initially
appointed the Investor to act as its agent and on its behalf in connection with
the matters contemplated by this Agreement. Until such time as the Company
shall have received a written notice from any Pecuniary Owner or the Investor
that the Investor is no longer acting as such Pecuniary Owner's agent
hereunder, the Company shall be entitled to rely on any instructions and
notices received from the Investor on behalf of Pecuniary Owner as if received
from such Pecuniary Owner directly. The parties hereto further acknowledge and
agree that Investor shall act solely as agent for and on behalf of the
Pecuniary Owners in connection with the matters set forth in this Agreement,
and that the Investor shall not, under any circumstances, have any liability to
the Company in its individual capacity arising out of or in connection with
this Agreement or the transactions contemplated hereby.
(ii) In the event that any Pecuniary Owner shall at
anytime subsequent to the date hereof appoint a successor agent to the Investor
in connection with the matters set forth in this Agreement, such successor
shall be entitled to, and to exercise on behalf of such Pecuniary Owner, all of
the rights and remedies provided for herein with respect to the Investor or
such Pecuniary Owner, as the case may be, and the rights and remedies of such
Pecuniary Owner hereunder shall not in any way be modified, limited, delayed or
impaired as a consequence of such appointment.
(iii) The provisions of Sections 5, 6 and of this Section
9(c) shall remain in full force and effect with respect to the Investor
notwithstanding any termination of the Investor's appointment as agent for and
on behalf of any or all of the Pecuniary Owners hereunder.
(iv) Reference herein to the Investor "holding"
Registrable Securities shall mean holding such securities, as agent for and on
behalf of the Pecuniary Owners.
(d) 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,
Pecuniary Owners and, for so long as the Investor shall act as agent for and on
behalf of any of the Pecuniary Owners, the Investor; provided, that the
provisions of Sections 5, 6, and 9(c) may not, under any circumstances and
notwithstanding any termination of the Investor's appointment as agent for and
on behalf of any or all of the Pecuniary Owners hereunder, be amended,
modified, supplemented or waived without the written consent of the Investor.
(e) Notices. The notice provisions contained in Section
12.11 of the Purchase Agreements shall be incorporated herein and shall be
governing under this Agreement.
(f) 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, provided further,
that the Company cannot assign its rights hereunder except pursuant to a
merger.
(g) 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
<PAGE> 15
be deemed to be an original and all of which taken together shall constitute
one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) 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
MARYLAND, WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAWS.
(j) Severability. If any provision of this 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 Agreement would not
be materially and adversely affected thereby, such provision shall be fully
separable, and this Agreement shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part thereof,
and the remaining provisions of this 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 simultaneously as a part of this
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 or any arbitrator to whom disputes relating to this
Agreement are submitted to reform the otherwise illegal, invalid or
unenforceable provision in accordance with this Section 9(j).
(k) Arbitration. In the event of a dispute hereunder
which cannot be resolved by the parties, such dispute shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association and judgment on the award rendered by the arbitration
panel may be entered in any court or tribunal of competent jurisdiction. Any
arbitration occurring under this Section 9(k) shall be held in Baltimore,
Maryland in the first instance, in Dallas, Texas in the second instance, and
continuing in that order with respect to each dispute occurring hereunder.
(l) 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.
<PAGE> 16
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
"INVESTOR"
LaSalle Advisors Limited Partnership
as agent for and on behalf of the
Pecuniary Owners
----------------------------------------
Stanley J. Kraska, Jr.
Managing Director
<PAGE> 1
EXHIBIT 99.1
AMERICAN INDUSTRIAL PROPERTIES REIT
CERTIFICATE OF INSPECTOR
The undersigned Inspector of Election for the Annual Meeting of
shareholders of American Industrial properties REIT held on June 30, 1997, does
hereby certify:
1. A total of 10,000,000 shares of common stock of the company were
entitled to vote at the meeting.
2. The holders of at least 8,164,759 shares of common stock of the
Company entitled to vote were present, in person or by proxy, at the meeting,
constituting a quorum for the transaction of all business considered at the
meeting.
3. Authorization of additional Common Shares.
FOR: 6,981,043 AGAINST: 1,100,958 ABSTAIN: 82,758
4. Adoption of the Third Amended and Restated Declaration of Trust
which includes provisions limiting share ownership, dealing with business
combinations, allowing dividends to be paid in cash or shares and allowing the
Board to take any action necessary to preserve the Trust's REIT status.
FOR: 7,109,419 AGAINST: 949,729 ABSTAIN: 105,611
---------- ---------- ---------
5. Authorization of Preferred Shares.
FOR: 6,736,036 AGAINST: 1,317,008 ABSTAIN: 111,715
---------- ---------- ---------
6. Elimination of Cumulative Voting.
FOR: 6,801,305 AGAINST: 1,236,479 ABSTAIN: 126,974
---------- ---------- ---------
7. Conversion of debt to USAA REALCO into Common Shares and, if
proposal one is not approved, authorization of additional Common Shares to
permit such conversion.
FOR: 7,206,715 AGAINST: 867,272 ABSTAIN: 90,772
---------- ---------- ---------
8. Conversion of debt to Morgan Stanley affiliates and clients into
Common Shares and, if proposal one is not approved, authorization of additional
Common Shares to permit such conversion.
FOR: 7,193,272 AGAINST: 867,532 ABSTAIN: 103,955
---------- ---------- ---------
9. Issuance of up to $15 million of convertible debt securities and,
if proposal one is not approved, authorization of additional Common Shares to
permit such conversion.
FOR: 6,915,641 AGAINST: 1,142,203 ABSTAIN: 103,955
---------- ---------- ---------
10. Adoption of Employee and Trust Manager Incentive Plan.
FOR: 6,751,846 AGAINST: 1,281,834 ABSTAIN: 131,080
---------- ---------- ---------
<PAGE> 2
11. Election of Trust Managers.
<TABLE>
<CAPTION>
Withhold Withhold
For All Authority Authority
Nominees Nominees All Nominees Individual Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William H. Bricker 9,215,881 338,965 68,779 9,623,625
- --------------------------------------------------------------------------------
T. Patrick Duncan 9,256,995 338,965 27,665 9,623,625
- --------------------------------------------------------------------------------
Robert E. Giles 9,240,266 338,965 44,394 9,623,625
- --------------------------------------------------------------------------------
Edward B. Kelly 9,257,670 338,965 26,990 9,623,625
- --------------------------------------------------------------------------------
Charles W. Wolcott 9,208,841 338,965 75,819 9,623,625
- --------------------------------------------------------------------------------
</TABLE>
12. Ratification of selection of Ernst & Young LLP as independent
auditors.
FOR: 9,479,693 AGAINST: 90,315 ABSTAIN: 53,219
----------- ---------- ----------
13. Postponement or adjournment of the Annual Meeting for the
solicitation of additional votes if necessary.
FOR: 8,367,838 AGAINST: 1,133,297 ABSTAIN: 122,089
---------- ---------- ----------
IN WITNESS WHEREOF, I have hereunto set my hand this 30th day of June 1997.
/s/ HARRIET C. YATES
--------------------------
Harriet C. Yates, Inspector
