<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13D
Under the Securities Exchange Act of 1934
American Industrial Properties REIT
(Name of Issuer)
Common Shares of
Beneficial Interest,
par value $.10 per share
(Title of Class of Securities)
------------
026791-10-3
(CUSIP Number)
Stuart J.M. Breslow
Morgan Stanley, Dean Witter, Discover & Co.
1585 Broadway
New York, New York 10036
(212) 761-4000
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
July 8, 1997
(Date of Event which Requires Filing of
this Statement)
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If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of this Schedule
13D, and is filing this statement because of Rule 13d-1(b)(3) or (4), check
the following: [ ]
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SCHEDULE 13D
CUSIP No. 026791-10-3 Page 2 of Pages
- ----------------------- -----------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Morgan Stanley, Dean Witter, Discover & Co.
IRS #39-314-5972
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [x]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
627,943
8 SHARED VOTING POWER
NUMBER OF SHARES
BENEFICIALLY OWNED BY EACH 6,539,476
REPORTING PERSON WITH
9 SOLE DISPOSITIVE POWER
627,943
10 SHARED DISPOSITIVE POWER
6,539,476
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
7,167,419
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
30.8%
14 TYPE OF REPORTING PERSON*
IA, CO, HC
*SEE INSTRUCTIONS BEFORE FILLING OUT!
SEC 1746 (9-88) 2 of 7
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SCHEDULE 13D
CUSIP No. 026791-10-3 Page 3 of Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Morgan Stanley Asset Management Inc.
IRS # 13-304-0307
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [x]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF SHARES
BENEFICIALLY OWNED BY EACH 8 SHARED VOTING POWER
REPORTING PERSON WITH
6,539,476
9 SOLE DISPOSITIVE POWER
10 SHARED DISPOSITIVE POWER
6,539,476
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
6,539,476
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
28.0%
14 TYPE OF REPORTING PERSON*
IA, CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
SEC 1746 (9-88) 2 of 7
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SCHEDULE 13D
CUSIP No. 026791-10-3 Page 4 of Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Morgan Stanley Real Estate Special Situations Fund I, L.P.
IRS # Pending
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [x]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
8 SHARED VOTING POWER
NUMBER OF SHARES
BENEFICIALLY OWNED BY EACH 1,883,830
REPORTING PERSON WITH
9 SOLE DISPOSITIVE POWER
10 SHARED DISPOSITIVE POWER
1,883,830
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,883,830
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
8.1%
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
SEC 1746 (9-88) 2 of 7
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SCHEDULE 13D
CUSIP No. 026791-10-3 Page 5 of Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
The Morgan Stanley Real Estate Special Situations Fund II, L.P.
IRS # Pending
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [x]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
8 SHARED VOTING POWER
NUMBER OF SHARES
BENEFICIALLY OWNED BY EACH 2,326,660
REPORTING PERSON WITH
9 SOLE DISPOSITIVE POWER
10 SHARED DISPOSITIVE POWER
2,326,660
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,326,660
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.9%
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
SEC 1746 (9-88) 2 of 7
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Item 1. Security and Issuer.
The class of equity securities to which this statement relates
is the common shares of beneficial interest, $.10 par value per share (the
"Common Shares"), of American Industrial Properties REIT, a Texas real estate
investment trust (the "Issuer"). The principal executive offices of the
Issuer are located at 6210 North Beltline Road, Suite 170, Irving Texas
75063-2656.
Item 2. Identity and Background.
This statement is being filed by (i) Morgan Stanley, Dean
Witter, Discover & Co., a Delaware corporation ("MSDWD") and an investment
adviser registered with the Securities and Exchange Commission with offices at
1585 Broadway, New York, New York 10036, (ii) Morgan Stanley Asset Management
Inc., a Delaware corporation ("MSAM") and an investment adviser registered
with the Securities and Exchange Commission with offices at 1221 Avenue of the
Americas, New York, New York 10020, (iii) The Morgan Stanley Real Estate
Special Situations Fund I, L.P. ("MSRESSF I"), a Delaware limited partnership
with its office at 1221 Avenue of the Americas, New York, New York 10020, the
general partner of which is MS Real Estate Special Situations GP Inc., a
wholly-owned subsidiary of MSDWD, and (iv) The Morgan Stanley Real Estate
Special Situations Fund II, L.P. ("MSRESSF II"), a Delaware limited
partnership with its office at 1221 Avenue of the Americas, New York, New York
10020, the general partner of which is MS Real Estate Special Situations GP
Inc., a wholly-owned subsidiary of MSDWD.
During the last five years, none of MSDWD, MSAM, MSRESSF I and
MSRESSF II have been (i) convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), or (ii) a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The funds used to acquire the Common Shares were obtained from
the working capital of MSDWD, MSRESSF I and MSRESSF II, respectively. The
amounts of the consideration for the acquisitions are set forth in Item 5.
MSAM has not contributed its own assets in connection with the purchases
described herein. MSAM is an investment adviser to MSRESSF I, MSRESSF II and
the other clients referred to in Item 5 below (collectively with MS Real
Estate Special Situations Inc. ("MSRESSI"), the wholly-owned subsidiary through
which MSDWD holds Common Shares, the "Investors").
Item 4. Purpose of Transaction.
MSAM acquired the Common Shares described at Item 5(c) below on
behalf of the Investors for investment purposes, and in order to protect the
investment in the Issuer, has obtained the right to nominate for election two
Trust Managers to the Issuer's Board of Trust Managers until the value of the
Issuer's Common Shares and Common Share equivalents equals $150,000,000 based
on 10 days average trading prices (the "Minimum Capitalization"), at which
time, MSAM will have the right to nominate one Trust Manager. When the
capitalization of the Issuer reaches $250,000,000, MSAM will no longer have
rights to nominate Trust Managers. In addition, as described in Item 6, MSAM,
on behalf of the Investors, has the right until the Final Closing (as defined
below) to approve various matters relating to the conduct of the Issuer's
business including, among other things, the issuance of capital stock,
incurrence or prepayment of debt, sales of assets, mergers, admissions of
partners to partnerships of which the Issuer is the general partner and
maintenance of REIT status. MSAM, on behalf of the Investors, intends to
continue to consider various alternative courses of action and will in the
future take such actions with respect to the equity ownership in the Issuer as
MSAM deems appropriate in light of the circumstances exiting from time to
time. Such actions may include making recommendations to management
concerning various business strategies, acquisitions, dividend policies and
other matters, pursuing a transaction or transactions involving a change in
control of the Issuer or such other actions as it may deem appropriate. Such
actions also may involve the purchase of additional Common Shares pursuant to
certain preemptive rights described in Item 5(c) below or otherwise or,
alternatively, may involve the sale of all or a portion of the Common Shares
beneficially owned by the Investors in the open market or in privately
negotiated transactions to one or more purchasers.
Item 5. Interest in Securities of the Issuer.
(a) -(b) Incorporated by reference to items (7) - (11) and (13)
of the cover pages. Information regarding the percentage of Common Shares is
based on 23,289,868 Common Shares outstanding as of July 17, 1997, which
number was provided by the Issuer.
(c) Pursuant to the Common Shares Purchase Agreement, dated
June 20, 1997 (the "Purchase Agreement"), a copy of which is attached hereto
as Exhibit 1, the clients named on Exhibit A to the Purchase Agreement
(including for this purpose, MSRESSI) acquired on July 8, 1997 and July 17,
1997 at a purchase price of $2.45 per share the number of Common Shares for
the aggregate purchase prices set forth below:
Buyer Number of Common Shares Aggregate Purchase Price
---- -------------------------- ------------------------
MSRESSI 7/8/97 658,269 $1,612,759.05
7/17/97 11,779 $28,858.55
MSRESSF I 7/8/97 1,501,163 $3,677,849.35
7/17/97 363,829 $891,381.05
MSRESSF II 7/8/97 1,501,163 $3,677,849.35
7/17/97 802,231 $1,965,465.95
Other Clients 7/8/97 1,517,845 $3,718,720.25
7/17/97 811,140 $1,987,293.00
The transactions described above took place in New York, New
York.
Pursuant to separate investment management agreements between
MSAM and each of the clients named on Exhibit A to the Purchase Agreement,
MSAM has been granted voting and dispositive power with respect to the Common
Shares held by each client.
MSDWD, through MSRESSI its wholly-owned subsidiary, exercises
sole voting and dispositive power with respect to all such shares of Common
Shares that it acquired. MSDWD, through MSAM its wholly-owned subsidiary,
exercises voting and dispositive power with respect to the Common Shares
acquired by MSRESSF I, MSRESSF II and the other clients.
Except as disclosed herein, none of MSDWD, MSRESSI, MSAM,
MSRESSF I nor MSRESSF II has effected any transactions in Common Shares during
the preceding 60 days.
Item 6. Contracts, Arrangements, Understandings or
Relation-ships with Respect to Securities of the Issuer.
Pursuant to the Purchase Agreement attached hereto as Exhibit 1
MSAM, on behalf of the Investors, has been granted the right to designate two
individuals to be nominated as Trust Managers of the Issuer, and the Issuer
will recommend such individual for election to the Board of Trust Managers,
until the value of the Issuer's Common Shares and Common Share equivalents
equals the Minimum Capitalization, at which time, MSAM will have the right to
nominate one Trust Manager. When the capitalization of the Issuer reaches
$250,000,000, MSAM will no longer have a right to nominate Trust Managers.
MSAM has designated two employees who have been elected as
Trust Members of the Board of Trust Managers of the Issuer. At least one
Trust Manager designated by MSAM will serve on committees of the Board.
If the Investors do not have a representative on the Board of
Trust Managers of the Issuer, the Issuer must permit a representative of MSAM
to attend, but not vote, as an observer at each meeting of the Board of Trust
Managers or any committee meeting of the Board of Trust Managers of the
Issuer. The right to designate a person for election to the board or to be an
observer is not transferable.
Pursuant to the Purchase Agreement, the Investors have agreed
to purchase up to an additional 995,846 Common Shares at subsequent closings
at a price of $2.45 per Common Share (subject to certain antidilution
adjustments) at one or more subsequent closings (the last closing being called
the "Final Closing"). The subsequent purchases, if any, are subject to
various conditions.
The Investors have also been granted certain preemptive rights
to acquire that portion of Common Shares that are otherwise offered by the
Issuer (with certain exceptions) that will permit the Investors to maintain
their respective percentage ownership of Common Shares. The preemptive rights
terminate when the Issuer achieves Minimum Capitalization.
Pursuant to a Registration Rights Agreement, dated June 20,
1997, MSRESSI, MSAM, on behalf of the clients and the Issuer, upon the request
of an Investor holding 25% of Common Shares held by the Investors for a shelf
registration statement, the Issuer is required to offer to include the Common
Shares held by such Investor and other Investors in such shelf registration
statement, and, subject to certain conditions, to effect registration of the
Common Shares of the Issuer held by Investors so requesting within 60 days of
the request. The Investors during a five year period may also make up to
three demands that the Issuer file a non-shelf registration statement and,
subject to certain conditions, the shares of Common Shares held by the
Investors may be included in the registration of the Issuer's Common Shares
when the Issuer proposes to register its Common Shares or the shares of other
holders of Common Shares.
Except for the investment management agreements entered into by
each of MSRESSF I, MSRESSF II and the other clients, each of which grants
voting and dispositive power over the Common Shares to MSAM, there exist no
contracts arrangements, understandings or relations (legal or otherwise)
between the Investors and other persons with respect to finder's fees, joint
ventures, loan or option arrangements, puts or calls, guarantees of profits,
division of profits or loss, or the giving or withholding of proxies.
Item 7. Material to be Filed as Exhibits.
Exhibit 1: Common Share Purchase Agreement dated as of June 20,
1997 between the Issuer and MSAM.
Exhibit 2: Registration Rights Agreement dated as of June 20,
1997 between the Issuer and MSAM.
Exhibit 3: Joint Filing Agreement dated July 18, 1997 among
MSDWD, MSAM, MSRESSI and MSRESSII.
Exhibit 4: Secretary's Certificate authorizing Stuart J.M.
Breslow to sign on behalf of MSDWD.
SIGNATURES
After reasonable inquiry and to the best knowledge and belief
of the undersigned, the undersigned certifies that the information set forth
in this statement is true, complete and correct.
Date: July 18, 1997
By: /s/ Stuart J.M. Breslow
-------------------------------------
Name: Stuart J.M. Breslow
Title: Authorized Signer
EXHIBIT INDEX
Exhibit No. Description
----------- -------------------------------------------------------
1 Common Share Purchase Agreement, dated as of June 20,
1997, between the Issuers and Morgan Stanley Asset
Management Inc.
2 Registration Rights Agreement, dated as of June 20,
1997, between the Issuer, MS Real Estate Special
Situations Inc. and Morgan Stanley Asset Management
Inc.
3 Joint Filing Agreement, dated July 18, 1997 among
Morgan Stanley, Dean Witter, Discover & Co., Morgan
Stanley Asset Management Inc., The Morgan Stanley
Real Estate Special Situations Fund I, L.P. and The
Morgan Stanley Real Estate Special Situations Fund II,
L.P.
4 Secretary's Certificate authorizing Stuart J.M. Breslow to
sign on behalf of Morgan Stanley, Dean Witter, Discover
& Co.
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
TABLE OF CONTENTS
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-
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-
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
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
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.
"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.
"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
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) 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 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.
"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.
"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.
---------------
"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.
"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 .
- ---------
(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 "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 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 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 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 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 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 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 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.
(g) To Seller's knowledge, each unsatisfied brokerage obligation that
is in excess of $25,000 with respect to the Properties is set forth on
Schedule 3.13.
- -------------
(h) To Seller's knowledge and except as set forth on Schedule 3.13, no
-------------
capital expenditures are contemplated by Seller to be incurred by Seller, any
Subsidiary or any Seller Partnership within twelve months after the date of
this Agreement in excess of $50,000 per Property with respect to any
Property.
(i) Except as set forth in Schedule 3.13, all management contracts with
-------------
respect to the Properties are terminable by Seller on 30 days notice.
(j) To Seller's knowledge, except for customary easements for access to
building systems or utilities and except as set forth in Schedule 3.13,
-------------
each Property is an independent unit which does not now rely on any
facilities (other than facilities of municipalities or public utilities)
located on any property that is not part of the Property for the furnishing
to the Property of any essential building systems or utilities (including
drainage facilities, catch basins and retention ponds) that if the owner of
the Property could not avail the use of which, would materially detract from
the value of the Property or materially interfere with the use of the
Property.
3.14 TAX MATTERS.
-----------
(a) For purposes of this Agreement, "TAXES" means any federal
(including, without limitation, tax on its undistributed taxable income,
alternative minimum tax, tax on certain sale proceeds or other nonqualifying
income from foreclosure property or on income from prohibited transactions,
and any taxes imposed upon Seller, Subsidiaries or Seller Partnerships under
Section 857 or Section 4981 of the Code), state, county, local or foreign
taxes, charges, fees, levies, or other assessments, including, without
limitation, all net income, gross income, sales and use, ad valorem,
transfer, gains, profits, excise, franchise, real and personal property,
gross receipt, capital stock, business and occupation, disability,
employment, payroll, license, estimated, or withholding taxes or charges
imposed by any Governmental Entity, and includes any interest and penalties
(civil or criminal) on or additions to any such taxes.
(b) For purposes of this Agreement, "TAX RETURN" means a report, return
or other information required to be filed with or supplied to a Governmental
Entity with respect to Taxes including, without limitation, any notices or
information reports or returns required to be filed by Seller, Subsidiaries
or Seller Partnerships with respect to their respective operations, income,
assets and shareholders or partners in order to maintain Seller's status as a
real estate investment trust ("REIT") under the Code.
(c) Seller elected to be taxed as a REIT under Sections 856 through 860
of the Code effective for its taxable year ended December 31, 1985 (the
"INITIAL REIT YEAR"). Seller, since the Initial REIT Year through the end of
the immediately preceding taxable year, has always qualified as a REIT under
the Code. At all times from and after the Initial REIT Year to the date
hereof, Seller has complied with, and through the 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 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 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 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 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 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 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 $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 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 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 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 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.
---------
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 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.
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.
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
------------------------------------
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.
(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 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 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 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 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.
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.
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: /s/ Russell C. Platt
----------------------------------------
Name: Russell C. Platt
--------------------------------------
Title: President
-------------------------------------
"BUYERS"
MORGAN STANLEY ASSET MANAGEMENT, INC.,
as Agent and Attorney-in-fact for each
of its clients listed on Exhibit A hereto
By: /s/ Russell C. Platt
----------------------------------------
Name: Russell C. Platt
--------------------------------------
Title: Managing Director
-------------------------------------
"SELLER"
AMERICAN INDUSTRIAL PROPERTIES REIT
By: /s/ Charles W. Wolcott
----------------------------------------
Charles W. Wolcott
President and Chief Executive Officer
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.
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.
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.
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 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 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 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 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;
(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;
(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
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, 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
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 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.
(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.
(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
"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
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.
EXHIBIT 3 TO SCHEDULE 13D
JULY 18, 1997
MORGAN STANLEY, DEAN WITTER, DISCOVER & CO., MORGAN STANLEY ASSET
MANAGEMENT INC., The Morgan Stanley Real Estate Special Situations Fund I
L.P. and The Morgan Stanley Real Estate Special Situations Fund II L.P.
hereby agree that, unless differentiated, this Schedule 13D is filed on
behalf of each of the parties.
MORGAN STANLEY ASSET MANAGEMENT INC.
BY: /s/ Donald P. Ryan
-------------------------------------------------------------------
Donald P. Ryan / Vice President Morgan Stanley Asset Management Inc.
MORGAN STANLEY, DEAN WITTER, DISCOVER & CO.
BY: /s/ Stuart J.M. Breslow
-------------------------------------------------------------------
Stuart J.M. Breslow / Morgan Stanley, Dean Witter, Discover & Co.
The Morgan Stanley Real Estate Special Fund I L.P.
By Morgan Stanley Real Estate Special Situations GP
BY: /s/ Theodore Bigman
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Name: Theodore Bigman
Title: Vice President
The Morgan Stanley Real Estate Special Situations Fund II L.P.
By Morgan Stanley Real Estate Special Situations GP
BY: /s/ Theodore Bigman
----------------------------
Name: Theodore Bigman
Title: Vice President
EXHIBIT 4 TO SCHEDULE 13D
MORGAN STANLEY, DEAN WITTER, DISCOVER & CO.
SECRETARY'S CERTIFICATE
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I, Charlene R. Herzer, a duly elected and acting Assistant Secretary
of Morgan Stanley, Dean Witter, Discover & Co., a corporation organized and
existing under the laws of the State of Delaware (the "Corporation"),
certify that, as approved by a Unanimous Consent of Directors in Lieu of a
Meeting dated as of May 31, 1997, the following persons are each authorized
to sign reports to be filed under Sections 13 and 16 of the Securities
Exchange Act of 1934 on behalf of the Corporation, and such authorizations
are in full force and effect as of this date:
Stuart J.M. Breslow
Robert G. Koppenol
Bruce Bromberg
Robin Sherak
IN WITNESS WHEREOF, I have hereunto set my name and affixed the seal
of the Corporation as of the 3rd day of June, 1997.
/s/ Charlene R. Herzer
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Charlene R. Herzer
Assistant Secretary
[SEAL]
