SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
_x_ Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarter ended June 30, 1995.
Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period from
________________ to _______________.
Commission File Number 1-12222
BEDFORD PROPERTY INVESTORS, INC.
(Exact name of Registrant as specified in its charter)
MARYLAND 68-0306514
(state or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
270 Lafayette Circle, Lafayette, CA 94549
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code (510)283-8910
Indicate by check mark whether Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months or for such shorter period
that Registrant was required to file such reports and (2) has been
subject to such filing requirements for the past 90 days. Yes _x_
No___
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Class Outstanding as of August 14, 1995
Common Stock, $0.01 par value 5,990,650
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
INDEX
PART I. FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS
Statement 3
Consolidated Balance Sheets
as of June 30, 1995 and December 31, 1994 4
Consolidated Statements of Income for the three
and six months ended June 30, 1995 and 1994 5
Consolidated Statements of Stockholders' Equity
for the six months ended June 30, 1995 and the
year ended December 31, 1994 6
Consolidated Statements of Cash Flows for the
six months ended June 30, 1995 and 1994 7
Notes to Consolidated Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's Discussion and Analysis of Results of
Operations and Financial Condition
PART II. OTHER INFORMATION
ITEMS 1 - 6
SIGNATURES
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATEMENT
The financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The information furnished
reflects all adjustments which are, in the opinion of management,
necessary for a fair presentation of results of operations for the
interim periods. Such adjustments are of a normal recurring nature.
These financial statements should be read in conjunction with the
notes to financial statements appearing in the annual report to
stockholders for the year ended December 31, 1994.
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited)
(in thousands, except share amounts)
June 30, December 31,
1995 1994
ASSETS:
Real estate investments:
Office buildings-held for sale $ 8,934 $ 8,928
Office buildings-held for investment 23,385 23,022
Industrial buildings 26,355 26,253
58,674 58,203
Less accumulated depreciation 3,762 3,150
54,912 55,053
Cash 1,115 4,733
Other assets 2,647 2,508
Total assets $ 58,674 $62,294
LIABILITIES AND STOCKHOLDERS' EQUITY:
Bank loan payable 18,523 22,400
Accounts payable and accrued expenses 907 850
Dividend payable 629 568
Acquisition payable 600 600
Other liabilities 1,000 944
Total liabilities 21,659 25,362
Stockholders' equity:
Preferred stock, par value $0.01 per
share; authorized 10,000,000 shares,
issued none - -
Common stock, par value $0.01 per share;
authorized 30,000,000 shares, issued
and outstanding, 5,990,650 shares in 1995;
5,976,900 shares in 1994 60 60
Additional paid-in capital 107,209 107,151
Accumulated losses and distributions
in excess of net income (70,254) (70,279)
Total stockholders' equity 37,015 36,932
Total liabilities and
stockholders' equity $ 58,674 $ 62,294
See accompanying notes to consolidated financial statements.
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (Unaudited)
(in thousands, except share and per share amounts)
Three Months Six Months
1995 1994 1995 1994
Property operations:
Rental income $2,616 $1,976 $5,278 $3,832
Rental expenses:
Operating expenses 643 552 1,305 1,067
Real estate taxes 250 218 482 423
Depreciation and
amortization 357 211 698 605
Income from property operations 1,366 995 2,793 1,737
General and administrative
expense (312) (319) (682) (615)
Interest income 8 17 19 36
Interest expense (446) (128) (908) (197)
Income before gain on sale 616 565 1,222 961
Gain on sale of real estate
investment - - - 1,193
Net income $616 $565 $1,222 $2,154
Net income per common and common
equivalent share $0.10 $0.09 $0.20 $0.35
Weighted average number of common
and common equivalent shares
outstanding 6,134,361 6,144,673 6,132,750 6,140,557
See accompanying notes to consolidated financial statements.
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1995
AND THE YEAR ENDED DECEMBER 31, 1994(Unaudited)
(in thousands, except per share data)
Accumulated
losses and Total
Additional distributions stock-
Common paid-in in excess of holders'
stock capital net income equity
Balance,
December 31,
1993 $60 $107,147 $(71,766) $35,441
Issuance of
Common Stock - 4 - 4
Net Income - - 3,609 3,609
Dividends
($0.355 per share) - - (2,122) (2,122)
Balance,
December 31, 1994 60 107,151 (70,279) 36,932
Issuance of
Common Stock - 58 - 58
Net Income - - 1,222 1,222
Dividends
($0.20 per share) - - (1,197) (1,197)
Balance,
June 30, 1995 $60 $107,209 ($70,254) $37,015
See accompanying notes to consolidated financial statements.
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994 (Unaudited)
(in thousands)
1995 1994
Operating Activities:
Net income $1,222 $2,154
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 833 715
Gain on sale of real estate investment 0 (1,193)
Change in other assets (360) (313)
Change in accounts payable and
accrued expenses 57 (722)
Change in other liabilities 56 242
Net cash provided by operating activities 1,808 883
Investing Activities:
Investments in real estate (471) (17,718)
Proceeds from sale of real estate
investment 0 8,289
Net cash used by investing activities (471) (9,429)
Financing Activities:
Proceeds from bank loan 2,500 22,683
Repayments of bank loan (6,377) (14,059)
Issuance of common stock 58 0
Payment of dividends (1,136) (896)
Net cash provided (used) by financing
activities (4,955) 7,728
Net decrease in cash (3,618) (818)
Cash at beginning of period 4,733 4,930
Cash at end of period $1,115 $4,112
Supplemental disclosure of cash flow information:
Cash paid during the period for
interest $ 812 $ 40
See accompanying notes to consolidated financial statements.
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The Company and Basis of Presentation
The Company
On July 1, 1993, the Company (formerly known as ICM Property Investors
Incorporated) reincorporated from the State of Delaware to the State
of Maryland under a new name, Bedford Property Investors, Inc. Since
July 1, 1993, the Company's Common Stock has traded under the symbol
"BED" on both the New York and Pacific Stock Exchanges.
Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and, therefore, do not
include all information and footnotes necessary for a fair
presentation of financial condition, results of operations, and cash
flows in conformity with generally accepted accounting principles.
When necessary, reclassifications have been made to prior period
balances to conform to current period presentation.
Per Share Data
Per share data is based on the weighted average number of common and
common equivalent shares outstanding during the period. Stock options
issued under the Company's stock option plans are considered common
stock equivalents and are included in the calculation of per share
data if, upon exercise, they would have a dilutive effect.
<PAGE>
Note 2. Real Estate Investments
As of June 30, 1995, the Company's real estate investments (net of
depreciation) were diversified by property type as follows (in
thousands):
Number of Investment % of
Properties Amount Total
Office Buildings 5 $29,636 54
Industrial Buildings 7 25,276 46
Total 12 $54,912 100
As of June 30, 1995, the Company's real estate investments (net of
depreciation) were diversified by geographic region as follows (in
thousands):
Number of Investment % of
Properties Amount Total
San Francisco Bay
Area, California 5 $14,086 26
Greater Los Angeles
Area, California 3 23,349 43
Salt Lake City,
Utah 1 6,757 12
Greater Kansas City
Area, Kansas 2 3,760 7
Jackson, Mississippi
(offered for sale) 1 6,960 12
Total 12 $54,912 100
<PAGE>
The following table sets forth the Company's real estate investments
as of June 30, 1995 (in thousands):
Less
Accumulated
Depre-
Land Building ciation Total
Office Buildings:
IBM Building (1) $ 2,590 $6,344 $1,974 $6,960
Woodlands Tower II 945 6,090 278 6,757
1000 Town Center
Drive 1,785 4,691 242 6,234
Mariner Court 3,221 4,499 157 7,563
Village Green 743 1,411 32 2,122
Total Office 9,284 23,035 2,683 29,636
Industrial Buildings:
Building 3
Contra Costa Diablo
Industrial Park 495 1,167 118 1,544
Building 8
Contra Costa Diablo
Industrial Park 877 1,551 158 2,270
Building 18,
Mason Industrial Park 610 1,305 136 1,779
Building 6,
Cody Street Park 380 1,259 191 1,448
Building 3,
Ninety-Ninth Street
Park 360 2,172 220 2,312
Dupont Industrial
Center 3,588 6,131 167 9,552
Milpitas Town Center 1,935 4,525 89 6,371
Total Industrial 8,245 18,110 1,079 25,276
Total $17,529 $41,145 $3,762 $54,912
____________________
(1)Offered for sale.<PAGE>
Texas Bank North Building
During the fourth quarter of 1992, the Company decided to offer the
Texas Bank North Building for sale. In anticipation of such sale, the
property was evaluated and written down to management's best estimate
of net realizable value. The Company wrote down its investment in
this property by $3,631,000. This write down resulted from the
general economic conditions that existed in the national and local
real estate markets. In December 1993, the Company entered into a
contract to sell the Texas Bank North Building for a cash sale price
of $8,500,000. The sale was completed on January 14, 1994, and
resulted in a gain of $1,193,000. This gain was primarily
attributable to an improvement in 1993 in the local real estate
economy.
Mariner Court
The property, a suburban three-story office building located in
Torrance, California, was purchased for $7,500,000 or $71 per square
foot on January 5, 1994.
Dupont Industrial Center
The property, a three-building industrial complex located in Ontario,
California, was purchased for $9,750,000 or $22 per square foot on May
24, 1994.
Village Green
The property, a suburban three-building office complex located in
Lafayette, California, was purchased for $1,792,000 or $106 per square
foot on July 7, 1994.
Milpitas Town Center
The property, consisting of two suburban research and development
buildings and 3.1 acres of entitled land, is located in Milpitas,
California. It was purchased for $6,320,000 or $62 per square foot
(excluding the undeveloped land), on August 11, 1994. The property
has a Phase I environmental site assessment which indicates that the
groundwater under the property either has been or may in the future be
impacted by the migration of contaminants originating from an off-site
source. The responsible party has begun remediation pursuant to a
clean-up program which is backed by an insurance policy from CIGNA up
to $10 million. The Company does not believe that this environmental
matter will impair the future value of the property.
There has been no significant development in environmental matters or
proceedings since the filing of the Company's 1994 Annual Report on
Form 10-K.
The Company internally manages the majority of its properties and
maintains centralized financial record keeping. For the IBM Building
and Woodlands Tower II, the Company has subcontracted on-site
maintenance to local maintenance firms.
Note 3. Related Party Transactions
Since February 1993, all of the Company's activities relating to debt
and equity financings and the acquisition of new properties have been
handled through an arrangement with Mr. Bedford, whereby he provides
acquisition and financing personnel, allocable overhead costs, and the
costs of all due diligence conducted prior to an acquisition. Upon
the completion of a financing or the acquisition of a property, Mr.
Bedford is paid a fee by the Company equal 1-1/2% of the gross amount
raised or 1-1/2% of the purchase price of the property, as the case
may be. However, because Mr. Bedford is a related party and in order
to insure that such fees were reasonable, the Board of Directors has
limited the maximum amount of fees that can be paid to Mr. Bedford.
The agreement specifies that aggregate fees paid to Mr. Bedford for
such services cannot exceed the total costs incurred by Mr. Bedford in
maintaining a staff of personnel skilled in such activities. As of
June 30, 1995, the Company had paid Mr. Bedford an aggregate of
$903,000 pursuant to this arrangement, which was $1,182,000 less than
the amount of total acquisition and financing costs funded by Mr.
Bedford.
The Company believes that since the fees charged are (1) comparable to
those charged by other sponsors or real estate investment entities or
other third party service providers, and (2) charged only for
services on acquired properties or completed financings, such fees are
properly includable in direct acquisition costs and are capitalized as
part of the asset or financing activities.
The Company is leasing 2,400 square feet of industrial space on a
month-to-month basis at a market rental rate of $1,288 per month to a
company wholly-owned by Mr. Bedford.
Note 4. Bank Loan Payable
In December 1993, the Company concluded an agreement with Bank of
America for a $20 million revolving line of credit for real estate
acquisitions. In August 1994, the maximum commitment amount of the
facility was increased from $20 million to $23 million. The facility,
which matures on January 1, 1997, carries an interest rate option of
either prime plus 0.75% or IBOR plus 3.00%. The facility is secured
by mortgages on Woodlands Tower II, Mariner Court, Village Green,
Milpitas Town Center, IBM Building, 1000 Town Center Drive and Dupont
Industrial Center. At June 30, 1995, the Company had outstanding
borrowings of $18,523,000 under the credit facility and a letter of
credit issued under the facility in the amount of $600,000.
The daily weighted average amount owing to the bank was $17,834,000
and $2,592,000 in the first six months of 1995 and 1994, respectively.
The weighted average interest rate in these periods was 8.86% and
7.35%, respectively. The effective interest rate at June 30, 1995, was
8.59%
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Results of Operations - Six Months Ended June 30, 1995 Compared with
Six Months Ended June 30, 1994
Income
Income from property operations (defined as rental income less rental
expenses) increased $1,056,000 or 61% for the six months ended June
30, 1995, as compared to the same period in 1994. This is due
primarily to an increase in rental income of $1,446,000 for the first
six months in 1995 compared to the first six months in 1994, offset by
an increase in rental expenses of $390,000. The increase in rental
income and expenses is primarily attributable to the increase in real
estate investments.
Village Green and Milpitas Town Center were acquired after the second
quarter of 1994, and Dupont Industrial Center was acquired on May 24,
1994. These acquisitions increased rental income in the first six
months of 1995 by approximately $1,207,000. Additionally, 1000 Town
Center Drive (acquired December 30, 1993) had an increase in rental
income of approximately $461,000, resulting from an increase in
occupancy from 43% to 93%. The increase in rental income was offset
by rental loss of $132,000 as a result of the vacancies at the Contra
Costa Diablo Buildings 3 and 8.
The increase in rental expenses is primarily attributable to operating
expenses incurred in connection with the newly acquired properties and
the increase in occupancy at 1000 Town Center Drive.
Expenses
Interest expense, which includes amortization of loan fees, increased
$711,000 or 361% for the first six months of 1995 compared with the
same period in 1994. The increase is attributable to the Company's
higher level of borrowing on its credit facility to finance the
acquisition of properties in 1994, combined with the increase in
interest rates. The amortization expense of loan fees was $111,000
and $103,000 in the first six months of 1995 and 1994, respectively.
General and administrative expenses increased $67,000 or 11% for the
first six months of 1995 compared with the same period in 1994. The
increase is attributable to the higher administrative and personnel
costs associated with a larger real estate portfolio.
Gain on Sale
On January 14, 1994, the Company sold its investment in the Texas Bank
North Building for $8,500,000 and recorded a gain of $1,193,000. The
gain on the sale of the Texas Bank North Building primarily resulted
from an improvement in the local real estate economy subsequent to a
1992 write down of this asset by $3,631,000. There were no comparable
sales during the first quarter of 1995.
At June 30, 1995, the Company is offering for sale the IBM Building
located in Jackson, Mississippi. This property was first offered for
sale in 1991, at which time the Company's investment in the property
was written down by $2,113,000. The Company continues to depreciate
this property during the holding period prior to disposition and the
net book value of the property at June 30, 1995 was $6,960,000.
The Company has received an offer for the property at a price of
$6,500,000. The property was last appraised in September, 1993 for
approximately $7,300,000 and the Company is currently updating this
appraisal to ascertain whether to proceed with a sale at $6,500,000.
A sale at this price would generate a loss on sale of approximately
$460,000. Since the property is substantially leased and continues to
provide net operating income at the 1993 level, the Company does not
believe, at this time, that the investment in this property should be
written down.
The Company's current accounting policy is to depreciate properties
held for sale during the holding period, since rental revenues and
operating expenses continue to be recorded. The Company will adopt
the provisions of Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, commencing January 1, 1996. Under the
provisions of SFAS 121, depreciation will not be recorded on
properties being held for sale. The future impact from not
depreciating properties held for sale will be a reduction in the gain
on sale or an increase in the loss on sale.
Results of Operations-Three Months Ended June 30, 1995 Compared with
Three Months Ended June 30, 1994.
Income
Income from property operations (defined as rental income less rental
expenses) increased 371,000 or 37% for the three months ended June 30,
1995, as compared to the same period in 1994. This is due primarily
to an increase in rental income of $640,000 for the three months ended
June 30, 1995 compared to the three months ended June 30, 1994, offset
by an increase in rental expenses of $269,000. The increase in rental
income and expenses is primarily attributable to the increase in real
estate investments.
Village Green and Milpitas Town Center were acquired after the second
quarter of 1994, and Dupont Industrial Center was acquired on May 24,
1994. These acquisitions increased the second quarter 1995 rental
income by approximately $553,000. Additionally, 1000 Town Center
Drive (acquired December 30, 1993) had an increase in quarterly rental
income of $239,000, resulting from an increase in occupancy from 43%
to 93%. The increase in rental income was offset by a rental loss of
$109,000 as a result of the vacancies at Contra Costa Diablo Buildings
3 and 8.
The increase in rental expenses is primarily attributable to operating
expenses incurred in connection with the newly acquired properties and
the increase in occupancy at 1000 Town Center Drive.
Expenses
Interest expense, which includes amortization of loan fees, increased
$318,000 or 248% for the three months ended June 30, 1995 compared
with the same period in 1994. The increase is attributable to the
Company's higher level of borrowing on its credit facility to finance
the acquisition of properties in 1994 combined with the increase in
interest rates. The amortization expense of loan fees was $55,000 and
$57,000 in the three months ending June 30,1995 and June 30, 1994,
respectively. General and administrative expenses remained relatively
unchanged as compared with the same period in 1994. In the second
quarter of 1995, the increase in administrative and personnel costs
associated with a larger real estate portfolio was offset by lower
directors and officers (D & O) insurance expense. D & O insurance was
renewed at a lower premium due to the Company's improved performance
in the recent years.
Liquidity and Capital Resources
In December 1993, the Company secured a $20 million revolving credit
facility with Bank of America. In August 1994, the maximum commitment
amount of the facility was increased from $20 million to $23 million.
The facility was used, in part, to finance the acquisitions of Mariner
Court, Dupont Industrial Center, Village Green, and Milpitas Town
Center during the first nine months of 1994. To minimize interest
expense, the Company utilized a portion of its available cash
resources to reduce the outstanding borrowings under the line of
credit. The Company may re-borrow such amounts at its discretion. At
June 30, 1995, the Company was in compliance with the covenants and
requirements of its revolving credit facility with Bank of America.
The Company does not anticipate that cash flow from operations will be
sufficient to enable it to repay amounts outstanding under the credit
facility when they become due in 1997. The Company expects to make
such payments by refinancing or extending the credit facility or by
raising funds through the sale of equity securities or properties.
In October 1994, the Company obtained a commitment from Bank of
America to increase its $23 million revolving line of credit to $60
million. The availability of the increased commitment is subject to
several performance conditions which the Company believes it will be
able to satisfy. Among other provisions, the commitment provides for
a three year term and a more competitive interest rate structure. The
commitment expired on March 31, 1995. In May 1995, Bank of America
gave the Company a six-month extension of the commitment from March
31, 1995 to September 30, 1995.
The Company anticipates that the cash flow generated by its real
estate investments and funds available under the above credit facility
will be sufficient to meet its short-term liquidity requirements.
The Company expects to fund the cost of acquisitions, capital
expenditures, costs associated with lease renewals and reletting of
space, repayment of indebtedness, and development of properties from
(i) cash flow from operations, (ii) borrowings under the credit
facility and, if available, other indebtedness (which may include
indebtedness assumed in acquisitions), (iii) the sale of real estate
investments, and (iv) the sale of equity securities and, possibly, the
issuance of equity securities in connection with acquisitions.
The ability to obtain mortgage loans on income producing property is
dependent upon the ability to attract and retain tenants and the
economics of the various markets in which the properties are located,
as well as the willingness of mortgage lending institutions to make
loans secured by real property. The ability to sell real estate
investments is partially dependent upon the ability of purchasers to
obtain financing at commercially reasonable rates.
Potential Factors Affecting Future Operating Results
For the period ended June 30, 1994, net income was positively affected
by the gain on sale of real estate investments. The Company does not
anticipate that its 1995 net income will be materially impacted by
gains on sales of real estate investments.
At the present time, borrowings under the Company's credit facility
bear interest at a floating rate. The Company anticipates that its
results from operations in 1995 will be impacted negatively by substantial
borrowings to finance property acquisitions.
While the Company has historically been successful in renewing and
releasing space, the Company will be subject to the risk that certain
leases expiring in 1995 may not be renewed or the terms of renewal may
be less favorable to the Company than current lease terms. As of July
1995, the Company was in active negotiations to release the vacant
spaces at both Contra Costa Diablo Building 3 and Building 8. The
Company expects to release the vacancies without any material adverse
impact on 1995 operations. The Company expects to incur costs in
making improvements or repairs to its portfolio of properties required
by new or renewing tenants and expects to incur expenses associated
with brokerage commissions payable in connection with the reletting of
space.
Inflation
Most of the leases require the tenants to pay their share of operating
expenses, including common area maintenance, real estate taxes and
insurance, thereby reducing the Company's exposure to increases in
costs and operating expenses resulting from inflation. Inflation,
however, could result in an increase in the Company's borrowing costs.
Dividends
Dividends declared for the first and second quarters of 1995 were
$0.095 and $0.105 per share, respectively. Consistent with the
Company's policy, the dividend declared for the last quarter of 1994
was paid in 1995; as a result, the Company's statement of cash flows
for the period ended June 30, 1995 reflects dividends paid for the
fourth quarter of 1994 and the first quarter of 1995. Similarly, the
Company's statement of cash flows for the period ended June 30, 1994
reflects dividends paid for the fourth quarter of 1993 and the first
quarter of 1994. The dividends declared for the fourth quarter of
1994 and 1993 were $0.095 and $0.07 per share, respectively.
Government Regulations
As more fully discussed in Item 1 above, the Phase I environmental
assessment for Milpitas Town Center indicates that the groundwater
under the property either has been or may in the future be impacted by
the migration of contaminants originating off-site. The Company does
not believe that this environmental matter will impair the future
value of Milpitas Town Center.
Financial Condition
During the three months ended June 30, 1995, the Company's operating
activities provided cash flow of $1,808,000. Investing activities
utilized cash of $471,000 for improvements to real estate. Financing
activities utilized cash of $4,955,000 primarily to reduce bank
borrowings by $3,877,000 and to pay dividends of $1,136,000.
Industry analysts generally consider Funds From Operations (FFO) to be
one measure of the performance of an equity REIT. FFO during the
three and six months ended June 30, 1995 amounted to $964,000 and
$1,920,000, respectively. During the same periods in 1994, FFO
amounted to $773,000 and $1,566,000, respectively. FFO was determined
in accordance with the National Association of Real Estate Investment
Trusts' interpretation published in March, 1995. FFO is defined as
net income, excluding gains or losses from debt restructuring and
sales of property, plus depreciation and amortization of assets
related to real estate, after adjustments for unconsolidated ventures.
FFO, therefore, does not represent cash generated from operating
activities in accordance with generally accepted accounting principles
and should not be considered an alternative to net income as an
indication of the Company's performance or to cash flow as a measure
of liquidity or its ability to pay distributions.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit No. Exhibit
2.1 Agreement and Plan of Merger dated July 1, 1993, between ICM
Property Investors Incorporated, a Delaware corporation, and
Bedford Property Investors, Inc., a Maryland corporation,
is incorporated herein by reference to the Company's
registration statement on Form 8-B/A filed March 6, 1994.
3.1 Articles of Incorporation of Bedford Property Investors,
Inc. is incorporated herein by reference to the Company's
registration statement on Form 8-B/A filed March 6, 1994.
3.2 Bylaws of Bedford Property Investors, Inc. are incorporated
herein by reference to the Company's registration statement
on Form 8-B/A filed March 6, 1994.
4.1 The Rights Agreement between ICM Property Investors
Incorporated and the Chase Manhattan Bank, N.A., dated July
18, 1989, is incorporated herein by reference to Exhibit A,
filed with the Company's Form 8-K dated July 19, 1989.
4.2 Amendment No. 1 to the Rights Agreement, dated March 20,
1990, between ICM Property Investors Incorporated and the
Chase Manhattan Bank, N.A., is incorporated herein by
reference to Exhibit B, filed with the Company's Form 8-K
dated April 6, 1990.
4.3 Registration Rights Agreement dated as of December 5, 1990,
between ICM Property Investors Incorporated and Peter B.
Bedford, is incorporated herein by reference to Exhibit D,
filed with the Company's Form 8-K dated December 13, 1990.
10.2 The Company's Automatic Dividend Reinvestment and Share
Purchase Plan, as adopted by the Company, is incorporated
herein by reference to Exhibit 4.1 filed with Amendment No.
2 to the Registration Statement No. 2-94354, of ICM Property
Investors Incorporated dated January 25, 1985.
10.3 Real Estate Purchase and Sale Agreement dated as of June 4,
1993 by and between Bay Street Number Two, Ltd., as Seller
and ICM Property Investors Incorporated, as Purchaser, for
Woodlands Tower II and Woodlands Commercial Center, Plan II
and Related Properties, filed with the Company's Form 10-Q
for the quarter ended September 30, 1993.
10.4* Bedford Property Investors, Inc. Employee Stock Option Plan,
effective September 16, 1985, amended as of June 9, 1993, as
adopted by the Company on September 27, 1993 and amended and
restated as of February 7, 1994, is incorporated herein by
reference to the Company's registration statement on Form 8-
B/A filed March 6, 1994.
10.5* Bedford Property Investors, Inc. Directors' Stock Option
Plan effective May 20, 1992, as adopted by the Company on
September 27, 1993 and amended and restated as of February
7, 1994, is incorporated herein by reference to the
Company's registration statement on Form 8-B/A filed March
6, 1994.
10.6 Agreement to Purchase Real Property, dated July 23, 1993, by
and between Bedford Property Investors, Inc., as Seller, and
MGI Properties, as Purchaser, for Point West Place.
10.7 Purchase and Sale Agreement dated December 14, 1993, by and
between NCEC Realty, Inc., as Seller, and Bedford Property
Investors, Inc., as Purchaser, for 1000 Town Center Drive,
is incorporated herein by reference to the Company's Form
8-K filed January 13, 1994, and amended on Form 8-K/A filed
on March 17, 1994.
10.8 Purchase and Sale Agreement dated December 20, 1993, by and
between Mariner Court Associates, as Seller, and Bedford
Property Investors, Inc., as Purchaser, for Mariner Court,
is incorporated herein by reference to the Company's Form
8-K filed January 13, 1994, and amended on Form 8-K/A filed
March 17, 1994.
10.9 Agreement to Purchase Real Property, dated June 11, 1993, by
and between Country Hollow Associates, as Seller, and A.S.,
Inc., as Purchaser, for Texas Bank North Building, is
incorporated herein by reference to the Company's Form 8-K
filed January 27, 1994.
10.10 Purchase and Sale Agreement dated May 24, 1994, by and
between NCEC Realty, as Seller, and Bedford Property
Investors, Inc., as Purchaser, for Dupont Industrial Center
is incorporated herein by reference to the Company's Form
8-K filed on June 8, 1994.
10.11 Credit Agreement for $20 million revolving line of credit
dated December 20, 1993, by and between Bedford Property
Investors, Inc., as Borrower, and Bank of America National
Trust and Savings Association.
10.12 Modification Agreement to increase $20 million revolving
line of credit to $23 million dated August 8, 1994, by and
between Bedford Property Investors, Inc., as Borrower, and
Bank of America National Trust and Savings Association.
10.13 Purchase and Sale Agreement dated June 15, 1994, by and
between The Prudential Insurance Company of America, as
Seller, and Bedford Property Investors, Inc., as Purchaser,
for Milpitas Town Center, is incorporated herein by
reference to the Company's Form 8-K filed on August 24,
1994.
10.14* Employment Agreement dated February 17, 1993, by and between
ICM Property Investors Incorporated, a Delaware Corporation,
and Peter B. Bedford.
10.15 Series A Convertible Preferred Stock Purchase Agreement
among the Company, AEW Partners, L.P. and Peter B. Bedford
dated as of May 18, 1995.
B. Reports on Form 8-K
During the quarter ended June 30,1995, the Company filed a report
on form 8-K dated May 19,1995, announcing that it had entered into a
stock purchase agreement with an investment fund managed by Aldrich
Eastman Waltch to sell $50 million of the Company's Series A
Cumulative Convertible Preferred Stock.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Sections 13 or 15(a), Registrant has duly caused this report to
be signed on its behalf of the undersigned, thereunto duly authorized.
Dated: August 14, 1995
BEDFORD PROPERTY INVESTORS, INC.
(Registrant)
By: /s/ PETER B. BEDFORD
Peter B. Bedford
Chairman of the Board and
Chief Executive Officer
By: /s/ DONALD A. LORENZ
Donald A. Lorenz
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
By: /s/ HANH KIHARA
Hanh Kihara
Controller
(Principal Accounting Officer)
<PAGE>
SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
among
AEW PARTNERS, L.P.
and
BEDFORD PROPERTY INVESTORS, INC.
and
PETER B. BEDFORD
May 18, 1995
<PAGE>
TABLE OF CONTENTS
Page
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. SALE AND PURCHASE OF SHARES . . . . . . . . . . . . . . . . . 10
1.1 Sale and Purchase of Shares. . . . . . . . . . . . . . . 10
1.2 Payment and Delivery of Shares . . . . . . . . . . . . . 11
2. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . 12
3.1 Corporate Existence and Power. . . . . . . . . . . . . . 12
3.2 Corporate Authorization. . . . . . . . . . . . . . . . . 12
3.3 Governmental Authorization . . . . . . . . . . . . . . . 13
3.4 Non-Contravention. . . . . . . . . . . . . . . . . . . . 14
3.5 Capitalization . . . . . . . . . . . . . . . . . . . . . 15
3.6 SEC Filings. . . . . . . . . . . . . . . . . . . . . . . 16
3.7 Financial Statements . . . . . . . . . . . . . . . . . . 17
3.8 No Material Adverse Matter . . . . . . . . . . . . . . . 17
3.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . 18
3.10 Compliance with Laws . . . . . . . . . . . . . . . . . . 18
3.11 ERISA Plans. . . . . . . . . . . . . . . . . . . . . . . 19
3.12 Property Related Matters . . . . . . . . . . . . . . . . 19
3.13 Environmental Matters. . . . . . . . . . . . . . . . . . 25
3.14 Contracts With Insiders. . . . . . . . . . . . . . . . . 27
3.15 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . 27
3.16 Investment Company . . . . . . . . . . . . . . . . . . . 28
3.17 Qualification as a Real Estate Investment Trust. . . . . 28
3.18 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 29
3.19 Registration Rights. . . . . . . . . . . . . . . . . . . 29
3.20 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . 29
3.21 Board Resolution . . . . . . . . . . . . . . . . . . . . 29
3.22 HSR. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4. REPRESENTATIONS AND WARRANTIES OF AEW . . . . . . . . . . . . 30
4.1 Existence and Power. . . . . . . . . . . . . . . . . . . 30
4.2 Authorization. . . . . . . . . . . . . . . . . . . . . . 30
4.3 Governmental Authorization . . . . . . . . . . . . . . . 31
4.4 Non-Contravention. . . . . . . . . . . . . . . . . . . . 31
4.5 Purchase for Investment; Legend. . . . . . . . . . . . . 32
4.6 REIT Ownership . . . . . . . . . . . . . . . . . . . . . 34
4.7 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . 35
5. COVENANTS OF THE COMPANY. . . . . . . . . . . . . . . . . . . 35
5.1 Conduct of the Company . . . . . . . . . . . . . . . . . 35
5.2 Access to Information; Confidentiality . . . . . . . . . 37
5.3 Qualification as a REIT. . . . . . . . . . . . . . . . . 38
5.4 Other Offerings. . . . . . . . . . . . . . . . . . . . . 38
5.5 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . 39
5.6 No Solicitation. . . . . . . . . . . . . . . . . . . . . 39
5.7 Reporting Requirements . . . . . . . . . . . . . . . . . 41
5.8 Post-Closing Share Transfer Covenant . . . . . . . . . . 45
5.9 Series A Directors Compensation. . . . . . . . . . . . . 46
5.10 Payments to AEW or its Affiliates. . . . . . . . . . . . 46
6. COVENANTS OF AEW AND THE COMPANY. . . . . . . . . . . . . . . 46
6.1 Reasonable Best Efforts. . . . . . . . . . . . . . . . . 46
6.2 Certain Filings. . . . . . . . . . . . . . . . . . . . . 47
6.3 Proxy Statement; Board Recommendation. . . . . . . . . . 47
6.4 Public Announcements . . . . . . . . . . . . . . . . . . 48
6.5 Brokers or Finders . . . . . . . . . . . . . . . . . . . 48
6.6 Notices of Certain Events. . . . . . . . . . . . . . . . 49
6.7 Renegotiation of Conversion Price. . . . . . . . . . . . 49
6.8 NYSE Listing . . . . . . . . . . . . . . . . . . . . . . 50
7. SECURITIES MATTERS. . . . . . . . . . . . . . . . . . . . . . 50
7.1 AEW Right to Participate in Future Offerings . . . . . . 50
7.2 Rule 144 Reporting . . . . . . . . . . . . . . . . . . . 52
8. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . 53
8.1 Demand Registration. . . . . . . . . . . . . . . . . . . 53
8.2 Piggyback Registration . . . . . . . . . . . . . . . . . 58
8.3 Expenses of Registration . . . . . . . . . . . . . . . . 62
8.4 Registration Procedures. . . . . . . . . . . . . . . . . 63
8.5 Information Furnished by Holder. . . . . . . . . . . . . 64
8.6 Indemnification. . . . . . . . . . . . . . . . . . . . . 64
8.7 Transfer of Rights . . . . . . . . . . . . . . . . . . . 68
8.8 Market Stand-off . . . . . . . . . . . . . . . . . . . . 69
9. CONDITIONS TO THE CLOSING . . . . . . . . . . . . . . . . . . 69
9.1 Conditions to the Obligation of Each Party . . . . . . . 69
9.2 Conditions to the Obligations of AEW . . . . . . . . . . 70
9.3 Conditions to the Obligation of the Company. . . . . . . 76
9.4 Due Diligence Period . . . . . . . . . . . . . . . . . . 77
10. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . 80
10.1 Termination. . . . . . . . . . . . . . . . . . . . . . . 80
10.2 Effect of Termination. . . . . . . . . . . . . . . . . . 81
11. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . 81
11.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . 81
11.2 Amendments; No Waivers. . . . . . . . . . . . . . . . . 82
11.3 Fees and Expenses . . . . . . . . . . . . . . . . . . . 83
11.4 Successors and Assigns. . . . . . . . . . . . . . . . . 83
11.5 Governing Law . . . . . . . . . . . . . . . . . . . . . 84
11.6 Counterparts; Effectiveness . . . . . . . . . . . . . . 84
11.7 Severability. . . . . . . . . . . . . . . . . . . . . . 84
11.8 Specific Performance. . . . . . . . . . . . . . . . . . 84
11.9 Survival of Representations and Warranties;
Knowledge and Materiality . . . . . . . . . . . . . . . 85
11.10 Entire Agreement. . . . . . . . . . . . . . . . . . . . 86
11.11 Costs and Expenses of Litigation. . . . . . . . . . . . 86
11.12 Bedford . . . . . . . . . . . . . . . . . . . . . . . . 86
<PAGE>
THIS SERIES A CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (the
"Agreement") is made as of the 18th day of May, 1995, among BEDFORD
PROPERTY INVESTORS, INC. (the "Company"), AEW PARTNERS, L.P. ("AEW"),
and (for purposes of Section 8.2.2.2 hereof only) PETER B. BEDFORD
("Bedford").
RECITAL
Upon the terms and subject to the conditions of this Agreement,
AEW desires to purchase from the Company, and the Company desires to
sell to AEW, newly issued shares of the Company's Series A Convertible
Preferred Stock.
THE PARTIES AGREE AS FOLLOWS:
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"AEW" shall mean AEW PARTNERS, L.P., a Delaware limited
partnership.
"Affiliate" shall mean with respect to any person, any other
person controlling, controlled by or under direct or indirect common
control with such person (for the purposes of this definition
"control," when used with respect to any specified person, shall mean
the power to direct the management and policies of such person,
directly or indirectly, whether through ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing).
"Articles of Amendment" shall mean both of the Articles of
Amendment of Charter of the Company in the forms attached as Exhibit
3.2A and Exhibit 3.2B hereto, subject to such changes as are
contemplated by Section 6.8 and such changes to Article VII as the
parties mutually agree.
"Average Pre-Closing Price" shall mean the average closing sale
price of the Company's Common Stock as reported by the NYSE for the
seven Business Days immediately preceding the Closing Date.
"Bedford Registration Rights Agreement" shall mean the
Registration Rights Agreement dated December 5, 1990 by and between
the Company and Bedford.
"B of A" shall mean Bank of America N.T. & S.A.
"BPIA" shall mean Westminster Holdings, Inc., a California
corporation, dba BPIA.
"BPIA Agreement" shall mean the BPIA Agreement dated as of
January 1, 1995 between BPIA and the Company.
"Business Day" shall mean any day, Monday through Friday, on
which the NYSE is open for regular trading.
"Closing Date" shall mean the date on which the closing
contemplated by Section 2 takes place.
"Closing Memorandum" shall mean the memorandum setting forth the
documents to be delivered by the parties at the closing in the form
attached as Exhibit 1.2 hereto.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean Bedford Property Investors, Inc., a Maryland
corporation, its predecessor, ICM Property Investors, Incorporated, a
Delaware corporation, and, unless the context requires otherwise, the
Subsidiaries.
"Company 10-K's" shall mean the Company's Annual Reports on Form
10-K for the fiscal years ended December 31, 1991, 1992, 1993 and
1994, as filed with the SEC.
"Company 10-Q's" shall mean the Company's Quarterly Reports on
Form 10-Q for the three-month periods ended March 31, 1994, June 30,
1994 and September 30, 1994, as filed with the SEC.
"Conversion Price" shall mean $6.00 which is 105% of the average
closing sale price of the Company's Common Stock as reported by the
NYSE for the 60 Business Days prior to the first public announcement
relating to this transaction. As set forth in the Articles of
Amendment, based on the initial $6.00 Conversion Price, each Share
shall initially be convertible into one share of Common Stock ($6.00
price per share divided by the $6.00 initial Conversion Price).
"Co-Sale Agreement" shall mean the Co-Sale Agreement between AEW
and Peter Bedford in substantially the form of Exhibit 9.2(h) hereto.
"Directors Option Plan" shall mean the Company's 1992 Directors
Stock Option Plan.
"Disclosure Schedule" shall mean the Disclosure Schedule dated
the same date as this Agreement furnished by the Company to AEW and
attached as Exhibit 3 hereto.
"Employee Option Plan" shall mean the Company's amended Employee
Stock Option Plan.
"Environmental Claim" shall mean any claim, action, cause of
action or notice by any person or entity alleging (i) any liability or
potential liability arising out of, based on or resulting from the
presence or release or threatened release into the environment of any
Materials of Environmental Concern, (ii) responsibility or potential
responsibility for the clean-up, removal, treatment or remediation of
any Materials of Environmental Concern or (iii) a violation of
Environmental Laws.
"Environmental Laws" shall mean all federal, state, and local
laws and regulations applicable to the Company and relating to
pollution or protection of human health or the environment, including,
without limitation, laws and regulations relating to emissions,
discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the use, treatment,
storage, disposal, transport or handling of Materials of Environmental
Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations adopted under that
statute.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations adopted under that statute.
"GAAP" shall mean United States generally accepted accounting
principles in effect as of the date of this Agreement.
"Holder" shall mean any holder of outstanding Registrable
Securities which have not been sold to the public, but only if such
holder is AEW or an assignee or transferee of Registration Rights as
permitted by Section 8.7.
"Initiating Holders" shall mean any holders of Registrable
Securities that have not been sold to the public who in the aggregate
hold at least 40% of the Registrable Securities.
"Inspection Period" shall mean the period commencing on the date
of this Agreement and ending at 5:00 p.m. San Francisco time on June
20, 1995.
"Leases" shall mean those real and personal property leases set
forth in Exhibit 3.12B hereto (which Exhibit 3.12B includes the Major
Leases).
"Major Leases" shall mean those real property leases set forth in
Exhibit 3.12A hereto.
"Material Adverse Matter" shall mean one or more facts or events
which individually or in the aggregate represent a material adverse
matter relating to, or a material adverse change in, the Properties or
the consolidated assets, earnings, results of operation or financial
condition of the Company; provided that for purposes of this Agreement
any event or events which individually or in the aggregate would
impose a liability of, impair the financial condition of the Company
by, or require an amount to cure of, more than $500,000 shall be
conclusively deemed to be material.
"Materials of Environmental Concern" shall mean pollutants,
contaminants, hazardous waste, hazardous substances, toxic substances,
petroleum and petroleum products as defined in the Comprehensive
Environmental Response, Compensation and Liability Act, as amended,
and the regulations adopted by the United States Environmental
Protection Agency under that statute or in any other environmental
law.
"Merrill" shall mean Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
"NYSE" shall mean the New York Stock Exchange.
"New Securities" shall mean any offering by the Company of any
Voting Securities for cash or cash equivalents; provided, that "New
Securities" shall not include (i) securities issuable upon conversion
of any convertible Voting Securities; (ii) securities issuable upon
exercise of any options, warrants or other similar Voting Securities;
(iii) securities issuable pursuant to the Option Plans to employees,
directors or consultants of the Company, approved by the Board of
Directors of the Company; (iv) securities issuable in consideration of
the acquisition of assets or shares of another entity; (v) securities
issuable in a firm commitment underwritten public offering; (vi)
warrants (or the shares of Common Stock issuable upon exercise
thereof) issuable to an underwriter as partial compensation for a firm
commitment underwritten public offering; and (vii) securities issuable
in connection with any stock split, stock dividend, or
recapitalization of the Company.
"Option Plans" shall mean the Directors Option Plan and the
Employee Option Plan.
"Outstanding Shares" shall mean the sum of all then outstanding
Common Shares plus the Common Shares that would be issued upon the
conversion of all then outstanding Shares.
"PSE" shall mean the Pacific Stock Exchange.
"Permits" shall mean licenses, permits, orders and approvals of
any federal, state or local regulatory body.
"Permitted Exceptions" shall mean, with respect to the
Properties, the exceptions to title and survey matters approved by AEW
as contemplated in Section 9.4.
"Preclosing Affiliate" shall mean that single Affiliate of AEW
permitted by Section 11.4 hereof.
"Properties" shall mean the real property including all
improvements and fixtures thereon set forth in Exhibit 3.12 hereto.
"REIT" shall mean a real estate investment trust, as defined in
Section 856 of the Code.
"Registrable Securities" shall mean (i) the Common Shares
issuable upon conversion of the Shares and (ii) any Common Shares
issued pursuant to stock splits, stock dividends and similar
distributions with respect to the Shares.
"Registration Expenses" shall mean all expenses (other than
Selling Expenses) incurred in complying with Section 8.1 or Section
8.2 of this Agreement, including, without limitation, all federal and
state registration, qualification and filing fees, printing expenses,
fees and disbursements of counsel for the Company and one counsel for
all of the selling shareholders, blue sky fees and expenses.
"Rent Roll" shall mean collectively the schedule of leases,
rental and other pertinent data with respect to the leases relating to
any Property provided to AEW.
"Rights Plan" shall mean the Company's 1989 Stockholders Rights
Plan.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations adopted under that statute.
"Selling Expenses" shall mean all underwriting discounts and
selling commissions and any transfer taxes resulting from sales by
Holders applicable to the sale of Registrable Securities pursuant to
Section 8 of this Agreement.
"Shares" shall mean the 8,333,334 shares of the Company's Series
A Convertible Preferred Stock purchased by AEW pursuant to this
Agreement.
"Subsidiaries" shall mean ICMPI (Concord Diablo 3), Inc., ICMPI
(Concord Diablo 8), Inc., ICMPI (Concord Mason 18), Inc., ICMPI
(Irvine), Inc., ICMPI (Overland Park), Inc., ICMPI (Lenexa), Inc.,
ICMPI (Jackson), Inc., ICMPI (CBC), Inc., ICMPI (San Antonio), Inc.
and ICMPI (Scottsdale), Inc., each a Delaware corporation.
"Voting Securities" shall mean: (i) the Company's Common Shares
and any other issued and outstanding securities of the Company
generally entitled to vote for the election of directors of the
Company and other matters for which the shareholders of the Company's
Common Shares are entitled to vote; (ii) securities of the Company
convertible into or exchangeable for such securities; and (iii)
options, rights and warrants issued by the Company to acquire such
securities.
1. SALE AND PURCHASE OF SHARES
1.1 Sale and Purchase of Shares. Upon the terms and subject to
the conditions set forth in this Agreement, at the closing, AEW shall
purchase and accept, and the Company shall issue, sell and deliver to
AEW the Shares.
1.2 Payment and Delivery of Shares. Upon the terms and subject
to the conditions set forth in this Agreement, at the closing, (a) the
Company shall deliver to AEW one or more share certificates, as AEW
may request in writing to the Company at least three Business Days
prior to the closing, registered in the name of AEW, representing the
Shares, (b) AEW shall deliver to the Company $50,000,000 by wire
transfer of immediately available funds in accordance with the
Company's instructions, given to AEW in writing at least three
Business Days prior to the closing and (c) the parties shall deliver
the other certificates and documents set forth in the Closing
Memorandum.
2. CLOSING DATE
The closing of the sale and purchase of the Shares contemplated
hereby shall take place at the offices of Heller Ehrman White &
McAuliffe, 333 Bush Street, San Francisco, California at 10:00 a.m.
California time, on a date to be mutually agreed upon by the parties,
which date shall be no later than the third Business Day after the
satisfaction or waiver of the conditions set forth in Sections 9.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to AEW that, except as
disclosed by the Company to AEW in the Disclosure Schedule:
3.1 Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the
laws of the state of its incorporation, and has all requisite
corporate power to carry on its business as now or currently proposed
to be conducted as described in the Company's 10-K's. The Company has
heretofore delivered to AEW true and complete copies of the Charter
and Bylaws as in effect on the date hereof of the Company and the
minute books of the Company. The minute books of the Company contain
true and complete records of all meetings and consents in lieu of
meeting of the Board of Directors of the Company (and any committees
thereof), and of the Company's shareholders from January 1, 1992 until
(i) the date of this Agreement, in the case of this representation and
warranty made as of the date hereof and (ii) the Closing Date, in the
case of this representation and warranty as deemed made as of the
Closing Date.
3.2 Corporate Authorization. The Company has all requisite
corporate power and, upon approval of the stockholders of the Company,
will have all requisite corporate authority, to execute and deliver
this Agreement, and to perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The
execution, delivery and performance by the Company of this Agreement
and the consummation by the Company of the transactions contemplated
hereby have been duly authorized and approved by the Board of
Directors and, except for approval by the stockholders of the Company,
no further corporate action on the part of the Company is necessary to
authorize the execution, delivery and performance by the Company of
this Agreement or the consummation by the Company of the transactions
contemplated hereby. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding
obligation of the Company enforceable against the Company in
accordance with its terms subject to applicable bankruptcy,
insolvency, reorganization, equity or redemption, moratorium or
similar laws now or hereafter in effect affecting the enforcement of
creditors' rights generally and to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or
in equity) and to the limitations imposed by applicable law or public
policy on the enforceability of the indemnification and contribution
provisions of Section 8. The Shares will, when issued and delivered
in accordance with the terms hereof, be validly issued, fully paid and
nonassessable and free of preemptive rights and shall have the rights,
preferences and privileges set forth in the Articles of Amendment.
3.3 Governmental Authorization. The execution, delivery and
performance by the Company of this Agreement and the consummation by
the Company of the transactions contemplated hereby require no action
by or in respect of, or filing by the Company with, any United States
federal or state governmental body, agency, official or authority
other than: (i) compliance with any applicable requirements of the
Exchange Act; (ii) compliance with any applicable U.S. federal or
state securities laws; (iii) filing of the Articles of Amendment with
the State Department of Assessments and Taxation of Maryland; and (iv)
compliance with the rules and regulations of the NYSE and PSE.
3.4 Non-Contravention. The execution, delivery and performance
by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby do not (i) contravene or
conflict with the Charter or Bylaws of the Company; (ii) violate,
conflict with or result in the breach of any of the terms of,
otherwise give any other contracting party the right to terminate, or
constitute (or with notice or lapse of time or both constitute) a
default (by way of substitution, novation or otherwise) under, any
contract or other agreement to which the Company is a party or by
which any of its respective assets or Properties may be bound or
affected; (iii) violate any order, judgment, injunction, award or
decree of any court, arbitrator or governmental or regulatory body
against, or binding upon, the Company or upon its assets or
Properties; (iv) violate in any material respect any statute, law or
regulation of the United States or any of the several states thereof
as such statute, law or regulation relates to the Company or to its
assets or Properties (subject to compliance with any laws, rules and
regulation, and the making of filings, as set forth in Section 3.3
and, with respect to federal securities laws, the continuing accuracy
of AEW's representations and warranties as set forth in Section 4);
(v) result in the creation or imposition of any lien, encumbrance or
security interest on any assets or Properties of the Company.
3.5 Capitalization. As of the date hereof, the authorized
shares of stock of the Company consist of 30,000,000 Common Shares,
par value $.01 per share, and 10,000,000 Preferred Shares, par value
$.01 per share (which amount of Preferred Shares will be increased to
20,000,000 upon adoption and filing of the Articles of Amendment
attached as Exhibit 3.2A). As of the date hereof, there are
outstanding (a) 5,976,900 Common Shares and (b) options to purchase
approximately 565,000 Common Shares, no Preferred Shares and 5,976,900
rights to purchase Series A Preferred Stock under the Rights Plan;
approximately 2,206,000 Common Shares were reserved for issuance
pursuant to the Option Plans. All outstanding Common Shares of the
Company have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights. Except as set
forth in or contemplated by this Agreement, as of the date hereof
there are, and except for changes occurring after the date hereof
resulting from (x) the exercise of options outstanding on such date or
(y) the grant of options pursuant to the Option Plans in the ordinary
course of business and the exercise of such options, on the Closing
Date there will be no outstanding (i) shares of stock or other
securities of the Company, (ii) securities of the Company convertible
into or exchangeable for shares of stock or other securities of the
Company or (iii) options, rights, subscriptions, warrants, calls,
unsatisfied preemptive rights, or agreements to acquire or otherwise
receive from the Company, and no obligation, commitment or arrangement
of the Company to issue, transfer or sell, any shares of stock or
other securities of, or securities convertible into or exchangeable
for shares of stock or other securities of the Company. As of the
date hereof, there are, and except for options granted pursuant to the
Option Plans in the ordinary course of business after the date hereof,
as of the Closing Date there will be no options, grants, stock
appreciation rights or other awards outstanding under any stock option
plan other than the options to purchase Common Shares described in
this Section 3.5
3.6 SEC Filings.
(a) The Company has delivered to AEW true and complete
copies of: (i) the Company's 10-K's as filed with the SEC, (ii) the
Company's 10-Q's as filed with the SEC, (iii) the Company's proxy
statements relating to meetings of the stockholders of the Company
held since January 1, 1991 and (iv) all of the Company's other
reports, statements, schedules and final registration statements filed
with the SEC since January 1, 1991.
(b) As of its filing date, no such report, schedule or
statement (including all exhibits and schedules thereto and documents
incorporated by reference therein) referred to in clauses (a) (i)-
(iv), as amended or supplemented if applicable, filed pursuant to the
Exchange Act contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which
they were made, not misleading.
3.7 Financial Statements. The audited consolidated balance
sheets of the Company as at December 31, 1994, 1993, 1992 and 1991 and
the related audited consolidated statements of operations, changes in
shareholders' equity and cash flows for the fiscal years then ended,
together with the notes thereto certified by KPMG Peat Marwick LLP,
independent certified public accountants, included in the Company 10-
K's fairly present, in conformity with GAAP applied on a consistent
basis throughout the periods covered thereby, the consolidated
financial position of the Company as of the dates thereof and its
consolidated results of operations and cash flows for the periods then
ended. The financial statements of the Company included in the
Company's 10-Q's, fairly present the consolidated financial condition
and consolidated results of operations of the Company as of and for
the periods then ended (subject to year-end adjustments consisting
only of normal recurring accruals and the absence of notes required by
GAAP) in accordance with GAAP applied in a manner consistent with the
principles applied during the fiscal years ended December 31, 1994,
1993, 1992 and 1991.
3.8 No Material Adverse Matter. Since December 31, 1994, the
Company has conducted its business in the ordinary course and there
has not been any Material Adverse Matter (except, in either case, for
matters or transactions after the date of this Agreement to which AEW
consents pursuant to Section 5.1 of this Agreement).
3.9 Litigation. As of the date hereof, there are no outstanding
orders, judgments, injunctions, awards or decrees of any court,
governmental or regulatory body or arbitration tribunal against or
involving the Company. As of the date hereof, there are no material
actions, suits or claims or legal, administrative or arbitral
proceedings of which the Company has received notice, or, to the
knowledge of the Company, investigations (whether or not the defense
thereof or liabilities in respect thereof are covered by insurance)
pending of which the Company has received notice or, to the knowledge
of the Company, threatened against or involving the Company or any of
its assets or properties.
3.10 Compliance with Laws. The Company is not in violation of,
(i) any material federal, state or local law, statute, ordinance or
regulation or any other requirement of any federal, state or local
governmental or regulatory body of competent jurisdiction applicable
to the Company, any of its assets, Properties, or business or (ii) any
term of any applicable judgment, decree, injunction and/or order
issued by a governmental or regulatory body of competent jurisdiction.
The Company has all Permits required as of the date hereof for the
conduct of the business of the Company as now or, to its knowledge,
currently proposed to be conducted by the Company; and no proceeding
is pending of which the Company has received notice or, to the
knowledge of the Company, is threatened, to revoke or limit any Permit
which revocations or limitations would constitute, in the aggregate, a
Material Adverse Matter.
3.11 ERISA Plans. All Company employee benefit plans are in
compliance in all material respects with all of applicable provisions
of ERISA, and the Company is not subject to any liabilities based on
past non-compliance. The Company has made all contributions under
each employee benefit plan that have accrued for all periods through
the closing. The Company has never been obligated to contribute to a
multi-employer plan. The Company does not maintain any employee
benefit plans providing for continued life or health benefits or
coverage for any employee (or beneficiary thereof) after the
employee's termination of employment. The Company does not have any
employee pension benefit plan as defined in Section 3 of ERISA.
3.12 Property Related Matters.
(a) The Company has good and marketable title to each
Property, free and clear of all liens, encumbrances, security
interests, charges, adverse claims, contracts and other exceptions to
title, except for the Leases, the contracts (that require payments in
excess of $50,000) delivered to AEW, all matters disclosed in the
preliminary title reports delivered to AEW, all zoning and land use
laws and all matters that an accurate survey or inspection of the
Property would disclose.
(b) A list of the Leases is set forth in the Rent Roll
previously provided to AEW and dated as of April 17, 1995. The
Company shall supplement the Rent Roll promptly in the event that any
further Leases are entered into after the date hereof. Except for the
Leases set forth in Rent Roll and matters set forth in the preliminary
title reports delivered to AEW, as of the date of this Agreement there
are no other leases, licenses or other agreements pursuant to which a
party has or would have the right of occupancy of a Property which
would become an obligation of the Company after the Closing Date.
Except as disclosed on the Rent Roll, with respect to each Lease:
(i) the Lease has been duly and validly executed and delivered by the
Company or, to its knowledge, its predecessor in interest, as lessor,
and each tenant; (ii) the Lease is in full force and effect, and
constitutes the valid and binding legal obligation of the Company and
the respective tenant, enforceable against them in accordance with its
terms subject to applicable bankruptcy, insolvency, reorganization,
equity or redemption, moratorium or similar laws now or hereafter in
effect affecting the enforcement of creditors' rights generally and to
general principles of equity (regardless of whether enforcement is
sought in a proceeding at law or in equity); (iii) there has been no
assignment or subletting of the tenant's interest under the Lease or
release of any guarantor of the tenant's obligations; (iv) with
respect to each Major Lease, the copy of such Lease delivered by the
Company to AEW is true and accurate and is unmodified except as shown
therein, and there are no understandings, oral or written, between the
parties to such Lease which in any manner vary the material
obligations or rights of either party; (v) except as disclosed on the
Rent Roll, there is no default by the Company under the Lease (or
event that with the giving of notice or the passage of time or both
would constitute a material default on the part of the Company), the
Company has not received or given written notice of any default by the
tenant under the Lease, and to the knowledge of the Company there is
no event or condition that is, or would with notice or passage of time
or both, become a material default by the tenant under such Lease;
(vi) all contributions and obligations in respect of common area
maintenance and/or any promotional association presently due and
payable are not more than 30 days past due; (vii) all rent and
additional rent presently due under the Lease are not more than 30
days past due; (viii) except as set forth in the Major Leases or the
Disclosure Schedule, the tenants have no right of refusal, option
right or other right to purchase all or any portion of any Property;
(ix) any security deposit held by or for the benefit of the Company
under the Lease and any brokerage commissions payable in connection
with the Lease or any extension or expansion of the Lease are as set
forth on the Rent Roll or the Disclosure Schedule, and (x) no rents
under the Leases have been paid for more than 30 days in advance. The
Company agrees to provide AEW with an updated Rent Roll at closing;
any material changes in the Rent Roll from those approved during the
Inspection Period that involve a single lease covering more than
10,000 square feet in the aggregate shall be approved by AEW prior to
such change, which approval shall not be unreasonably withheld or
delayed. Brokerage commissions payable in connection with leases of
10,000 or fewer square feet on commercially reasonable terms or those
approved by AEW shall not constitute a breach of this representation.
(c) The Company has not received any written notice of or
communications regarding any material dispute with any tenant which
remains unresolved, and, to the Company's knowledge, there is no basis
therefor.
(d) The Company has not received any written notice of or
communications regarding any material violation of any applicable law,
ordinance, rule or regulation (including without limitation those
relating to zoning), and, the Company has complied and each Property
is in compliance in all material respects with all applicable laws,
ordinances, rules and regulations (including without limitation those
relating to zoning). The Company has received no written notice or
communication that any government agency or any employee or official
considers the construction of any Property or its operation or uses to
have failed to comply with any law, ordinance, regulation or order or
that any investigation has been commenced or is contemplated
respecting any such possible failure of compliance. The Company has
not received from any insurance company or Board of Fire Underwriters
any written notice of any defect or inadequacy in connection with any
Property or its operation.
(e) The Company has not received any written notice or
communication relating to a material default by the Company or any
other party under any agreement affecting a Property, and no event
exists which, with the passage of time or the giving of notice or
both, will become a material default hereunder on the part of the
Company or, to the knowledge of the Company, any other party thereto.
The Company is in full compliance with the material terms and
provisions of the covenants, conditions, restrictions, rights-of-way
or easements affecting each Property.
(f) The Company has not received any notice of or
communication regarding any pending or threatened eminent domain or
similar proceeding or private purchase in lieu of such a proceeding,
which would affect any Property in any way whatsoever, and to the
Company's knowledge, no such proceeding or purchase in lieu thereof is
planned.
(g) All building permits, certificates of occupancy,
business licenses and all other notices, licenses, permits,
certificates and authority required to be obtained by the Company (as
opposed to by a tenant) in connection with the construction, use or
occupancy of each Property and customarily issued by applicable
governmental authorities on projects in the county in which the
Property is located and on projects of a level of completion similar
to that of the Property have been obtained and are in full force and
effect and in good standing. Each Property is presently zoned for the
buildings, business and parking included in the Property. No Property
was constructed pursuant to any development agreement, variance,
conditional use permit or similar waiver of applicable zoning laws or,
if a Property was so developed, no conditions precedent or subsequent
to development approvals remain unperformed. The Company has received
no written notice or communication regarding any pending or proposed
change in the zoning classification of a Property and to the Company's
knowledge, no such change is pending or threatened. Neither the
Company, nor to the Company's knowledge any predecessor to the
Company, has entered into any commitment or agreement with a
governmental agency with respect to any Property. No rights with
respect to any other property, except as may be conveyed with the
Property, are required to provide access to any Property, to meet
parking or other contractual or regulatory requirements or to provide
structural support to the Property.
(h) All real and personal property taxes currently owing by
the Company relating to each Property, excepting those for the current
tax year which are not yet overdue (i.e., which are still payable
without interest or penalty), have been paid in full. The Company has
not received written notice of and to the Company's knowledge there is
not pending or threatened (i) any proposed increase in the assessed
valuation of any Property (except construction at the Property and
annual increases in real property taxes permitted under applicable
law), or (ii) except as disclosed in the preliminary title reports,
any existing or proposed assessment that has or may become a lien on
the Property.
(i) Each contract that requires payments in excess of
$50,000 relating to any of the Properties is listed on the Disclosure
Schedule (provided that contracts entered into after the date of this
Agreement with AEW's consent or as otherwise allowed pursuant to
Section 5.1 of this Agreement need not be listed on the Disclosure
Schedule).
(j) There are no physical, structural or design defects in
the improvements on any Property and the improvements and tangible
personal property (including without limitation plumbing equipment,
HVAC, electric wiring and fixtures, gas distribution system, and water
and sewage systems presently on or in any Property) are in good
working order and condition, normal wear and tear excepted.
(k) All bills and claims due and payable for labor performed
and materials furnished to or for the benefit of any Property at the
request of the Company or, to the Company's knowledge any other party,
are not more than 30 days past due, and there are no mechanic's, or
materialmen's liens (whether or not perfected) on or affecting a
Property, other than the bills, claims and unperfected mechanics liens
in favor of the general contractor and any subcontractors thereof
under the works of tenant improvement commenced on or after the date
hereof.
3.13 Environmental Matters. With respect to the Properties and
operations of the Company's business:
(a) Except as set forth in the environmental reports
identified on the Disclosure Schedule, copies of which have been
delivered to AEW, to the Company's knowledge: (i) neither the Company
nor any previous owner, tenant, occupant or user of any Property, nor
any other person, has engaged in or permitted any operations or
activities upon, or any use or occupancy of the Property, or any
portion thereof, for the purpose of or in any way involving the
handling, manufacture, treatment, storage, use, generation, release,
discharge, refining, dumping or disposal of any Materials of
Environmental Concern (whether legal or illegal, accidental or
intentional) on, under, in or about the Property, or transported any
Materials of Environmental Concern to, from or across the Property,
except in all cases in compliance with Environmental Laws and only in
the course of ordinary business operations at the Property (which
shall not include any business operations substantially involving the
handling, manufacture, treatment, storage, use, generation, release,
discharge, refining, dumping or disposal of Materials of Environmental
Concern); (ii) no Hazardous Materials are presently constructed,
deposited, stored, or otherwise located on, under, in or about any
Property, except to the extent that such presence would not require
reporting to any Environmental authority and is otherwise in
compliance with Environmental Laws and that such presence is only in
the course of ordinary business operations at the Property (which
shall not include any business operations substantially involving the
handling, manufacture, treatment, storage, use, generation, release,
discharge, refining, dumping or disposal of Materials of Environmental
Concern); (iii) no Materials of Environmental Concern have migrated
from any Property upon or beneath other properties; (iv) no Materials
of Environmental Concern have migrated or threaten to migrate from
other properties upon or beneath any Property; and (v) there are no
underground storage tanks on any Property and no underground storage
tanks have been removed from any Property.
(b) To its knowledge, there is no Environmental Claim
pending or threatened against the Company or any of the Properties
which, either individually or in the aggregate would constitute a
Material Adverse Matter.
3.14 Contracts With Insiders. Except as disclosed in the
Company's 10-K's, there are no executory agreements, obligations,
understandings or other arrangements, direct or indirect, between the
Company and any director or executive officer of the Company.
3.15 Tax Matters. The Company has filed all federal, state and
other tax returns (including information reports) which are required
to be filed and has paid all taxes which have become due and payable,
except for the failure to file such returns (or reports) or pay such
taxes as would not have resulted in a Material Adverse Matter. None
of such returns has been audited for any period, and the Company has
not received notice that any such returns will be audited for any
period. The provision for taxes on the Company's balance sheet
included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994 filed with the SEC is sufficient in all
material respects for the payment of all accrued and unpaid taxes with
respect to the periods then ended. Taxes include all federal, state,
county, local or foreign taxes, charges or other assessments,
including all net income, gross income, gross receipts, excise,
alternative minimum, sale and use, property, transfer, capital stock,
business and occupation, payroll and withholding taxes or charges
imposed on the Company by any government or governmental entity, as
well as penalties and interest on or additions to any taxes.
3.16 Investment Company. The Company is not required to be
registered under the Investment Company Act of 1940, as amended.
3.17 Qualification as a Real Estate Investment Trust. At all
times since the date of formation of the Company's predecessor, the
Company has operated and qualified as a REIT under Section 856 through
860 of the Code and the related regulations, and has met all
applicable organizational and operational requirements for
qualification as a REIT, including the requirements relating to stock
ownership and annual stockholder reporting, sources of income, nature
of assets and annual distributions. Based on the Company's current
and anticipated status and operations, and assuming completion of the
transactions contemplated by this Agreement and the continuing
accuracy of the representation of AEW at Section 4.6, the Company will
qualify as a REIT for the Company's current taxable year and the
Company has no reason to believe that it will be unable to maintain
that status in subsequent taxable years.
3.18 Subsidiaries. The Company does not directly or indirectly
own any of the capital stock of, or any joint venture, partnership or
other ownership interest in, any other person, other than the
Subsidiaries, each of which is a "qualified REIT subsidiary" within
the meaning of Section 856(i)(2) of the Code.
3.19 Registration Rights. Except as set forth in this Agreement
and the Bedford Registration Rights Agreement, the Company is not
under any contractual obligation to register any of its presently
outstanding securities or any of its securities which may hereafter be
issued.
3.20 Brokers. The Company has not engaged, consented to or
authorized any broker, finder or intermediary to act on its behalf,
directly or indirectly, as a broker, finder or intermediary in
connection with the transactions contemplated by this Agreement other
than Merrill. The Company has disclosed the terms and conditions of
all agreements with Merrill regarding the issuance of the Shares and
the transactions contemplated by this Agreement.
3.21 Board Resolution. Prior to the date hereof, the Board of
Directors of the Company has adopted an irrevocable resolution
exempting from the terms of Section 3-602 of the Maryland General
Corporation Law and from the terms of Article VIII of the Company's
Charter any business combination between AEW (or any Affiliate or
permitted transferee of AEW) and the Company and any transaction
contemplated by or resulting from the exercise of any redemption right
of the Shares which may constitute a business combination.
3.22 HSR. The assets of the Company consist of real property and
assets incidental to the ownership of real property (such as cash,
prepaid taxes or insurance, rentals receivable and the like). The
aggregate value of the retail space located in the property owned by
the Company in any one metropolitan area does not exceed $15,000,000.
4. REPRESENTATIONS AND WARRANTIES OF AEW
AEW represents and warrants to the Company that:
4.1 Existence and Power. AEW is a limited partnership duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite powers required to carry on
its business as now conducted.
4.2 Authorization. AEW has all requisite power and authority to
execute and deliver this Agreement and perform its obligations under
this Agreement and to consummate the transactions contemplated hereby.
The execution, delivery and performance by AEW of this Agreement and
the consummation by AEW of the transactions contemplated hereby have
been duly authorized, and no other action on the part of AEW will be
necessary to authorize the execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by AEW and
constitutes a valid and binding obligation of AEW enforceable against
AEW in accordance with its terms subject to applicable bankruptcy,
insolvency, reorganization, equity or redemption, moratorium or
similar laws now or hereafter in effect, affecting the enforcement of
creditors' rights generally, general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity)
and the limitations imposed by applicable law or public policy on the
enforceability of the indemnification and contribution provisions of
Section 8.
4.3 Governmental Authorization. The execution, delivery and
performance by AEW of this Agreement and the consummation by AEW of
the transactions contemplated hereby require no action by or in
respect of, or filing by the Company with any United States federal or
state governmental body, agency, official or authority other than: (i)
compliance with any applicable requirements of the Antitrust
Improvements Act, (ii) compliance with any applicable requirements of
the Exchange Act, (iii) compliance with any applicable federal or
state securities laws, and (iv) compliance with the rules and
regulations of the NYSE and PSE.
4.4 Non-Contravention. The execution, delivery and performance
by AEW of this Agreement and the consummation by AEW of the
transactions contemplated hereby do not and will not (i) contravene or
conflict with its Certificate of Limited Partnership; (ii) violate,
conflict with or result in the breach of any of the terms of,
otherwise give any other contracting party the right to terminate, or
constitute (or with notice or lapse of time or both constitute) a
default (by way of substitutions, novation or otherwise) under, any
contract or other agreement to which AEW is a party or by or to which
it or any of its assets or properties may be bound or affected; (iii)
violate any order, judgment injunction, award or decree of any court,
arbitrator or governmental or regulatory body against, or binding upon
AEW or upon the assets or properties of AEW, or (iv) violate any
statute, law or regulation of any jurisdiction as such statute, law or
regulation relates to AEW or to the properties or business of AEW or
(v) result in the creation or imposition of any lien on any asset of
AEW, except for violations, breaches, modifications, termination
rights, conflicts, defaults or liens, encumbrances or security
interests which, individually or in the aggregate, are not reasonably
likely to have a material adverse effect on the ability of AEW to
consummate the transactions contemplated hereby.
4.5 Purchase for Investment; Legend.
AEW hereby:
(a) acknowledges that AEW has been advised that the Shares
have not been registered under the Securities Act or under any
state securities laws and the Company will rely upon AEW's
representations in this Section 4.5 to establish an exception
from the registration requirements of the Securities Act and any
applicable state securities laws;
(b) represents and warrants that the Shares are being
purchased by AEW for AEW's own account for investment and not
with a view to, or for resale in connection with, a public
offering or distribution thereof;
(c) represents and warrants that AEW was not formed or
capitalized for the purpose of investing in the Shares and each
general and limited partner of AEW is an "accredited investor" as
that term is defined in Regulation D under the Securities Act;
(d) represents and warrants that it has had the
opportunity to discuss the Company's business, management and
financial affairs with the Company's management and to obtain all
information which it believes necessary to an informed decision
to purchase the Shares and has not relied upon the Company's
Private Placement Memorandum dated November 15, 1994;
(e) agrees that the Shares will not be sold or otherwise
disposed of except in compliance with registration requirements
or exemption provisions under the Securities Act, and any other
applicable securities laws;
(f) consents that stop transfer instructions in respect of
the Shares may be issued to any transfer agent, registrar or
other agent at any time acting for the Company;
(g) agrees that the Shares may not be pledged,
hypothecated, sold or transferred in the absence of an effective
registration statement for the Shares under the Securities Act or
an exemption therefrom and consents that the certificate or
certificates representing the Shares will bear a legend in
substantially the form set forth in the Articles of Amendment,
the legends required by Section 2-211 of the Maryland General
Corporation Law, and a legend in substantially the following
form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
THE SHARES MAY NOT BE PLEDGED, HYPOTHECATED, SOLD, OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER SUCH ACT OR AN OPINION OF
COUNSEL OR OTHER EVIDENCE REASONABLY SATISFACTORY TO THE
COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED."
4.6 REIT Ownership. AEW represents that (a) for purposes of the
stock ownership rules of Section 856(h) of the Code, it is a
partnership and no partner of AEW or member of its Preclosing
Affiliate (other than AEW), will be treated as the owner of more than
8.2% of the Outstanding Shares and (b) to the best of its knowledge,
AEW's or its Preclosing Affiliate's purchase of the Shares will not
cause the Company to be treated as the owner of a ten percent or more
interest in a tenant of the Company, applying the principles of
Sections 856 (d) (2) (B) and (d) (5) of the Code. During the period
that AEW or its Preclosing Affiliate continues to own Shares
representing more than 5% of the value of the outstanding shares of
the Company, applying the stock ownership rules of Code Section
856(h), AEW or its Preclosing Affiliate will continue to be treated as
a partnership and no partner of AEW or member of its Preclosing
Affiliate (other than AEW) will be treated as the owner of more than
8.2% of the Outstanding Shares of the Company; provided, however, that
this percentage will be reduced in proportion to the reduction in the
Outstanding Shares resulting from any redemption of the Shares.
4.7 Brokers. AEW has not engaged, consented to or authorized
any broker, finder or intermediary to act on its behalf, directly or
indirectly, as a broker, finder or intermediary in connection with the
transactions contemplated by this Agreement.
5. COVENANTS OF THE COMPANY
5.1 Conduct of the Company. From the date hereof until the
earlier of the termination of this Agreement pursuant to Section 10
and the Closing Date, the Company shall conduct its business in the
ordinary course and shall use all reasonable efforts to preserve
intact its business organizations and relationships with third
parties. Without limiting the generality of the foregoing, from the
date hereof until the Closing Date, without AEW's written consent:
(a) except pursuant to the exercise of options outstanding
on the date hereof or the grant or exercise of options pursuant
to the Option Plans in the ordinary course of business after the
date hereof, the Company shall not issue any Voting Securities;
(b) the Company shall not take any action that would make
any representation and warranty of the Company hereunder required
to be true at and as of the Closing Date as a condition to AEW's
obligations to consummate the transactions contemplated hereby
inaccurate in any material respect at the Closing Date, provided
that the representations and warranties of the Company contained
in the Agreement shall be deemed true if any discrepancies
individually or in the aggregate (and in the case of the
representations and warranties at Sections 3.4, 3.10, 3.12(b),
3.12(c) and 3.12(d) for purposes of this determination, the terms
"material" and "materially" included in such representations and
warranties shall be disregarded) do not constitute a Material
Adverse Matter; and
(c) the Company shall not sell any of the Properties
(other than sale of the IBM Building for a price of at least
$6,500,000 on commercially reasonable terms);
(d) the Company shall not, except in the ordinary course
of business and pursuant to the terms of the existing loan
agreement with B of A, mortgage, pledge or subject to any lien or
other encumbrance any of the Properties;
(e) the Company shall not make any capital expenditures in
the business, or any commitment with respect thereto, other than
capital expenditures which are included in the 1995 capital
budget as previously disclosed to AEW plus a contingency of an
aggregate of $100,000;
(f) the Company shall not enter into any material
transaction or make material commitment with respect to the
Company's Business, except in the ordinary course of business;
and
(g) the Company shall not agree or commit to do any of the
foregoing.
5.2 Access to Information; Confidentiality. From the date
hereof until the earlier of the termination of this Agreement pursuant
to Article 10 and the Closing Date, the Company shall give AEW, its
counsel, financial advisors, auditors and other authorized
representatives reasonable access during normal business hours to the
offices, properties, books and records of the Company. AEW will
maintain in confidence all Company information of a business sensitive
or confidential nature disclosed to AEW hereunder and will not use
such information for any purpose except as necessary in connection
with AEW's evaluation of the investment in the Shares. AEW will not
be obligated pursuant to the preceding sentence with respect to any
information that (i) was or is in the possession of AEW or any of its
directors, officers, employees, agents or advisors (collectively, its
"Representatives") at the time of disclosure or becomes available to
AEW or any of its Representatives on a non-confidential basis from a
source other than the Company; or (ii) is or becomes available to the
public other than as a result of any disclosure by AEW or its
Representatives, or (iii) is approved for release by the Company.
5.3 Qualification as a REIT. The Company shall at all times use
its reasonable best efforts to continue to meet the requirements to
qualify as a REIT under the Code unless and until the Board of
Directors shall determine that it is not in the best interests of the
Company and its stockholders to continue to meet such requirements.
5.4 Other Offerings. Neither the Company nor any person acting
on behalf of the Company has made or will make any public or private
offer of the Shares, shares of its Common Stock or similar securities
or warrants or options to purchase the Shares, shares of its Common
Stock or similar securities, or securities convertible into Shares,
shares of Common Stock or similar securities which, if the Shares and
such other securities were being issued in one or more private
placements, would likely be integrated with the offer of the Shares to
AEW under Rule 502 of the Securities Act.
5.5 Use of Proceeds. The Company shall use the net proceeds of
the sale of the Shares as follows: (i) between $18,750,000 and
$20,000,000 will be used to repay all indebtedness with B of A; (ii)
$750,000 will be paid to BPIA pursuant to the BPIA Agreement which
will be applied to accrued acquisition and financing costs and
expenses; and (iii) the balance will be used for the acquisition of
additional properties and for general corporate purposes.
5.6 No Solicitation. From the date hereof until the earlier of
the termination of this Agreement pursuant to Article 10 and the
Closing Date, the Company shall not, nor shall the Company authorize
or permit any of its officers, directors, employees, representatives
or agents (including but not limited to any investment banker,
financial advisor, attorney, accountant or other representative or
agent) to, directly or indirectly, (a) solicit, initiate, encourage
(including by way of furnishing information or assistance), or take
any other action to facilitate, any inquiry or the making of any
proposal which constitutes, or may reasonably be expected to lead to,
any acquisition or purchase of a substantial amount of assets of, or
any equity interest in, the Company or any tender offer (including a
self tender offer) or exchange offer, merger, consolidation, business
combination, sale of substantially all assets, sale of securities,
recapitalization, liquidation, dissolution or similar transaction
involving the Company or (b) enter into or participate in any
discussions or negotiations regarding any of the foregoing, or in the
furtherance of any inquiries regarding any of the foregoing, or
furnish to any other person any information with respect to its
business, Properties or assets or any of the foregoing, or otherwise
cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person to do or seek any
of the foregoing; provided, that the foregoing clauses (a) and (b)
shall not prohibit the Company from (i) furnishing information
concerning the Company and its business, Properties or assets to a
third party who has made a bona fide transaction proposal, which is
not subject to any material contingencies relating to financing, in
response to a request for such information, pursuant to a
confidentiality agreement, so long as neither such request for
information nor such transaction proposal was encouraged, solicited or
initiated after the date of this Agreement by the Company or any of
its affiliates or any of their respective officers, directors,
employees, representatives or agents, or (ii) engaging in discussions
or negotiations with such a third party who has made a transaction
proposal; provided, further, that any such action referred to in the
foregoing clauses (i) and (ii) may be taken by the Company only if
failure to take such action would constitute a breach of the duties of
the Company's Board of Directors under Maryland law; and provided,
further, that the Board of Directors of the Company shall not take any
of the foregoing actions referred to in clauses (i) and (ii) until
after reasonable prior notice to and consultation with AEW with
respect to such action. If the Board of Directors of the Company
receives an inquiry or proposal, then the Company shall orally (within
one business day) and in writing (as promptly as practicable) inform
AEW of the terms and conditions of such proposal and the identity of
the person making it and shall keep AEW promptly informed of all steps
that it is taking pursuant to the first proviso of the preceding
sentence with respect to such transaction proposal.
5.7 Reporting Requirements. After the Closing Date, the Company
will provide either AEW or an assignee who owns Shares convertible
into Common Shares that represent at least 15% of the Outstanding
Shares after such assignment the following information for so long as
the Common Shares issuable upon conversion of the Shares held by AEW
or such assignee, as the case may be, represent at least 15% of the
Outstanding Shares.
(a) Company Business Plan. Within 30 days following the
date of this Agreement and on or before October 15th of each year
during the term hereof for the calendar year beginning on the
next following January 1st, the Company shall prepare and submit
to AEW, a proposed business plan for the Company. Such business
plan, or any modified version thereof, shall be referred to as
the "Company Business Plan." The Company Business Plan shall set
forth, in reasonable detail, the overall strategic plan for
acquiring, managing, financing, servicing and disposing of
Company assets. The Company Business Plan shall be supplemented
or modified as necessary from time to time, but not less
frequently than the annual submittal.
(b) Annual Budgets. As part of each Company Business Plan,
the Company shall prepare and submit to AEW each year budgets for
the Company as a whole and each Property, projecting all revenues
expected to be received and projecting all costs and expenses
expected to be incurred during the following calendar year,
explaining in reasonable detail any contracts, assumptions used
in projecting real estate taxes, insurance and general and
administrative costs and proposed capital expenditures and a
comparison of projected revenues and expenses against prior year
actual (including an explanation of significant changes).
(c) Monthly Reports. The Company shall prepare and furnish
to AEW for each Property and the entire portfolio on a
consolidated basis, within ten (10) days after the end of each
calendar month, a monthly report ("Monthly Statement"),
consistent with the following general requirements:
(i) the Monthly Statement will include, but not be
limited to, the following:
(A) A balance sheet as of month end,
prepared on an accrual basis, showing
current month and prior month balances with
the change from prior month, an accrual
basis statement of income and expense and a
cash flow statement reconciling from net
income to net cash flow on a monthly and
year-to-date basis. All expenses shall be
included in such statements, regardless of
the source of payment;
(B) An aged accounts receivable listing and
allowance for doubtful accounts, with a
discussion regarding significant
delinquencies;
(C) A current detailed rent roll in the
form and containing the information
delivered to AEW pursuant to
Section 3.12(b) (including vacancies, lease
expirations and security deposits);
(D) A budget versus actual variance report
for the Property for the then current month
and cumulatively year-to-date,
showing variances from the Budgets
and explanations of material variations.
(d) Quarterly Reports. In connection with
delivery of the monthly Property financial statements
described above for the last month of each calendar quarter
and at year end, the Company shall also furnish to AEW (to
the extent not included within the monthly statements): a
report on the status of any proposal or offers to purchase
or sell any Property, recommendations for modifications to
the Company Business Plans or Company or Property Budgets; a
status report on all capital improvements, including
analysis of expenditures to date, costs to complete and
expected completion date; a narrative leasing and marketing
report, including details on current competitive market
conditions, leasing programs, lease negotiations and
prospects; and such other information as AEW may from time
to time reasonably require.
(e) Annual Reports. Within sixty (60) days after the
end of each calendar year, the Company shall furnish to AEW
annual financial statements certified by the Company's chief
financial officer for such (full or partial) calendar year
accurately reflecting the financial condition and the
results of operation of each Property individually and
audited financial statements with respect to the Company as
a whole.
(f) Securities Filings. In addition to the
foregoing, the Company shall provide to AEW, within five
days following filing, any and all correspondence, reports,
disclosure materials, registration statements, financial
information, applications or other documents filed with the
SEC or the NYSE. The Company shall also provide AEW with
each press release issued by the Company within five days of
issuance.
(g) Confidentiality. AEW hereby agrees to
maintain as confidential all information delivered to it
pursuant to this Section 5.7 for a period of three years
after receipt, except such information that (i) was or is in
the possession of AEW or any of its Representatives at a
time of disclosure or becomes available to AEW or any of its
Representatives on a non-confidential basis from a source
other than the Company; or (ii) is or becomes available to
the public other than as a result of any disclosure by AEW
or its Representatives, or (iii) is approved for release by
the Company.
5.8 Post-Closing Share Transfer Covenant. After the Closing, if
AEW proposes to transfer all or a portion of the Shares (or the Common
Stock into which the Shares are convertible) to a person or persons
whose ownership would exceed (or would appear to exceed), as a result
of that transfer, any applicable ownership limitation imposed under
the Company s Charter, the Company agrees that its consent to such a
transfer will not be unreasonably withheld and that pursuant to the
provisions of its Charter, the Company will except the proposed
transferee from the otherwise applicable ownership limitation,
provided that the proposed transferee supplies such reasonable
representations and undertakings as appropriate to ensure that the
transfer will not cause the Company to lose its tax status as a REIT,
taking into account anticipated events or circumstances (in each case
consistent with the Articles of Amendment) disclosed to such
transferee in writing by the Company (under an appropriate agreement
not to trade the Company's securities, other than the Shares being
acquired, during any period in which such information is not public).
5.9 Series A Directors Compensation. The Company shall provide
the Series A Directors (as defined in the Articles of Amendment) with
the same compensation (including, without limitation, equity
incentives, meeting fees and expense reimbursement) as is provided to
other non-management directors of the Company.
5.10 Payments to AEW or its Affiliates. The Company hereby
covenants that all payments required to be made by the Company to AEW
or its Affiliates in connection with their ownership of the Shares,
including, without limitation, all redemption payments, liquidation
payments or dividend payments, shall be made by wire transfer pursuant
to the instructions provided to the Company by AEW or its Affiliates
from time to time.
6. COVENANTS OF AEW AND THE COMPANY
6.1 Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, each party will use its reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause
to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate the transactions contemplated
hereby.
6.2 Certain Filings. The Company and AEW shall cooperate with
one another (a) in determining whether any action by or in respect of,
or filing with, any governmental body, agency or official, or
authority is required, or any actions, consents, approvals or waivers
are required to be obtained from parties to any material contracts, in
connection with the transactions contemplated hereby and (b) in
seeking any such actions, consents, approvals or waivers or making any
such filings, furnishing information required in connection therewith
and seeking timely to obtain any such actions, consents, approvals or
waivers.
6.3 Proxy Statement; Board Recommendation. The Company and AEW
shall cooperate with one another in the preparation of a proxy
statement in connection with the Company's stockholder meeting to be
held to approve this Agreement and the transactions contemplated
hereby. The parties acknowledge that the Company will ask for
separate votes on the provision of the Articles of Amendment deleting
Article VIII on the one hand and on the provision amending Article V
on the other hand. The Company will use its reasonable best efforts
to complete and mail such proxy statement to stockholders of record
and to call such stockholder's meeting at the earliest practicable
date. The Board of Directors of the Company has passed a resolution
unanimously recommending that the Company's stockholders approve this
Agreement and the transactions contemplated hereby. Such resolution
shall not be amended or rescinded unless making such recommendation
would constitute a breach of the duties of the directors of the
Company under Maryland law.
6.4 Public Announcements. AEW and the Company will jointly make
the press release in the form attached hereto as Exhibit 6.4 as soon
as possible after the close of the trading markets on the date of this
Agreement. Thereafter, the parties will consult with each other
before issuing any press release or making any public statement with
respect to this Agreement and the transactions contemplated hereby and
will not issue any such press release or make any such public
statement prior to such consultation unless required by law and a
party has not responded to reasonable efforts to effect such
consultation.
6.5 Brokers or Finders. Each of the Company and AEW
respectively agrees to indemnify and hold the other harmless from and
against any and all claims, liabilities or obligations with respect to
any broker's, finder's or similar fees, commissions or expenses
asserted by any person on the basis of any act or statement alleged to
have been made by such party or any of its Affiliates in connection
with this Agreement, or any of the transactions contemplated hereby or
thereby. The Company shall pay and indemnify and hold AEW harmless
from all amounts due Merrill in connection with the Agreement between
the Company and Merrill dated as of June 10, 1994 and amended March
29, 1995.
6.6 Notices of Certain Events. The parties hereto will notify
one another of:
(a) any notice or other communication from any third party
alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this
Agreement;
(b) any notice or other communication from any
governmental or regulatory agency or authority in connection with
the transactions contemplated by this Agreement; and
(c) any actions, suits, claims, investigations or
proceedings commenced of which such party has received notice or,
to its knowledge, threatened, against the Company or which relate
to the consummation of the transactions contemplated by this
Agreement.
6.7 Renegotiation of Conversion Price. If the Average Pre-
Closing Price is less than $5.25, AEW and the Company will negotiate
in good faith for at least five Business Days a reduction of the
Conversion Price in light of then existing market conditions.
6.8 NYSE Listing. If the NYSE will not permit the listing of
the Common Stock issuable upon conversion of the Shares because of the
covenants in Paragraph 6(b) of Section 5 of Article V of the charter
of the Company as proposed to be amended by the Articles of Amendment
set forth in Exhibit 3.2A, the parties will amend Exhibit 3.2A prior
to submission of such Articles of Amendment to the stockholders of the
Company for approval to remove the covenants from the Articles of
Amendment and place them in this Agreement with the effect that AEW
shall be able to enforce the provisions pursuant to the terms of this
Agreement.
7. SECURITIES MATTERS
7.1 AEW Right to Participate in Future Offerings.
7.1.1 Pro Rata Share. Provided that AEW owns Shares
representing at least 15% of the Outstanding Shares, if the Company
authorizes the issuance of New Securities, then, prior to each
issuance of such New Securities, the Company shall offer to AEW the
right to purchase for cash its pro rata share of such issuance of New
Securities. For the purposes of this Section, AEW's pro rata share
shall mean a fraction of the entire issuance of New Securities the
numerator of which shall be the sum of the number of the Company's
Common Shares then owned (or issuable upon conversion of Shares then
owned) by AEW that were acquired from the Company and the denominator
of which shall be the total number of the Company's Common Shares
outstanding immediately prior to the issuance of such New Securities
assuming full conversion or exercise of all outstanding Shares and
Voting Securities. AEW may only assign its rights under this Section
7 if the assignee will own Shares representing at least 15% of the
Outstanding Shares after such assignment.
7.1.2 Mechanics. Any offer of New Securities made to AEW
under this Section shall be made by notice in writing at least 30 days
prior to the date on which the Company intends to issue and sell such
New Securities. Such notice shall set forth (i) the number and type
of New Securities proposed to be issued and sold to persons other than
AEW and the terms of such New Securities, (ii) the approximate price
at which such New Securities are proposed to be sold and the terms of
payment, (iii) the number of New Securities offered to AEW in
compliance with the provisions of this Section, and (iv) the proposed
date of issuance and sale of such New Securities. Not later than 15
days after receipt of such notice, AEW shall notify the Company in
writing whether it elects to purchase all or any portion of the New
Securities offered to AEW pursuant to such notice. If AEW does not so
notify the Company, AEW shall be deemed to have waived its rights to
purchase any of the New Securities. If AEW shall elect to purchase
any such New Securities, the New Securities which it shall have
elected to purchase shall be issued and sold to AEW by the Company at
the same time and on the same terms and conditions as the New
Securities are issued and sold to third parties. If, for any reason,
the sale of New Securities to third parties is not consummated, AEW's
election shall lapse, subject to AEW's ongoing subscription right with
respect to issuances of New Securities at later dates or times.
7.2 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any
time permit the sale of the Common Shares issuable upon conversion of
the Shares to the public without registration, the Company agrees to
use its reasonable best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act;
(b) File with the SEC in a timely manner all reports and
other documents required of the Company under the Securities Act and
the Exchange Act;
(c) Furnish to AEW promptly upon request a written
statement by the Company as to its compliance with the reporting
requirements of Rule 144 and of the Securities Act and the Exchange
Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents of the Company and other
information in the possession of or reasonably obtainable by the
Company as AEW may reasonably request in availing itself of any rule
or regulation of the SEC allowing AEW to sell any such securities
without registration.
8. REGISTRATION RIGHTS
8.1 Demand Registration.
8.1.1 Request for Registration; Registration on Form S-3.
If the Company shall receive from Initiating Holders at any time after
the second anniversary of the Closing Date a written request that the
Company effect any Registration with respect to all or a part of the
Registrable Securities for an offering of a minimum of 1,000,000
shares of Common Stock (as adjusted for stock splits and similar
events), the Company shall (i) promptly give written notice of the
proposed Registration to all other Holders and shall (ii) as soon as
practicable, use its reasonable best efforts to effect Registration of
the Registrable Securities specified in such request, together with
any Registrable Securities of any Holder joining in such request as
are specified in a written request given within 20 days after written
notice from the Company. The Company shall not be obligated to take
any action to effect any such Registration pursuant to this Section
8.1.1 (i) after the Company has effected five such Registrations
pursuant to this Section 8.1.1 and such Registrations have been
declared effective or (ii) more often than once in any 12 month
period. Notwithstanding the above registration requirements, if the
Company qualifies for the use of Form S-3 or any comparable or
successor form, the Holders of Registrable Securities shall have the
right at any time after the second anniversary of the Closing Date and
prior to the seventh anniversary of the Closing Date to unlimited
registration of Registrable Securities on Form S-3; provided the
registration relates to at least a minimum of 1,000,000 shares of
Common Stock (as adjusted for stock splits and similar events). Such
requests shall be in writing and shall state the number of shares of
Registrable Securities to be registered.
8.1.2 Right of Deferral or Suspension of Registration. If
the Company shall furnish to all such Holders who joined in the
request a certificate signed by the President of the Company stating
that, in the good faith judgment of the Board of Directors of the
Company, it would be detrimental to the Company for any registration
to be effected as requested under Section 8.1.1 (or maintained
effective), the Company shall have the right to defer the filing of a
Registration Statement with respect to such offering (or suspend the
use of a Registration Statement) for a reasonable period (not to
exceed 150 days) after delivery of the request of the Initiating
Holders (or after delivery of a notice of suspension by the Company).
8.1.3 Underwriting in Demand Registration.
8.1.3.1 Notice of Underwriting. If the Initiating
Holders intend to distribute the Registrable Securities covered by
their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to this Section 8.1,
and the Company shall include such information in the written notice
referred to in Section 8.1.1. The right of any Holder to Registration
pursuant to Section 8.1 shall be conditioned upon such Holder's
agreement to participate in such underwriting and the inclusion of
such Holder's Registrable Securities in the underwriting.
8.1.3.2 Inclusion Of Other Holders In Demand
Registration. If the Company, officers or directors of the Company
holding Common Stock other than Registrable Securities, or holders of
securities other than Registrable Securities, request inclusion in
such Registration, the Initiating Holders, to the extent they deem
advisable and consistent with the goals of such Registration, may, on
behalf of all Holders, offer to any or all of the Company, such
officers or directors, and such holders of securities other than
Registrable Securities that such securities other than Registrable
Securities be included in the underwriting and may condition such
offer on the acceptance by such persons of the terms of this Section
8.1. If, however, the number of shares so included exceeds the number
of shares of Registrable Securities included by all Holders, such
Registration shall be treated as governed by Section 8.2 hereof rather
than Section 8.1 and it shall not count as a Registration for purposes
of Section 8.1 hereof.
8.1.3.3 Selection of Underwriter In Demand
Registration. If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an
underwriting, the Company shall (together with all holders proposing
to distribute their securities through such underwriting) enter into
an underwriting agreement with the representative of the underwriter
or underwriters selected for such underwriting by the Company with the
approval of AEW which consent will not be unreasonably withheld,
provided that any such underwriter will be nationally recognized as a
leading underwriter of real estate securities. The Company shall not
have any obligation to provide an underwriter for any registration
hereunder, and if the Company does not provide an underwriter the
Initiating Holders may do so and the Company shall (together with all
holders proposing to distribute the securities through such
underwriting) enter into an underwriting agreement with the
representative of such underwriter or underwriters, provided the
Company consents to the use of such underwriter which consent shall
not be unreasonably withheld.
8.1.3.4 Marketing Limitation in Demand Registration.
If the underwriter's representative advises the Initiating Holders in
writing that market factors (including, without limitation, the
aggregate number of shares of Common Stock requested to be Registered,
the general condition of the market, and the status of the persons
proposing to sell securities pursuant to the Registration) require a
limitation of the number of shares to be underwritten, then (i) first
the Common Stock other than Registrable Securities held by officers or
directors of the Company, (ii) next the securities other than
Registrable Securities, and (iii) last the securities requested to be
registered by the Company, shall be excluded from such Registration to
the extent required by such limitation. If a limitation of the number
of shares is still required, the Initiating Holders shall so advise
all Holders and the number of shares of Registrable Securities that
may be included in the Registration and underwriting shall be
allocated among all Holders in proportion, as nearly as practicable,
to the respective amounts of Registrable Securities entitled to
inclusion in such Registration held by such Holders at the time of
filing the Registration Statement. No Registrable Securities or other
securities excluded from the underwriting by reason of this Section
8.1.3.4 shall be included in such Registration Statement.
8.1.4 Right of Withdrawal in Demand Registration. If any
Holder of Registrable Securities, or a holder of other securities
entitled (upon request) to be included in such Registration,
disapproves of the terms of the underwriting, such person may elect to
withdraw therefrom by written notice to the Company, the underwriter
and the Initiating Holders delivered at least seven Business Days
prior to the effective date of the Registration Statement. The
securities so withdrawn shall also be withdrawn from the Registration
Statement. If the Holders decide to withdraw a demand after
commencement by the Company of preparation of a Registration
Statement, the Holders shall either (a) pay the Registration Expenses
incurred in connection with such Registration Statement or (b) reduce
by one the total number of demand registrations available pursuant to
Section 8.1.1; provided, however, that if such withdrawal results from
discovery by the Holders of a Material Adverse Matter with respect to
the condition, business or prospects of the Company not known to the
Holders at the time of their request, then the Holders shall not be
required to pay such Registration Expenses and shall not have the
number of registration statements they can demand reduced.
8.1.5 Blue Sky in Demand Registration. In any
Registration pursuant to Section 8.1, the Company will exercise its
reasonable best efforts to register and qualify the securities covered
by the Registration Statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably appropriate for the
distribution of such securities; provided, however, that (i) the
Company shall not be required to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions, and (ii) notwithstanding anything in this Agreement to
the contrary, in the event any jurisdiction in which the securities
shall be qualified imposes a non-waivable requirement that expenses
incurred in connection with the qualification of the securities be
borne by selling shareholders, such expenses shall be payable pro rata
by selling shareholders.
8.2 Piggyback Registration.
8.2.1 Notice of Piggyback Registration and Inclusion of
Registrable Securities. Upon the terms and subject to the conditions
set forth in this Agreement, if the Company decides to Register any of
its Common Shares (either for its own account or the account of a
security holder or holders exercising their respective demand
registration rights) on a form (other than Form S-8 or Form S-4 or any
comparable or successor forms) that would be suitable for a
registration involving solely Registrable Securities, the Company
will: (i) promptly give each Holder who holds at least 300,000
Registrable Securities (as adjusted for stock splits and similar
events) written notice thereof (which shall include a list of the
jurisdictions in which the Company intends to attempt to qualify such
securities under the applicable blue sky or other state securities
laws) and (ii) include in such Registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities
specified in a written request delivered to the Company by any Holder
within 15 days after delivery of such written notice from the Company
by any Holder so long as not less than 500,000 Registrable Securities
(as adjusted for stock splits and similar events) are requested to be
included. The Company shall not be obligated to include Registrable
Securities of any Holders in more than four Registrations of the
Company.
8.2.2 Underwriting in Piggyback Registration.
8.2.2.1 Notice of Underwriting in Piggyback
Registration. If the Registration of which the Company gives notice
is for a public offering involving an underwriting, the Company shall
so advise the Holders as a part of the written notice given pursuant
to Section 8.2.1. In such event the right of any Holder to
Registration shall be conditioned upon such underwriting and the
inclusion of such Holder's Registrable Securities in such underwriting
to the extent provided in this Section 8.2. All Holders proposing to
distribute their Registrable Securities through such underwriting
shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting
agreement in customary form with the underwriter's representative for
such offering. The underwriters for an offering pursuant to this
Section 8.2 shall be selected by the Company provided that such
underwriter will be nationally recognized as a leading underwriter of
real estate securities.
8.2.2.2 Marketing Limitation in Piggyback
Registration. In the event the underwriter's representative advises
the Holders seeking registration of Registrable Securities pursuant to
this Section 8.2 and Bedford (if he is exercising his right to include
his shares of Company Common Stock in such registration) in writing
that market factors (including, without limitation, the aggregate
number of shares of Common Shares requested to be Registered, the
general condition of the market, and the status of the persons
proposing to sell securities pursuant to the Registration) require a
limitation of the number of shares to be underwritten, the
underwriter's representative may limit the number of shares of
Registrable Securities and the shares of Company Common Stock owned by
Bedford to be included in such Registration and underwriting to not
less than ten percent (10%) of the total number of shares included in
such Registration in the case of Registrable Securities and not less
than three percent (3%) of the total number of shares included in such
Registration in the case of Bedford. To the extent that the
underwriter's representative determines that additional shares may be
included in such registration, such shares shall be allocated first to
the Holders up to the full amount of Registrable Securities they wish
to include and thereafter to Bedford.
8.2.2.3 Allocation of Shares in Piggyback
Registration. In the event that the underwriter's representative
limits the number of shares of Registrable Securities to be included
in a Registration pursuant to Section 8.2.2.2, the number of shares of
Registrable Securities to be included in such Registration shall be
allocated (subject to Section 8.2.2.2) as follows: among all Holders
of Registrable Securities requesting to include shares in such
Registration, in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities entitled to inclusion in
such Registration held by such Holders. No Registrable Securities or
other securities excluded from the underwriting by reason of this
Section 8.2.2.3 or Section 8.2.2.2 shall be included in such
Registration Statement.
8.2.2.4 Withdrawal in Piggyback Registration. If any
Holder, or a holder of other securities entitled (upon request) to be
included in such Registration, disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by written
notice to the Company and the underwriter delivered at least seven
Business Days prior to the effective date of the Registration
Statement. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such
Registration.
8.2.3 Blue Sky in Piggyback Registration. In the event of
any Registration of Registrable Securities pursuant to Section 8.2,
the Company will exercise its reasonable best efforts to register and
qualify the securities covered by the Registration Statement under
such other securities or blue sky laws of such jurisdictions as the
Holders shall reasonably request and as shall be reasonably
appropriate for the distribution of such securities; provided,
however, that if the Registration involves a public offering involving
an underwriting, the underwriters shall have sole authority to
determine such jurisdictions; and provided further, however, that (i)
the Company shall not be required to qualify to do business or to file
a general consent to service of process in any such states or
jurisdictions and (ii) notwithstanding anything in this Agreement to
the contrary, in the event any jurisdiction in which the securities
shall be qualified imposes a non-waivable requirement that expenses
incurred in connection with the qualification of the securities be
borne by selling shareholders, such expenses shall be payable pro rata
by the selling shareholders.
8.3 Expenses of Registration. All Registration Expenses
incurred in connection with all Registrations pursuant to Section 8.1
and 8.2 shall be borne by the Company. All Selling Expenses shall be
borne by the holders of the securities Registered pro rata on the
basis of the number of shares Registered.
8.4 Registration Procedures. The Company will keep each Holder
whose Registrable Securities are included in any registration pursuant
to this Section 8 advised as to the initiation and completion of such
Registration. The Company will: (a) use its reasonable best efforts
to keep such Registration effective for a period of 180 days or until
the Holder or Holders have completed the distribution described in the
Registration Statement relating thereto, whichever first occurs
provided that to the extent the Company has exercised its rights
pursuant to Section 8.1.2 to suspend the use of a Registration
Statement, this period shall be extended one day for each day that the
use of a Registration Statement is suspended; (b) furnish such number
of prospectuses (including preliminary prospectuses) and other
documents as a Holder from time to time may reasonably request; (c)
prepare and file with the SEC amendments and supplements to such
Registration Statement and the prospectus used in connection with such
Registration Statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of
all securities covered by such Registration Statement; and (d) notify
each Holder of Registrable Securities covered by such Registration
Statement at any time when a prospectus relating thereto is required
to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such Registration
Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing.
8.5 Information Furnished by Holder. It shall be a condition
precedent of the Company's obligations under this Section 8 that each
Holder of Registrable Securities included in any Registration furnish
to the Company such information regarding such Holder and the
distribution proposed by such Holder or Holders as the Company may
reasonably request.
8.6 Indemnification.
8.6.1 Company's Indemnification of Holders. To the extent
permitted by law, the Company will indemnify each Holder, each of its
officers, directors and constituent partners, legal counsel for the
Holders, and each person controlling such Holder, with respect to
which Registration, qualification or compliance of Registrable
Securities has been effected pursuant to this Agreement, and each
underwriter, if any, and each person who controls any underwriter
against all claims, losses, damages or liabilities (or actions in
respect thereof) to the extent such claims, losses, damages or
liabilities arise out of or are based upon any untrue statement (or
alleged untrue statement) of a material fact contained in any
prospectus or other document prepared by or on behalf of the Company
(including any related Registration Statement) and incident to any
such Registration, qualification or compliance, or are based on 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, or any violation by the Company of the
Securities Act, the Exchange Act, or any state securities law, or any
rule or regulation promulgated under the Securities Act, the Exchange
Act or any state securities law, applicable to the Company and
relating to action or inaction required of the Company in connection
with any such Registration, qualification or compliance; and the
Company will reimburse each such Holder, each of its officers,
directors and constituent partners, and legal counsel, each such
underwriter, and each person who controls any such Holder or
underwriter, for any expenses, (other than legal fees which shall be
reimbursable solely in accordance with Section 8.6.3) reasonably
incurred, as incurred, in connection with investigating or defending
any such claim, loss, damage, liability or action; provided, however,
that the indemnity contained in this Section 8.6 shall not apply to
amounts paid in settlement of any such claim, loss, damage, liability
or action if settlement is effected without the consent of the Company
(which consent shall not unreasonably be withheld); provided, further,
that the Company will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of
or is based upon any untrue statement or omission based upon written
information furnished to the Company by such Holder, its officers,
directors, constituent partners, or legal counsel, underwriter, or
controlling person and stated to be for use in connection with the
offering of securities of the Company; and provided further that the
Company will not be liable in any such case to the extent any such
claim, loss, damage, liability or expense arises out of or is based
upon the failure of such Holder to comply with the prospectus delivery
requirements of the Securities Act.
8.6.2 Holder's Indemnification of Company. To the extent
permitted by law, each Holder will, if Registrable Securities held by
such Holder are included in the securities as to which such
Registration, qualification or compliance is being effected pursuant
to this Agreement, indemnify the Company, each of its directors and
officers, each legal counsel and independent accountant of the
Company, each underwriter, if any, of the Company's securities covered
by such a Registration Statement, each person who controls the Company
or such underwriter within the meaning of the Securities Act, and each
other such Holder, each of its officers, directors and constituent
partners and each person controlling such other Holder, against all
claims, losses, damages and liabilities (or actions in respect
thereof) arising out of or based upon any untrue statement (or alleged
untrue statement) of a material fact contained in any such
Registration Statement, prospectus, offering circular or other
document (including any related Registration Statement) incident to
any such Registration, qualification or compliance, 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, or any violation by such Holder of the Securities Act, the
Exchange Act or any state securities law, or any rule or regulation
promulgated under the Securities Act, the Exchange Act or any state
securities law, applicable to such Holder and relating to action or
inaction required of such Holder in connection with any such
Registration, qualification or compliance; and will reimburse the
Company, such Holders, such directors, officers, partners, persons,
law and accounting firms, underwriters or control persons for any
legal and any other expenses reasonably incurred, as incurred, in
connection with investigating or defending any such claim, loss,
damage, liability or action; provided, however, that in the case of a
misstatement or omission, such obligation shall apply only to the
extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such Registration Statement,
prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by
such Holder and stated to be specifically for use in connection with
the offering of securities of the Company; provided that the indemnity
contained in this Section 8.6.2 shall not apply to amounts paid in
settlement of any such claim, loss, damage, liability or action if
settlement is effected without the consent of the Holder (which
consent shall not unreasonably be withheld).
8.6.3 Indemnification Procedure. Promptly after receipt by
an indemnified party under this Section 8.7 of notice of the
commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party under this
Section 8.6, notify the indemnifying party in writing of the
commencement thereof and generally summarize such action. The
indemnifying party shall have the right to participate in and to
assume the defense of such claim, jointly with any other indemnifying
party similarly noticed; provided, however, that the indemnifying
party shall be entitled to select counsel for the defense of such
claim with the approval of any parties entitled to indemnification,
which approval shall not be unreasonably withheld; provided further,
however, that if either party reasonably determines that there may be
a conflict between the position of the Company and the Holder in
conducting the defense of such action, suit or proceeding by reason of
recognized claims for indemnity under this Section 8.6, then counsel
for such party shall be entitled to conduct the defense to the extent
reasonably determined by such counsel to be necessary to protect the
interest of such party. The failure to notify an indemnifying party
promptly of the commencement of any such action, if prejudicial to the
ability of the indemnifying party to defend such action, shall relieve
such indemnifying party, to the extent so prejudiced, of any liability
to the indemnified party under this Section 8.6, but the omission so
to notify the indemnifying party will not relieve such party of any
liability that such party may have to any indemnified party otherwise
other than under this Section 8.6.
8.7 Transfer of Rights. Subject to compliance with the transfer
restrictions on the Shares, as set forth in this Agreement and the
Charter and By-laws of the Company, the Registration rights set forth
in Section 8.1 and 8.2 may be assigned by any Holder to a transferee
or assignee acquiring at least 500,000 Registrable Securities (as
adjusted for stock splits and similar events) not sold to the public;
provided, however, that the Company must receive written notice at
least five Business Days prior to said transfer, stating the name and
address of said transferee or assignee and identifying the securities
with respect to which such Registration rights are being assigned.
8.8 Market Stand-off. AEW agrees, and AEW shall cause each
assignee of its rights under this Section 8 to so agree, that if so
requested by the underwriter in connection with any public offering of
securities by the Company, AEW (or such assignee) shall not sell, or
make any short sale of, Registrable Securities without the prior
written consent of the underwriter for such period of time not to
exceed 30 days before the effective date of the registration statement
and 120 days after the effective date of the registration statement as
may be requested by the underwriter; provided that Bedford, his
Affiliates, all officers and directors of the Company and all holders
of 5% or more of the outstanding Common Stock of the Company are
subject to a substantially similar obligation.
9. CONDITIONS TO THE CLOSING
9.1 Conditions to the Obligation of Each Party. The obligations
of each of the Company and AEW to consummate the transactions
contemplated hereby are subject to the satisfaction of the following
conditions (which may be waived in whole or in part by the party
against whom the waiver is to be effective, unless such a waiver is
prohibited by law):
(a) the stockholders of the Company shall have approved
this Agreement and the transactions contemplated hereby;
(b) no provision of any applicable law or regulation and
no judgment, injunction, order or decree of any court or other
governmental body of competent jurisdiction shall be in effect
which prohibits or makes illegal the consummation of the
transactions contemplated hereby; and
(c) all consents or actions by or in respect of or filings
with any governmental body, agency, official, or authority
required to permit the consummation of the transactions
contemplated hereby, as between the parties shall have been
obtained, taken or made (other than those consents, actions or
filings which, if not obtained, taken or made prior to the
consummation of the transactions contemplated hereby, would not
constitute a Material Adverse Matter).
9.2 Conditions to the Obligations of AEW. The obligation of AEW
to consummate the transactions contemplated hereby is subject to the
satisfaction of the following further conditions (which may be waived
in whole or in part by AEW, unless such a waiver is prohibited by
law):
(a) (i) the Company shall have performed in all material
respects all of its material obligations hereunder required to be
performed by it at or prior to the Closing Date; (ii) each of the
representations and warranties of the Company contained in this
Agreement shall be true in all material respects at and as of the
Closing Date (except to the extent such representations and warranties
set forth at Sections 3.6 and 3.7 are expressly made as of an earlier
date) as if made at and as of such time; provided that the
representations and warranties of the Company contained in the
Agreement shall be deemed true in all material respects if any
discrepancies individually or in the aggregate (and in the case of the
representations and warranties at Sections 3.4, 3.10, 3.12(b), 3.12(c)
and 3.12(d) for purposes of this determination, the terms "material"
and "materially" included in such representations and warranties
shall be disregarded) do not constitute a Material Adverse Matter; and
(iii) AEW shall have received a certificate signed by the Chief
Executive Officer of the Company to the foregoing effect;
(b) The Company shall have furnished AEW with:
(i) a copy of a resolution or resolutions duly
adopted by the Board of Directors of the Company approving this
Agreement, and the transactions contemplated hereby, certified by the
Secretary of the Company;
(ii) an opinion of Greene Radovsky Maloney & Share,
dated the Closing Date, in substantially the form of Exhibit
9.2(b)(ii);
(iii) an opinion of Shearman & Sterling, dated the
Closing Date, in substantially the form of Exhibit 9.2(b)(iii); and
(iv) an opinion of Ballard Spahr Andrews & Ingersoll,
dated the Closing Date, in substantially the form of Exhibit
9.2(b)(iv).
(c) The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares
to be issued at the Closing, subject to timely filings after the
Closing where appropriate; and
(d) The shares of Common Stock issuable upon conversion of
the Shares shall have been listed with the NYSE and the PSE.
(e) The Company shall have closed (simultaneously with the
closing of the sale of the Shares) on a $60 million credit facility
with B of A on terms consistent with the business terms set forth in
the Commitment Letter dated May 12, 1995 from B of A to the Company
and other material terms reasonably satisfactory to AEW.
(f) The Company shall have executed and delivered the BPIA
Agreement on terms reasonably acceptable to AEW for a period ending on
the earlier of (i) three years after the Closing Date or (ii) that
date when the Company begins to conduct its acquisition and financing
services internally on terms reasonably acceptable to AEW;
(g) Amendments to the employment agreement, registration
rights agreement and other agreements between the Company and Bedford
and other management employees shall be reasonably acceptable to AEW;
(h) Bedford shall have executed and delivered the Co-Sale
Agreement;
(i) AEW shall have received an updated Rent Roll as of the
closing;
(j) The Average Pre-Closing Price shall be at least $5.25,
unless mutually agreed otherwise pursuant to Section 6.7;
(k) Thomas G. Eastman and Thomas H. Nolan, Jr. shall have
been elected by the existing directors as directors of the Company
effective upon the Closing and on the date of such election each of
Mr. Eastman and Mr. Nolan shall have been granted an option to
purchase 50,000 Common Shares under the Company's Director Stock
Option Plan;
(l) AEW's review, inspection and approval, within the
Inspection Period, of all economic, legal, physical and environmental
matters relating to the Company and the assets of the Company pursuant
to Section 9.4 below;
(m) The willingness of a national title insurance company or
companies approved by AEW to issue, upon the sole condition of the
payment of its regularly scheduled premium, updates to the Company's
existing American Land Title Association extended coverage Owner's
Policies of Title Insurance confirming that title to the real property
owned by the Company remains vested of record in the Company on the
Closing Date subject only to the printed conditions and exceptions of
such policy and the Permitted Exceptions, provided that any printed
exceptions and conditions imposing co-insurance requirements,
mandatory arbitration and any exception for creditors' rights shall be
deleted;
(n) The Company shall have terminated (simultaneously with
the closing of the sale of the Shares) its Rights Plan and redeemed
all outstanding rights for an aggregate consideration of no more than
$60,000;
(o) The Voting Agreement between Bedford and AEW dated of
even date herewith shall be in full force and effect;
(p) Either (i) holders of 80% of the outstanding Common
Shares shall have approved the Articles of Amendment set forth in
Exhibit 3.2B, and such Articles of Amendment shall have been duly
filed, or (ii) Bedford shall have provided AEW with an agreement
reasonably satisfactory to AEW pursuant to which he will vote in favor
of the proposals to delete Article VIII and will not directly or
indirectly assert against AEW or any Affiliate of AEW the provisions
of Article VIII; and
(q) The Board of Directors of the Company shall have
approved an amendment of the By-laws to provide (i) that the last
paragraph of ARTICLE II, Section 10 and the By-law amendments set
forth at (ii), (iii), (iv) and (v) of this paragraph may not be
amended in any way without the affirmative vote of a majority of the
outstanding Series A Convertible Preferred, (ii) that the last
sentence of Article III, Section 3 will be amended in its entirety to
read as follows: "An Independent Director shall mean a Director who
is not an employee or consultant of the Corporation.", (iii) that
Article III, Section 18 will be amended to acknowledge that AEW
engages in business competitive with the Company and that any
directors affiliated with AEW shall have no obligation to present to
the Company opportunities that may be pursued by AEW unless such
opportunities were presented to such directors in their capacity as
directors of the Company, (iv) that ARTICLE III, Section 5 shall allow
a special meeting of the Board of Directors to be called by any one
Series A Director (as defined in the Articles of Amendment), as well
as those persons presently identified, and (v) that if the Board of
Directors creates any new Board committees (including an executive
committee) or increases the authority of any existing Board committee,
at least one Series A Director must be appointed to such committee.
9.3 Conditions to the Obligation of the Company. The obligation
of the Company to consummate the transactions contemplated hereby is
subject to the satisfaction of the following further conditions (which
may be waived in whole or in part by the Company, unless such waiver
is prohibited by law):
(a) (i) AEW shall have performed in all material respects
all of its material obligations hereunder required to be
performed by it at or prior to the Closing Date; (ii) the
representations and warranties of AEW contained in this Agreement
shall be true in all material respects as of the date hereof at
and as of the Closing Date as if made at and as of such time; and
(iii) the Company shall have received a certificate signed by an
executive officer of the general partner AEW to the foregoing
effect;
(b) The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of
exemptions therefrom, required by any state for the offer and
sale of the Shares to be issued at the Closing, subject to timely
filings after each Closing where appropriate; and
(c) The shares of Common Stock issuable upon conversion of
the Shares shall have been listed with the NYSE and PSE.
9.4 Due Diligence Period.
(a) As contemplated in Section 9.2 above, AEW's
obligations under this Agreement shall be conditioned upon AEW's
satisfactory completion during the Inspection Period of a complete
review and inspection of (i) the Company, including, without
limitation, all financial, tax and contractual matters relating to the
acquisition and assumption of assets and liabilities attendant to the
Company and (ii) the physical, legal, economic and environmental
condition of all real and personal property assets of the Company,
including, without limitation, any leases and contracts affecting the
Properties, books, records and files maintained by the Company or its
agents relating to the Properties, including, without limitation, all
operating and financial statements and real and personal property tax
bills and receipts, boundary and other survey-related issues relating
to the Properties, pest control matters, soil condition, asbestos,
PCB, hazardous waste, toxic substance or other environmental matters,
compliance with building, health, safety, land use and zoning laws,
regulations and orders, plans and specifications, structural, life
safety, HVAC and other building system and engineering
characteristics, traffic patterns and all other information pertaining
to the properties which AEW deems pertinent to its investment
decision. If AEW's due diligence investigation discloses any matters
that individually or in the aggregate in AEW's reasonable business
judgment constitute a Material Adverse Matter, AEW may terminate this
Agreement by written notice to the Company delivered on or before the
close of the Inspection Period. If AEW shall not deliver such written
notice before the close of the Inspection Period, AEW's due diligence
condition set forth in Section 9.2(l) shall be deemed satisfied.
(b) AEW's exercise of the rights of review and inspection
set forth in subsection (a) shall be subject to the following
limitations: (i) any entry onto a Property by AEW, its agents or
representatives, shall be during normal business hours, following
reasonable prior notice to the Company; (ii) AEW shall not conduct any
drilling, test borings or other physical disturbance of a real
property for review of soils, environmental, structural or other
conditions without the Company's prior written consent, which shall
not be unreasonably withheld or delayed; (iii) AEW shall exercise
reasonable diligence not to disturb the use or occupancy of any
occupant of the Property; and (iv) AEW shall indemnify, defend and
hold the Company harmless from any actual damage or injury resulting
from any physical entry or inspections performed by AEW, its agents or
representatives, provided that such obligation to indemnify, defend
and hold harmless shall not include any diminution in property value,
any cleanup or containment costs, or any other loss, liability, or
expense that may result from the discovery or presence of Materials of
Environmental Concern on a Property.
(c) As part of its due diligence review during the
Inspection Period, AEW shall be entitled to review both the Company's
existing title insurance policies and a current preliminary title
report with respect to each Property (which reports shall be ordered
by the Company and delivered to AEW within 5 days following the
commencement of the Inspection Period, together with all documents and
information pertaining to the exceptions to title listed in such
report). The Company shall provide AEW with copies of any existing
surveys of each Property. AEW shall have until the close of the
Inspection Period to notify the Company in writing of any objection
AEW may have to any exceptions reported in the preliminary title
report or matters shown on the surveys. If AEW shall not deliver such
written notice before the close of the Inspection Period, AEW shall be
deemed to have approved the exceptions to title set forth in the
preliminary title report and all matters disclosed on the surveys.
(d) In the event that AEW discovers a Material Adverse
Matter during the Inspection Period but does not terminate this
Agreement as a result thereof, then AEW shall be precluded from using
the specific facts of that Material Adverse Matter as a reason for not
closing the purchase of the Shares or as a cause of action for damages
after the Closing; provided, however, that AEW shall only be treated
as having discovered a Material Adverse Matter during the Inspection
Period if AEW notifies the Company in writing of such Material Adverse
Matter during the Inspection Period or the Company can prove that AEW
had actual knowledge of the character and magnitude of such Material
Adverse Matter during the Inspection Period.
10. TERMINATION
10.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(i) by mutual written consent of the Company and AEW;
(ii) by either party if the parties are unable to agree on
a reduction of the Conversion Price pursuant to Section 6.7;
(iii) by AEW if there has been a breach of any
representation, warranty or material covenant or agreement of the
Company which is incurable, or which is not cured on or prior to
September 15, 1995, and which would permit AEW, pursuant to Section
9.2(a) hereof, not to consummate the closing; or
(iv) by AEW if the closing has not occurred on or before
September 15, 1995;
(v) by the Company if there has been a material breach of
any representation, warranty, or material covenant or agreement of AEW
contained in this Agreement, which breach is incurable or has not been
cured on or prior to September 15, 1995, and which would permit the
Company, pursuant to Section 9.2 hereof, not to consummate the
closing;
(vi) by the Company if the closing has not occurred on or
before September 15, 1995; or
(vii) by AEW, if the Board of Directors does not recommend
to the Company's stockholders that they approve this Agreement and the
transactions contemplated hereby.
10.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 10.1, this Agreement shall become void and of no
effect with no liability on the part of any party hereto, except (a)
to the extent such termination results from the breach by a party
hereto of any of its representations, warranties, covenants or
agreements set forth in this Agreement and (b) that the agreements
contained in Sections 5.2, 6.5, 11.3 and this Section 10.2 shall
survive the termination hereof.
11. MISCELLANEOUS
11.1 Notices. All notices, requests and other communications to
any party hereunder shall be in writing and shall be given (and shall
be deemed to have been given upon receipt) if delivered in person and
shall be deemed to have been given (a) two Business Days after
transmission of a facsimile, telegram, telex, or (b) four Business
Days after deposit in United States registered or certified mail
(postage prepaid, return receipt requested) or (c) two Business Days
after delivery to a reputable overnight courier, to the respective
parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this
Section 11.1):
If to AEW, to: AEW PARTNERS, L.P.
c/o Aldrich Eastman Waltch
225 Franklin Street
Boston, Massachusetts
02110
Attn: J. Grant Mohanon,
Jr.
Fax: (617) 261-9555
With a copy to: Thomas H. Nolan, Jr.
Aldrich Eastman Waltch
225 Franklin Street
Boston, Massachusetts
02110
Facsimile: (617) 261-9555
and
Heller, Ehrman, White &
McAuliffe
333 Bush Street
San Francisco, California
94104
Attention: Brian Smith
Facsimile: (415) 772-6268
If to the Company, to: Bedford Property Investors, Inc.
270 Lafayette Circle
Lafayette, California 94549
Attention: Donald Lorenz
Facsimile: (510) 283-5697
With a copy to: Greene Radovsky Maloney & Share
Spear Street Tower, Suite
4200
One Market Street
San Francisco, California
94105
Attention: Joseph Radovsky
Facsimile: (415) 777-4961
All notices to AEW pursuant to Sections 5, 7 and 9.4 shall be clearly
marked on the envelope of any letter and the cover page of any
facsimile and the first page of any notice as follows:
"IMMEDIATE RESPONSE REQUIRED. DEADLINE FOR REPLY IS _________.
FAILURE TO REPLY BY SUCH DATE WILL ELIMINATE AEW'S RIGHTS TO OBJECT."
11.2 Amendments; No Waivers. Any provision of this Agreement
may be amended or waived prior to the Closing Date if, and only if,
such amendment or waiver is in writing and signed, in the case of an
amendment, by the Company and AEW or in the case of a waiver, by the
party against whom the waiver is to be effective. No failure or delay
by any party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any
rights or remedies provided by law.
11.3 Fees and Expenses. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring
such cost or expense; provided that the Company shall pay promptly
upon submission of an invoice the transaction costs, including the
reasonable legal and due diligence expenses of AEW, in an amount not
to exceed $500,000 if the transaction closes or if the transaction
fails to close for any reason other than breach by AEW.
11.4 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto
and, except as otherwise herein provided, their respective successors
and assigns. Prior to the Closing Date, AEW may only assign its
rights and obligations hereunder to a single Preclosing Affiliate. If
the rights and obligations of AEW are so assigned, at the Closing, AEW
will be released of all liabilities and obligations hereunder,
provided that such Preclosing Affiliate agrees in writing to be bound
hereunder for such liabilities and obligations and such writing shall
include representations and warranties relating to it which are
consistent with those set forth in Section 4 hereof. This Agreement
shall be binding upon and is solely for the benefit of each of the
parties hereto and their permitted respective successors and assigns,
and nothing in this Agreement is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by
reason of this Agreement.
11.5 Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of California
applicable to agreements made and to be performed entirely within such
state, except to the extent that actions of the Company or its Board
of Directors or stockholders are governed by the Maryland General
Corporation Law.
11.6 Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement shall become effective when each
party hereto shall have received counterparts hereof signed by all of
the other parties hereto.
11.7 Severability. If the application of any provision hereof
to either party is held invalid and such party fails to adhere to the
requirements of such provision, the other party shall thereafter be
relieved of all further obligations and covenants pursuant to this
Agreement.
11.8 Specific Performance. The parties acknowledge that
they would be irreparably damaged in the event any of the provisions
of this Agreement were not performed by the parties in accordance with
their specific terms or were otherwise breached. Accordingly, it is
agreed that the parties shall be entitled to an injunction to prevent
breaches of this Agreement and to specifically enforce this Agreement
and the terms and provisions hereof in any proceeding, in addition to
any other remedy to which the parties may be entitled at law or in
equity.
11.9 Survival of Representations and Warranties; Knowledge and
Materiality. The representations and warranties of the Company and
AEW set forth in this Agreement shall survive the Closing and shall
remain effective for one year thereafter, except for the
representations and warranties set forth in Sections 4.5, 4.6, 4.7,
3.17, 3.20 and 3.22 which shall remain effective for the appropriate
statute of limitations for claims on written contracts. After the
expiration of such periods, such representations and warranties shall
expire and be of no further force and effect, and no claim shall be
made with respect to any breach thereof unless a written notice
specifying the nature and amount of the claim or claims shall have
been delivered by AEW or the Company, as the case may be, with respect
thereto on or before the expiration of such period. If AEW brings any
action after the Closing for breach of any representation or warranty
of the Company, AEW shall only be entitled to damages if AEW can show
that the Company had knowledge of the character and magnitude of the
breach at the time of the Closing and the breach (and in the case of
the representations and warranties at Sections 3.4, 3.10, 3.12(b),
3.12(c) and 3.12(d) for purposes of this determination the terms
"material" and "materially" included in such representations and
warranties shall be disregarded) constituted a Material Adverse
Matter.
11.10 Entire Agreement. This Agreement, including the Disclosure
Schedule and Exhibits, represents the entire agreement between the
parties relating to the subject matter hereof and supersedes all prior
and contemporaneous negotiations, understandings, agreements and
correspondence relating hereto.
11.11 Costs and Expenses of Litigation. In the event that any
dispute arises between the parties hereto and the parties resort to
litigation to settle such dispute, then the non-prevailing party in
such litigation shall pay the costs and expenses incurred by the
prevailing party in connection with such litigation, including,
without limitation, attorney and witness fees.
11.12 Bedford. Bedford is executing this Agreement only for the
purpose of Section 8.2.2.2 hereof in order to reconcile the
registration rights granted Bedford in the Bedford Registration Rights
Agreement with the registration rights granted AEW in Section 8, and
to the extent there is any conflict between the terms of this
Agreement and the Bedford Registration Rights Agreement, the terms of
this Agreement shall prevail.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
BEDFORD PROPERTY INVESTORS, INC.
By_________________________________
Name:
Title:
AEW PARTNERS, L.P., a Delaware
limited partnership
By: AEW/L.P., a Delaware limited
partnership
Its General Partner
By: AEW, Inc., a Delaware corporation
Its General Partner
By: ____________________________
Patrick J. Sullivan
Vice President
For purposes of Section 8.2.2.2 only
_______________________
PETER B. BEDFORD
<PAGE>
EXHIBITS
Exhibit 1.2 Closing Memorandum
Exhibit 3 Disclosure Schedule
Exhibits 3.2A & 3.2B Articles of Amendment
Exhibit 3.12 Property
Exhibit 3.12A Major Leases (not included herein,
filed with the S.E.C. by separate
cover letter as a confidential
filing)
Exhibit 3.12B Leases
Exhibit 6.4 Joint Press Release
Exhibit 9.2(b)(ii) Opinion of Greene Radovsky
Maloney & Share
Exhibit 9.2(b)(iii) Opinion of Shearman & Sterling
Exhibit 9.2(b)(iv) Opinion of Ballard Spahr Andrews
& Ingersoll
Exhibit 9.2(h) Co-Sale Agreement
<PAGE>
EXHIBIT 1.2
BEDFORD PROPERTY INVESTORS, INC.
SALE OF SERIES A PREFERRED STOCK
CLOSING MEMORANDUM
TIME AND PLACE OF CLOSING AND PERSONS PRESENT:
The closing was held at the offices of Heller Ehrman White &
McAuliffe, 333 Bush Street, San Francisco, California, at 10:00 a.m.
local time on , 1995.
The following persons were present at the Closing:
For BEDFORD PROPERTY INVESTORS, INC.
Peter Bedford
For AEW
Patrick Sullivan
For HELLER, EHRMAN, WHITE & McAULIFFE
Brian D. Smith
August J. Moretti
For GREENE RADOVSKY MALONEY & SHARE
Joseph S. Radovsky
Rachel Hardie
For MERRILL LYNCH & CO.
Victoria K. Collison
For BROWN & WOOD
Barbara A. Fiske
DOCUMENTS DELIVERED AT THE CLOSING:
All transactions at the closing were deemed to have taken
place simultaneously, and no transaction was deemed to have been
completed until all transactions were completed and all documents were
delivered.
A. Agreements
1. Series A Preferred Stock Purchase Agreement
2. Voting Agreement
3. Co-Sale Agreement
4. Bank of America Amended Credit Facility $60 Million
5. BPIA Agreement
B. Documents Delivered by the Company
6. Articles of Amendment of Charter
7. Preferred Stock Certificate
8. Certificate of Transfer Agent (re Outstanding Common
Stock)
9. Certificate of Chief Executive Officer of the Company
10. Certificate of Secretary of the Company
11. Opinion of Greene Radovsky Maloney & Share
12. Opinion of Shearman & Sterling
13. Opinion of Ballard Spahr Andrews & Ingersoll
14. Receipt from BPIA
15. Receipt from B of A
16. Evidence of Termination of Rights Plan
17. Updated Rent Roll
C. Documents Delivered by AEW
18. Check or wire transfer in the amount of $50,000,000
19. Certificate of Executive Officer of General Partner
20. Form 3 for AEW
21. Form 3 for New Directors
D. Miscellaneous
22. Joint Press Release
23. Indemnity Agreements for Directors
<PAGE>
<PAGE>
EXHIBI T 3.2A
ARTICL ES OF AMENDMENT OF
CHARTE R
OF
BEDFOR D PROPERTY INVESTORS, INC.
THIS IS TO CERTIFY THAT:
FIRST: The charter of Bedford Property Investors, Inc., a
Maryland corporation (the "Corporation"), is hereby amended by (a)
deleting existing Section 1 of Article V and adding a new Section 1 as
follows and (b) adding new Section 5 to Article V as follows:
Section 1. Authorized Shares. The total number of shares of
stock which the Corporation has authority to issue is 50,000,000
shares, of which 30,000,000 shares are shares of Common Stock, $.01
par value share ("Common Stock"), 10,000,000 shares are shares of
Preferred Stock, $.01 par value per share ("Preferred Stock"), and
10,000,000 shares are shares of Series A Convertible Preferred Stock,
$.01 par value per share ("Series A Preferred"). The aggregate par
value of all authorized shares of stock having a par value is
$500,000.
Section 5. Series A Preferred Stock. The preferences, conversion
or other rights, voting powers, restrictions, limitations as to
dividends and other distributions, qualifications and terms and
conditions of redemption of the Series A Preferred are set forth
below. The Board of Directors may reclassify any unissued shares of
Series A Preferred from time to time in one or more classes or series
of stock of the Corporation.
1. Cumulative Dividends.
(a) (i) The holders of outstanding shares of the Series A
Preferred shall be entitled to receive in each fiscal quarter, when
and as authorized and declared by the Board of Directors, out of any
assets at the time legally available therefor, dividends in cash at
the greater of (X) the rate of $0.135 (the "Dividend Rate") per share
and (Y) the dividends payable with respect to such quarter in respect
of the Common Stock into which each share of the Preferred Stock is
Convertible, plus, in both cases, dividends accumulated on the Series
A Preferred but unpaid for all prior quarters, before any cash
dividend is paid on the Common Stock for such quarter. If any shares
of Series A Preferred have been called for redemption by the holders
of the Series A Preferred but the redemption payment has not been made
thereon on the redemption date for any reason whatsoever, then the
rate at which dividends shall accrue on such shares shall increase to
$0.165 per share until the earlier of (A) the payment of the
redemption price, and (B) such time as the size of the board has been
increased to eleven pursuant to Paragraph 3(a) hereof and the holders
of Series A Preferred have elected four directors to fill the newly
created vacancies. The right to dividends on shares of Series A
Preferred shall be cumulative.
(ii) Such dividends or distributions shall be payable quarterly
(commencing with the calendar quarter ending September 30, 1995) in
arrears on such dates as the Board of Directors may from time to time
determine which shall not be later than the 45th day after the end of
the calendar quarter. Any dividends payable on Series A Preferred for
any partial dividend period (including the period commencing on the
date the shares are initially issued and ending on September 30, 1995)
will be computed on the basis of a 360-day year consisting of twelve
30-day months. Dividends or distributions (other than dividends
payable solely in shares of Common Stock) may be authorized and
declared and paid upon shares of Common Stock in any fiscal quarter of
the Corporation only if dividends shall have been paid on or declared
and set apart upon all shares of Series A Preferred at such quarterly
rates for all prior periods through and including the end of such
quarter.
(b) In the event the Corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness
issued by the Corporation or other persons, assets (excluding cash
distributions) or options or rights to purchase any such securities or
evidences of indebtedness, then, in each such case the holders of the
Series A Preferred shall he entitled to a proportionate share of any
such distribution as though the holders of the Series A Preferred were
the holders of the number of shares of Common Stock of the Corporation
into which their shares of Series A Preferred are convertible as of
the record date fixed for the determination of the holders of Common
Stock of the Corporation entitled to receive such distribution.
(c) In determining whether a distribution (other than upon
voluntary or involuntary liquidation), by dividend (but not by
redemption or other acquisition of shares or otherwise), is permitted
under the Maryland General Corporation Law, amounts that would be
needed, if the Corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of
holders of Preferred Stock whose preferential rights upon dissolution
are superior to those receiving the distribution shall not be added to
the Corporation's total liabilities.
2. Liquidation Preference.
(a) In the event of any Liquidation Event (as defined at (b)
below) either voluntary or involuntary, the holders of the Series A
Preferred shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation
to the holders of the Common Stock by reason of their ownership
thereof, the amount of $6.30 per share plus any accrued and unpaid
dividends, for each share of Series A Preferred then held by them (the
"Series A Liquidation Preference"). If, upon the occurrence of such
event, the assets and funds thus distributed among the holders of the
Series A Preferred shall be insufficient to permit the payment to such
holders of the full Series A Liquidation Preference, then the entire
assets and funds of the Corporation legally available for distribution
shall be distributed ratably in satisfaction of the Series A
Liquidation Preference in proportion to the aggregate preferential
amounts owed to each holder of the Series A Preferred. After payment
has been made to the holders of the Series A Preferred of their full
Series A Liquidation Preference, any remaining assets shall be
distributed ratably to the holders of the Common Stock.
(b) For purposes of this Paragraph 2, any transaction, including
without limitation a consolidation or merger of the Corporation (other
than for purposes of reincorporation), or other corporate
reorganization of the Corporation with or into any other corporation
or corporations, immediately after which transaction the stockholders
of the Corporation (determined prior to such event) hold fifty percent
or less in interest of the outstanding voting securities of the
surviving corporation, or a sale of all or substantially all of the
assets of the Corporation or the acquisition of a majority of the
outstanding shares of Common Stock of the Corporation by a person
other than (i) AEW Partners, L.P. and its Affiliates, (ii) as a result
of the conversion of the Series A Preferred Stock, (iii) Peter Bedford
or his Affiliates or members of his immediate family (his spouse,
issue, brothers, sisters and their respective issue and trusts for the
benefit of such persons) or (iv) underwriters in a public or private
placement, shall be treated as a Liquidation Event. "Affiliate" shall
mean with respect to any person, any other person controlling,
controlled by or under direct or indirect common control with such
person (for the purposes of this definition "control," when used with
respect to any specified person, shall mean the power to direct the
management and policies of such person, directly or indirectly,
whether through ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" shall have
meanings correlative to the foregoing).
(c) The value of securities and property paid or distributed
pursuant to this Paragraph 2 shall be computed at fair market value at
the time of payment by the Corporation or at the time made available
to stockholders, all as determined by the Board of Directors in the
good faith exercise of its reasonable business judgment, provided that
(i) if such securities are listed on any established stock exchange or
a national market system, their fair market value shall be the closing
sales price for such securities as quoted on such system or exchange
(or the largest such exchange) for the date the value is to be
determined (or if there are no sales for such date, then for the last
preceding business day on which there were sales), as reported in the
Wall Street Journal or similar publication, and (ii) if such
securities are regularly quoted by a recognized securities dealer but
selling prices are not reported, their fair market value shall be the
mean between the high bid and low asked prices for such securities on
the date the value is to be determined (or if there are no quoted
prices for such date, then for the last preceding business day on
which there were quoted prices).
(d) Nothing hereinabove set forth shall affect in any way the
right of each holder of Series A Preferred to convert such shares at
any time and from time to time into Common Stock in accordance with
Paragraph 4 hereof.
3. Voting Rights and Voting Switch. Except as expressly provided
in this Charter, the holders of Series A Preferred shall have no
voting rights.
(a) Directors. The holder of shares of Series A Preferred as a
class shall have the right to elect two members of the Board of
Directors (which right to elect such two directors shall be construed
for the purposes of this Charter as the right to vote generally in
the election of directors) and the holders of shares of Common Stock
shall have the right to elect the remaining directors; provided
however that if at any time (i) the Corporation has failed in two
consecutive quarters to pay in full and in a timely manner the
quarterly dividends on the Series A Preferred as required by Paragraph
1 (including all dividends accumulated but unpaid for all prior
quarters), (ii) Peter Bedford shall cease to serve as the
substantially full-time chief executive officer of the corporation,
(iii) Peter Bedford and his Affiliates and members of his immediate
family (his spouse, issue, brothers, sisters and their respective
spouses and issue and trusts for the benefit of such persons) own
beneficially fewer than 1,198,278 shares of Common Stock of this
Corporation (adjusted for any stock splits or similar transactions),
or (iv) the Company fails to pay the full redemption price on the
shares of Series A Preferred subject to redemption pursuant to
Paragraph 5(c) on any redemption date (provided, that such redemption
was made at the request of holders of a majority of the then
outstanding shares of Series A Preferred), then the holders of Series
A Preferred shall immediately (and regardless of any subsequent cure)
and thereafter be entitled to elect the smallest number of directors
constituting a majority of the Board of Directors, and the holders of
Common Stock, as a class, shall retain the right to elect the
remaining directors. The number of authorized directors is seven and
such number cannot be increased without the consent of the holders of
Series A Preferred. In order to facilitate the effective control of
the Board of Directors by the holders of Series A Preferred upon the
occurrence of any event identified in (i), (ii), (iii) or (iv) above,
the size of the Board shall automatically be increased to eleven, and
the holders of the Series A Preferred, voting together as a single
class, shall have the exclusive right to elect four persons to fill
such newly created vacancies on the Board of Directors. All directors
elected by the vote of the Series A Preferred shall be referred to as
"Series A Directors. "The holders of Series A Preferred may elect the
Series A Directors by unanimous written consent, by a special meeting
of the holders of Series A Preferred, or at an annual meeting of
stockholders of the Corporation. Any special meeting of the holders of
Series A Preferred may be called by holders who hold at least 10% of
the outstanding shares of Series A Preferred or by a Series A Director
and shall be held at the time and place specified by the holder or
director calling the meeting. A majority of the holders of the Series
A Preferred shall constitute a quorum for the purposes of any such
special meeting. In the case of any vacancy occurring among the Series
A Directors, a majority of the remaining Series A Directors, if any,
may elect a successor to hold office for the unexpired term of such
Series A Director. If all Series A Directors shall cease to serve as
directors before their terms expire, the holders of Series A Preferred
then outstanding may, by unanimous written consent or at a special
meeting of the holders of Series A Preferred, elect successors to hold
office for the unexpired terms of the Series A Directors.
(b) Senior Securities. Authorization of any series or class of
equity securities ranking senior or equal to the Series A Preferred
with respect to the payment of dividends or amounts upon liquidation,
dissolution or winding up of the Corporation, must be approved by the
affirmative vote of holders of at least a majority of the outstanding
shares of Series A Preferred, voting together as a single class.
(c) Amendment. Any amendment to the Charter of the Corporation
which would materially adversely affect the preferences or rights of
the Series A Preferred must be approved by affirmative vote of the
holders of at least a majority of the outstanding shares of Series A
Preferred, voting together as a single class.
(d) Termination. The voting rights set forth at (b) and (c)
above shall terminate if the Common Shares issuable upon conversion of
the outstanding shares of Series A Preferred shall represent less than
15% of the total of (i) outstanding shares of Common Stock and (ii)
the number of shares of Common Stock that would be outstanding upon
conversion of the outstanding Series A Preferred. If the Common Shares
issuable upon conversion of the outstanding Series A Preferred
represent less than 15% but 7% or more of such total, the voting
rights set forth at (a) above shall provide that the holders of shares
of Series A Preferred Stock as a class shall only have the right to
elect one member of the Board of Directors rather than two; and
provided further that the voting rights set forth at (a) above shall
terminate if the Common Shares issuable upon conversion of the
outstanding shares of Series A Preferred Stock represent less than 7%
of such total.
(e) Mechanics. Solely for purposes of this Paragraph 3, each
holder of shares of Series A Preferred shall be entitled to one vote
for each such share of Series A Preferred held on the record date for
the vote or consent of stockholders.
(f) Notice of Meetings. The holder of each share of the Series A
Preferred shall be entitled to notice of any stockholders' meeting in
the manner provided in the Bylaws of the Corporation.
4. Conversion. The holders of the Series A Preferred shall
have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Subject to Subsection (c), each share of
Series A Preferred shall be convertible, at the option of the holder
thereof, at any time after , 1997 [two years after closing]
at the office of the Corporation or any transfer agent for the Series
A Preferred, into such number of fully paid and nonassessable shares
of Common Stock as is determined by dividing $6.00 for each share of
Series A Preferred by the Conversion Price at the time in effect for
such share. The initial Conversion Price for shares of Series A
Preferred shall be $6.00 per share; provided, however, that such
Conversion Price shall be subject to adjustment as set forth in
Subsection (c) below.
(b) Mechanics of Conversion. Before any holder of Series A
Preferred shall be entitled to convert the same into shares of Common
Stock, the certificate or certificates therefor shall be surrendered,
duly endorsed, at the office of the Corporation or of any transfer
agent for the Series A Preferred, and the holder shall give written
notice by mail, postage prepaid, to the Corporation at its principal
office, of the election to convert the same and shall state therein
the name or names in which the certificate or certificates for shares
of Common Stock are to be issued. The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such
holder of Series A Preferred, or to the nominee or nominees of such
holder, a certificate or certificates for the number of shares of
Common Stock to which such holder shall be entitled as aforesaid. Such
conversion shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of the shares of
Series A Preferred to be converted, and the person or persons entitled
to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date. No fractional shares of
Common Stock shall be issued upon conversion of shares of Series A
Preferred Stock. Instead of any fractional shares of Common Stock that
would otherwise be issuable upon conversion, the Corporation shall pay
in cash an amount equal to the fair market value of such fractional
interest as determined in good faith by the Corporation's Board of
Directors. In determining the amount of fractional share payments, all
of the shares of a single holder of Series A Preferred shall be
aggregated so that no holder shall receive a fractional share payment
equal to or exceeding the value of one share.
(c) Conversion Price Adjustments. The Conversion Price of Series
A Preferred shall be subject to adjustment from time to time as
follows:
(i) Special Definitions. For purposes of this Paragraph 4(c),
the following definitions shall apply:
(1) "Options" shall mean rights,options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(2) "Original Issue Date" with respect to the Series A Preferred
shall mean the date on which the first share of such Series A
Preferred was issued.
(3) "Convertible Securities" shall mean any evidence of
indebtedness, shares (other than the Common Stock or Series A
Preferred Stock) or other securities convertible into or exchangeable
for Common Stock.
(4) "Additional Stock" shall mean all Common Stock issued (or,
pursuant to Paragraph 4(c)(iii), deemed to be issued) by the
Corporation after the Original Issue Date, other than Common Stock
issued or issuable at any time:
(A) upon conversion of the Series A Preferred;
(B) upon exercise of Options outstanding on the Original Issue
Date;
(C) upon issue of options to officers, directors, and employees
of, and consultants to the Corporation pursuant to the Amended
Employee Stock Option Plan and Directors Stock Option Plan of this
Corporation in amounts not exceeding the aggregate reserved for
issuance under such plans on the Original Issue Date, as increased
from time to time provided that any such increase is approved by a
majority of the Series A Directors;
(D) upon issue of warrants to underwriters in any firm commitment
public offering of securities by this Corporation;
(E) as a dividend or distribution on Series A Preferred or any
event for which adjustment is made pursuant to subparagraph (c)(vi)
hereof;
(F) by way of dividend or other distribution on Common Stock
excluded from the definition of Additional Stock by the foregoing
clauses (A), (B), (C), (D), (E) or this clause (F) or on Common Stock
so excluded.
(ii) No Adjustment of Conversion Price. No adjustment in the
Conversion Price of a particular share of Series A Preferred shall be
made as a result of the issuance of Additional Stock unless the
consideration per share for such Additional Stock issued or deemed to
be issued by the Corporation is less than the Conversion Price in
effect on the date of, and immediately prior to such issue, for such
share of Series A Preferred.
(iii) Deemed Issue of Additional Shares of Common Stock.
(1) Options and Convertible Securities. Except as otherwise
provided in Paragraph 4(c)(ii), in the event the Corporation at any
time or from time to time after the Original Issue Date shall issue
any Options or Convertible Securities or shall fix a record date for
the determination of holders of any class of securities entitled to
receive any such Options or Convertible Securities, then the maximum
number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein for a subsequent
adjustment of such number) of Common Stock issuable upon the exercise
of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be shares of Additional Stock issued as of the time
of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date, provided that Additional
Stock shall not be deemed to have been issued unless the consideration
per share (determined pursuant to Paragraph 4(c)(v) hereof) of such
Additional Stock would be less than the Conversion Price in effect on
the date of and immediately prior to such issue, or such record date,
as the case may be, and provided further that in any such case in
which Additional Stock is deemed to be issued:
(A) no further adjustment in the Conversion Price for such series
shall be made upon the subsequent issue of Convertible Securities or
shares of Common Stock upon the exercise of such Options or conversion
or exchange of such Convertible Securities;
(B) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Corporation, or in the
number of shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall,
upon any such increase or decrease becoming effective, be recomputed
to reflect such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities;
(C) upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall
not have been exercised, the Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based thereon, shall,
upon such expiration, be recomputed as if:
(I) in the case of Convertible Securities or Options for Common
Stock, the only Additional Stock issued was Common Stock, if any,
actually issued upon the exercise of such Options or the conversion or
exchange of such Convertible Securities and the consideration received
therefor was the consideration actually received by the Corporation
for the issue of all such Options, whether or not exercised, plus the
consideration actually received by the Corporation upon such exercise,
or for the issue of all such Convertible Securities which were
actually converted or exchanged, plus the additional consideration, if
any, actually received by the Corporation upon such conversion or
exchange, and
(II) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue of such Options, and the
consideration received by the Corporation for the shares of Additional
Stock deemed to have been then issued was the consideration actually
received by the Corporation for the issue of all such Options, whether
or not exercised, plus the consideration deemed to have been received
by the Corporation upon the issue of the Convertible Securities with
respect to which such Options were actually exercised;
(D) no readjustment pursuant to clause (B) or (C) above shall
have the effect of increasing the Conversion Price to an amount which
exceeds the lower of (i) the Conversion Price on the date immediately
prior to the original adjustment date, or (ii) the Conversion Price
that would have resulted from any issuance of Additional Stock between
such date readjustment date; and
(E) in the case of any Options which expire by their terms not
more than 90 days after the date of issue thereof, no adjustment of
the Conversion Price shall be made until the expiration or exercise of
all such Options
(2) Stock Dividends. In the event the Corporation at any time or
from time to time after the Original Issue Date shall pay any dividend
on the Common Stock payable in Common Stock, then and in any such
event, Additional Stock shall be deemed to have been issued
immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to
receive such dividend; provided, however, that if such record date is
fixed and such dividend is not fully paid the only Additional Stock
deemed to have been issued will be the number of shares of Common
Stock actually issued in such dividend, and such shares will be deemed
to have been issued as of the close of business on such record date,
and the Conversion Price shall be recomputed accordingly.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
Stock.
(1) Prior to , 1997 [two years after closing]. If prior to
, 1997, the Corporation shall issue Additional Stock (including
Additional Stock deemed to be issued pursuant to Paragraph 4(c)(iii))
for a consideration per share less than the Conversion Price for the
Series A Preferred in effect on the date of and immediately prior to
such issue, then and in such event, such Conversion Price shall be
reduced, concurrently with such issue, to a price equal to the
consideration per share received by the Corporation for such
Additional Stock.
(2) On or after , 1997. If on or after ,
1997 [two years after closing], the Corporation shall issue Additional
Stock (including Additional Stock deemed to be issued pursuant to
Paragraph 4(c)(iii)) for a consideration per share less than the
Conversion Price for the Series A Preferred in effect on the date of
and immediately prior to such issue, then and in such event, such
Conversion Price shall be reduced concurrently with such issue, to a
price (calculated to the nearest cent) determined by multiplying such
Conversion Price by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such
issue (including all shares of Common Stock issuable upon conversion
of the outstanding Series A Preferred) plus the number of shares of
Common Stock which the aggregate consideration received by the
Corporation for the total number of shares of Additional Stock so
issued would purchase at such Conversion Price; and the denominator of
which shall be the number of shares of Common Stock outstanding
immediately prior to such issue (including all shares of Common Stock
issuable upon conversion of the outstanding Series A Preferred) plus
the number of shares of such Additional Stock so issued.
(v) Determination of Consideration. For purposes of this
Paragraph 4(c), the consideration received by the Corporation for the
issue of any shares of Additional Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Corporation
excluding amounts paid or payable for accrued interest or
accrued dividends;
(B) insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of such
issue, as determined in good faith by the Board; and
(C) in the event Additional Stock is issued together with
other shares or securities or other assets of the
Corporation for consideration which covers both, be the
proportion of such consideration so received, computed as
provided in clauses (A) and (B) above, as determined in good
faith by the Board.
(2) Options and Convertible Securities. The consideration per
share received by the Corporation for Additional Stock deemed to have
been issued pursuant to Paragraph 4(c)(iii)(1), relating to Options
and Convertible Securities, shall be determined by dividing:
(x) the total amount, if any, received or receivable by
the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments relating
thereto, without regard to any provision contained therein for a
subsequent adjustment of such consideration) payable to the
Corporation upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible
Securities and the conversion or exchange of such Convertible
Securities; by
(y) the maximum number of shares of Common Stock (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of
such Convertible Securities.
(vi) Adjustments for Subdivisions. Combinations or Consolidation
of Common Stock. In the event the outstanding shares of Common Stock
shall be subdivided (by stock split, or otherwise), into a greater
number of shares of Common Stock, the Conversion Price for each series
then in effect shall, concurrently with the effectiveness of such
subdivision, be proportionately decreased.
In the event the outstanding shares of Common Stock shall be combined
or consolidated, by reclassification or otherwise, into a lesser
number of shares of Common Stock, the Conversion Price then in effect
shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately increased.
(vii) Adjustments for Other Distributions. In the event the
Corporation at any time or from time to time makes, or fixes a record
date for the determination of holders of Common Stock entitled to
receive any distribution payable in securities of the Corporation
other than shares of Common Stock and other than as otherwise adjusted
in this Paragraph 4 or as otherwise provided in Paragraph l(b), then
and in each such event provision shall be made so that the holders of
Series A Preferred shall receive upon conversion thereof, in addition
to the number of shares of Common Stock receivable thereupon, the
amount of securities of the Corporation which they would have received
had their shares of Series A Preferred been converted into shares of
Common Stock on the date of such event and had they thereafter, during
the period from the date of such event to and including the date of
conversion, retained such securities receivable by them as aforesaid
during such period, subject to all other adjustments called for during
such period under this Paragraph 4 with respect to the rights of the
holders of the Series A Preferred.
(viii) Adjustments for Reclassification. Exchange and
Substitution. If the Common Stock issuable upon conversion of the
Series A Preferred shall be changed into the same or a different
number of shares of any other class or classes of stock, whether by
capital reorganization, reclassification or otherwise (other than a
subdivision or combination of shares, consolidation or merger provided
for above), the Conversion Price then in effect shall, concurrently
with the effectiveness of such reorganization or reclassification, be
proportionately adjusted such that the shares of Series A Preferred
shall be convertible into, in lieu of the number of shares of Common
Stock which the holders would otherwise have been entitled to receive,
a number of shares of such other class or classes of stock equivalent
to the number of shares of Common Stock that would have been subject
to receipt by the holders upon conversion of the Series A Preferred
immediately before that change.
(e) No Impairment. The Corporation will not, by amendment of
its Charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder
by the Corporation but will at all times in good faith assist in the
carrying out of all the provisions of this Paragraph 4 and in the
taking of all such action as may be necessary or appropriate in order
to protect the Conversion Rights of the holders of Series A Preferred
against impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price for the Series A
Preferred pursuant to this Paragraph 4, the Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each holder of such Series A
Preferred a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request
at any time of any holder of Series A Preferred, furnish or cause to
be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price in effect at
the time for such series, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time
would be received upon the conversion of such Series A Preferred.
(g) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to
receive any dividend or other distribution, any right to subscribe
for, purchase, or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right,
this Corporation shall mail to each holder of Series A Preferred, at
least 20 days prior to the date specified therein, a notice specifying
the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of
such dividend, distribution, or right.
(h) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued Common Stock solely for the purpose of
effecting the conversion of the shares of the Series A Preferred such
number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of
Series A Preferred and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of the Series A Preferred,
in addition to such other remedies as shall be available to the holder
of such Series A Preferred, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes.
(i) Notices. Any notice required by the provisions of this
Paragraph (4) to be given to the holders of shares of Series A
Preferred shall be deemed given if deposited in the United States
mail, postage prepaid, and addressed to each holder of record at his
address appearing on the books of this Corporation.
5. Redemption. The Series A Preferred shall be redeemable as
follows:
(a) Redemption at the Option of the Corporation after 1997 But
Prior to 2000. At any time after , 1997, but prior to ,
2000, the Series A Preferred may be redeemed in whole (but not in
part) at the option of the Corporation. The Corporation will give
notice to the holders of Series A Preferred of its intent to redeem
the Series A Preferred not less than 30 nor more than 60 days prior to
the date set for redemption. The redemption price shall be that amount
necessary to cause the holders of the Series A Preferred to have
received an internal rate of return (defined below) of 25% per annum
over the period of the first two years commencing with the Original
Issue Date and an internal rate of return of 20% per annum over the
period from and after two years after the Original Issue Date until
the date of redemption (but not beyond ___________, 2000). For the
purposes of this paragraph (a), "internal rate of return" or "IRR"
shall be calculated using the acquisition purchase price paid by the
holders of the Series A Preferred under the stock purchase agreement
under which such shares were originally issued as the investment
"out-flows," with payments of dividends or other distributions
received by the Series A Preferred holders hereunder taken into
account as "in-flows" provided that (i) the original purchasers of the
Series A Preferred shall be deemed to be the holders of the Series A
Preferred for the purposes of calculating investment amounts and
receipts, (ii) the fact that such holders may from time to time
finance or leverage funds invested in the purchase of the Series A
Preferred shall not affect either the characterization or calculation
of such investment amounts (i.e. neither receipt of the proceeds of
any such financing nor the payment of any debt service or costs
related to such financing shall be taken into account), (iii) neither
the fact of any transfer of Series A Preferred from the original
holders nor the amount of any consideration received by the original
holders or paid by the successor holders in connection with any
transfer shall affect the calculation of internal rate of return and
(iv) all items of investment/expense and receipt shall be deemed to
have been invested/expended or received on the last day of the
calendar month in which they occur. An example of the calculation of
IRR is attached as Exhibit A.
(b) Redemption at the Option of the Corporation after Five Years
or Upon Less than 400,000 Shares Outstanding. Notwithstanding the
provisions of Paragraph 5(a), (i) at any time after _______, 2000, or
(ii) at any time prior thereto if there shall be less than 400,000
shares of Series A Preferred outstanding (adjusted for any stock
splits or similar transactions), the Series A Preferred may be
redeemed in whole or in part at the option of the Corporation. The
Corporation will give notice to the holders of the Series A Preferred
of its intent to redeem the Series A Preferred not less than 30 nor
more than 60 days prior to the redemption date. The redemption price
shall be $6.30 per share (declining $0.06 for each of the first 5 full
years after ___________ , 2000), plus in each case, all accrued and
unpaid dividends.
(c) Redemption at Preferred Stockholders Option. After ,
1996, the Corporation will be required, at the option of the holders
of the Series A Preferred, to redeem the Series A Preferred of any
holder demanding redemption at a price of $6.00 per share plus all
accrued and unpaid dividends on the occurrence of any one or more of
the following:
(i) failure in two consecutive quarters to pay in full the
quarterly dividends on the Series A Preferred required by
paragraph 1 of this Section 5 (including all dividends
accumulated but unpaid for all prior quarters);
(ii) a default in the payment of principal or interest on any
institutional debt (or debts)having an outstanding balance
(or balances aggregating) greater than (a) $5 million for
non-recourse debt, and (b) $2 million for recourse debt
(which default, in either case, shall not have been cured by
the Corporation within 30 business days from the time the
Corporation receives written notification of the default);
(iii) failure to comply with paragraph 6 hereof;
(iv) for calendar year 1996, the Corporation's FAD (defined
below) fails to reach at least a break-even dividend
coverage equal to the full dividend payable on the Series A
Preferred;
(v) for calendar year 1997, the Corporation's FAD fails to reach
at least a break-even dividend coverage equal to the full
dividend payable on the Series A Preferred and annual
dividends on the Common Stock equal to at least a seven
percent (7%) yield on $5.72; and
(vi) for calendar year 1998 and subsequent years, the
Corporation's FAD fails to reach at least a break-even
dividend coverage equal to the full dividend payable on the
Preferred Stock and dividends on the Common Stock equal to
at least an eight percent (8%) yield on $5.72 (rounded to
the nearest whole cent).
For purposes of this Charter, Funds Available for Distribution
("FAD") shall mean "Funds From Operations" minus "Non-Revenue
Enhancing Capital Expenditures." The calculation of FAD shall be made
by the Corporation and the Corporation's independent public accounting
firm shall prepare a special use report on such calculation.
"Funds from Operations" or "FFO" shall be defined in accordance
with the FFO White Paper prepared in March 1995 by the National
Association of Real Estate Investment Trusts and shall mean the
Corporation's net income (computed in accordance with generally
accepted accounting principles in effect on December 31, 1994, applied
in a manner consistent with the Corporation's accounting policies and
practices as of that date), excluding gains (or losses) from debt
restructuring and sales of property, plus depreciation and
amortization, and after adjustments for unconsolidated partnerships
and joint ventures. Adjustments for unconsolidated partnerships and
joint ventures will be calculated to reflect funds from operations on
the same basis. As the White Paper provides, only depreciation and
amortization of assets uniquely significant to the real estate
industry will be added back. Amounts added back would include real
property depreciation, amortization of capitalized leasing expenses,
tenant allowances or improvements, and the like. Specifically excluded
are the add back of items such as the amortization of deferred
financing costs, depreciation of computer software, company office
improvements, and other items commonly found in other industries and
required to be recognized as expenses in the calculation of net
income. Items classified by generally accepted accounting principles
as extraordinary or unusual, along with significant non-recurring
events that materially distort the comparative measurement of company
performance over time, are not meant to be reductions or increases in
FFO, and should be disregarded in its calculation. The use of a
corporate form versus a partnership form for unconsolidated
partnerships and joint ventures should not affect the determination of
whether an entity is to be treated as a joint venture for purposes of
the definition. Gains or losses on sales of securities or
undepreciated land shall be included in FFO, unless they are unusual
and non-recurring.
"Non-Revenue Enhancing Capital Expenditures" shall mean those
capital expenditures (computed in accordance with generally accepted
accounting principles consistently applied) made with respect to
existing real property that the Corporation has owned and leased to
others in order to continue (but not those expenditures designed to
enhance) the revenue-generating capacity of the property; the
following categories of capital expenditures shall not be included for
this purpose (and accordingly, the listed capital expenditures will
not be deducted from FFO in computing FAD): capital expenditures
relating to (i) acquisitions, (ii) deferred maintenance on
acquisitions, (iii) tenant improvements and leasing commissions on
square footage that was not leased at the time of acquisition, (iv)
development of new properties or material new elements of existing
properties, and (v) improvements to bring a property into compliance
with governmental regulations.
(d) Waiver. The Corporation shall promptly notify each holder of
Series A Preferred of the occurrence of any event set forth at (c)
above, and unless such holder has submitted a notice of redemption to
the Corporation on or before 90 days after receipt of the
Corporation's notice, the holder shall be deemed to have waived the
right to have shares of Series A Preferred redeemed as a result of
such occurrence. No such waiver shall constitute as a waiver of rights
with respect to any subsequent occurrence.
(e) Redemption Date: Notice of Redemption. The notice of
redemption submitted by the Corporation or a Series A Preferred
Stockholder shall set forth: (i) the redemption date which shall be
not less than 30 nor more than 60 days after the date of the notice in
the case of notice submitted by the Corporation and not less than 30
nor more than 180 days after the date of the notice in the case of
notice submitted by a Series A Preferred stockholder; (ii) the
redemption price; and (iii) the place at which the shareholders may
obtain payment of the redemption price upon surrender of their share
certificates. In case of a partial redemption of Series A Preferred,
such redemption shall be pro rata among the various holders thereof or
as determined by lot in the discretion of the Board of Directors. On
or before the redemption date, each holder of shares called for
redemption shall surrender the certificate representing such shares to
the Corporation at the place designated in the redemption notice and
shall thereupon be entitled to receive payment or the redemption price
on the redemption date. If less than all of the shares represented by
a surrendered certificate are redeemed, the Corporation shall issue a
new certificate representing the unredeemed shares.
If, on or before the redemption date, the Corporation has cash
funds available or has deposited for such purpose in trust with a bank
or trust company sufficient funds to pay the redemption price in full
to the holders of all shares called for redemption, the shares so
called shall be deemed to be redeemed as of the date of deposit,
dividends on those shares shall cease to accrue and no interest shall
accrue on redemption price from and after the redemption date.
All Conversion Rights shall remain valid and effective following
the Corporation's notice of redemption, provided that the right to
convert shares shall terminate at the close of business on the fifth
day prior to the redemption date if the holder thereof has not
exercised its Conversion Right in accordance with Paragraph 4(b) on or
prior to such date. Any amounts so deposited on account of the
redemption price of shares converted subsequent to the date of deposit
shall be repaid to the Corporation forthwith upon the conversion of
such shares.
(f) Automatic Redemption and Authority for NonSeries A Directors
to Cancel. In the event that the size of the Board of Directors has
been increased to eleven pursuant to Clauses (i), (ii) or (iii) of
Paragraph 3(a) hereof and the holders of Series A Preferred have
elected four Series A Directors to fill the newly created vacancies
(the date on which the last of such four directors is elected being
referred to as the "Board Switch Date"), then all of the shares of
Series A Preferred shall be redeemed on the 180th day following the
Board Switch Date pursuant to paragraph 5(a) or 5(b) (other than the
notice requirements and with any automatic redemption occurring prior
to __________, 1997 being deemed a redemption pursuant to paragraph
5(a)), as applicable, from holders of record of such Shares as of the
close of business on the 150th day following the Board Switch Date,
unless a majority of the directors who are not Series A Directors
rescind such automatic redemption prior to the 180th day following the
Board Switch Date. Nothing in this paragraph (f) is intended to limit
the rights of the Series A Preferred to effect a redemption pursuant
to paragraph 5(c) or to limit the authority of a majority of the full
board to effect a redemption pursuant to paragraphs 5(a) or 5(b),
including the ability to call the Series A Preferred for redemption
during the 180 day period following a Board Switch Date
notwithstanding the rescission of an automatic redemption by the
directors who are not Series A Directors pursuant to this clause (f)
during that period.
(g) Payment in Cash. All redemption payments shall be made in
cash; provided, however, that if shares of Series A Preferred are
called for redemption pursuant to paragraph 5(c) and the Corporation
does not reasonably believe that it can obtain the cash necessary to
make the redemption payment by the redemption date, the Corporation
within 30 days after the date of the redemption notice may provide the
holders of Series A Preferred a proposal to pay the redemption price
in other than cash, including real property, fully-collateralized
senior promissory notes or other assets. Such proposal shall contain a
valuation of any assets proposed to be transferred or to be used as
collateral to secure the Corporation's obligations. The holders of a
majority of the outstanding shares of Series A Preferred called for
redemption shall have the right in their absolute discretion, for any
reason or no reason, for a period of 30 days to accept or reject such
proposed alternative redemption payment following submittal by the
Corporation. If holders of a majority of the outstanding shares of
Series A Preferred fail to respond within such 30 day period, they
shall be deemed to have rejected such proposal.
(h) Payment Prohibited By Law. If the Corporation fails to make
a redemption payment because such payment is prohibited by Section
2-311 of the Maryland General Corporation Law or similar statute, then
on the redemption date the Corporation shall provide to the holders of
Series A Preferred, whose shares are subject to redemption, payment of
the maximum amount that may then be legally paid, on a pro rata basis,
together with a certificate of the chief executive or chief financial
officer of the Corporation setting forth the computation made under
the applicable statutory provision to determine what amount could be
legally paid. Thereafter, until the shares subject to redemption have
been fully redeemed, within fifteen days after the end of each month,
the Corporation shall provide the holders of Series A Preferred whose
shares are subject to redemption, a similar certificate showing the
computation of the maximum legally permitted redemption payment that
may be made as of the end of such month, together with the maximum
permitted payment, if any, on a pro rata basis. All shares of Series A
Preferred for which the redemption payment has not been made on the
redemption date shall be considered to be outstanding for all
purposes. Nothing in this paragraph (h) is intended to limit the other
rights of the Series A Preferred relating to the failure of the
Company to make a redemption payment.
6. Protective Provisions.
(a) For so long as the shares of Common Stock issuable upon
conversion of the outstanding shares of Series A Preferred represent
at least 15% of the total of (a) the shares of Common Stock
outstanding, plus (b) the shares, of Common Stock issuable upon
conversion of the outstanding Series A Preferred, then the Corporation
shall not voluntarily file or assent to or in any other way
participate in the filing of an involuntary petition in bankruptcy or
seek similar protection from creditors under federal or state
bankruptcy or insolvency laws without first obtaining the approval of
holders of a majority of the outstanding shares of Series A Preferred.
(b) For so long as (I) either the original purchaser of the
Series A Preferred still holds shares of Series A Preferred or at
least one holder holds more than 50% of the outstanding shares of
Series A Preferred and (II) the shares of Common Stock issuable upon
conversion of all outstanding shares of Series A Preferred represent
at least 15% of the total of (A) the shares of Common Stock
outstanding, plus (B) the shares of Common Stock issuable upon
conversion of the outstanding Series A Preferred, then the Corporation
shall not take any of the following actions without first obtaining
the approval of the original purchaser or, if a holder other than the
original purchaser owns more than 50% of the outstanding shares of
Series A Preferred, such holder ("the Approving Person"):
(i) The issuance of or modification of any debt in a
principal amount which exceeds $10 million;
(ii) New investments, including a purchase of real estate
operating companies or real estate investment trusts,
as defined in Section 856 of the Internal Revenue Code
of 1986 ("REIT"), with a purchase price equal to or
greater than $10 million, or any series of purchases
within any 90 day period with aggregate purchase
prices exceeding $25 million;
(iii) Issuance of any equity securities other than options
granted pursuant to the Director Option Plan or the
Employee Option Plan or Common Stock issued upon
exercise of such options (except approval will not be
required upon issuance of any equity securities the
proceeds of which will be used to redeem the Series A
Preferred);
(iv) Sale of any asset or assets with a sales price in
excess of $10 million, or any series of sales within
any 90 day period with aggregate sales prices
exceeding $25 million;
(v) Consolidation or merger of the Corporation;
(vi) Modification in any material respect of any employment
agreement with an executive officer of the
Corporation, including compensation;
(vii) Modification of the agreement between Corporation and
Westminster Holdings, Inc., a California corporation,
or any other agreement between the Corporation and
Peter Bedford or any Affiliate of Peter Bedford which
would make such agreement less favorable to the
Corporation, or entering into any new agreement,
arrangement or transaction with Peter Bedford or any
Affiliate of Peter Bedford; provided, however, that
this clause (vii) shall not apply to the Standstill
Agreement to be entered into between Peter B. Bedford
and the Corporation;
(viii) Issuance of awards of any shares or options other than
those permitted in paragraph (iii) above;
(ix) The termination of the Corporation's status as a REIT
for tax purposes;
(x) Any substantial change in the Corporation's business
strategies;
(xi) Permit Peter Bedford's ceasing to serve as
substantially full-time chief executive officer of the
Corporation or disposing of his shares of Common Stock
so that Peter Bedford and his Affiliates and members
of his immediate family, his spouse, issue, brothers,
sisters, and their respective spouses and issue, and
trusts for the benefit of such persons own
beneficially less than 1,198,278 shares of Common
Stock (as adjusted for stock splits or similar
transactions; and
(xii) any amendment to the resolution of the Board of
Directors exempting from the terms of Section 3-602 of
the Maryland General Corporation Law and the Charter
any transaction between AEW Partners, L.P. (or any
Affiliate of AEW Partners, L.P.) and the Corporation
and any transaction contemplated by or resulting from
the exercise of any redemption right of the Series A
Preferred which may constitute a business combination.
With respect to each of the above transactions, the Approving Person
shall be provided with the information regarding the proposed
transaction ten business days (any day, Monday through Friday, in
which the New York Stock Exchange is open for regular trading) prior
to the scheduled approval date. If the Approving Person shall not
deliver a written notice objecting to the particular transaction
before the end of such ten business day period, the Approving Person
shall be deemed to have consented to such transaction.
(c) In the event that any holder of Series A Preferred takes any
legal action to enforce any of its rights under this Section 5 of
Article V of the Corporation's Charter, the non-prevailing party shall
be required to pay the costs and expenses of the prevailing party
incurred in connection with such action, including attorney and
witness fees.
SECOND: The charter of the Corporation is further amended by
replacing Article VII in its entirety with the following:
ARTICLE VII
RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES
Section 7.1. Definitions. For the purpose of this Article
VII, the following terms shall have the following meanings:
Aggregate Stock Ownership Limit. The term "Aggregate
Stock Ownership Limit" shall mean not more than five percent in value
of the aggregate of the outstanding shares of Capital Stock. The value
of the outstanding shares of Capital Stock shall be determined by the
Board of Directors of the Corporation in good faith, which
determination shall be conclusive for all purposes hereof.
Beneficial Ownership. The term "Beneficial Ownership" shall mean
ownership of Capital Stock by a Person, whether the interest in the
shares of Capital Stock is held directly or indirectly (including by a
nominee), and shall include interests that would be treated as owned
through the application of Section 544 of the Code, as modified by
Section 856(h)(1)(B) of the Code. The terms "Beneficial Owner,"
"Beneficially Owns" and "Beneficially Owned" shall have the
correlative meanings.
Business Day. The term "Business Day" shall mean any day, other
than a Saturday or Sunday, that is neither a legal holiday nor a day
on which banking institutions in New York City are authorized or
required by law, regulation or executive order to close.
Capital Stock. The term "Capital Stock" shall mean all classes or
series of stock of the Corporation, including, without limitation,
Common Stock, Preferred Stock and Series A Preferred Stock.
Charitable Beneficiary. The term "Charitable Beneficiary" shall
mean one or more beneficiaries of the Trust as determined pursuant to
Section 7.3.6, provided that each such organization must be described
in Section 501(c)(3) of the Code and contributions to each such
organization must be eligible for deduction under each of Sections
170(b)(1)(A), 2055 and 2522 of the Code.
Charter. The term "Charter" shall mean the charter of the
Corporation, as that term is defined in the MGCL.
Code. The term "Code" shall mean the Internal Revenue
Code of 1986, as amended from time to time.
Common Stock Ownership Limit. The term "Common Stock Ownership
Limit" shall mean not more than five percent (in value or in number of
shares, whichever is more restrictive) of the aggregate of the
outstanding shares of Common Stock of the Corporation. The number and
value of outstanding shares of Common Stock of the Corporation shall
be determined by the Board of Directors of the Corporation in good
faith, which determination shall be conclusive for all purposes
hereof.
Constructive Ownership. The term "Constructive Ownership" shall
mean ownership of Capital Stock by a Person, whether the interest in
the shares of Capital Stock is held directly or indirectly (including
by a nominee), and shall include interests that would be treated as
owned through the application of section 318(a) of the Code, as
modified by Section 856(d)(5) of the Code. The terms "Constructive
Owner," "Constructively Owns" and "Constructively Owned" shall have
the correlative meanings.
Excepted Holder. The term "Excepted Holder" shall mean a
stockholder of the Corporation for whom an Excepted Holder Limit is
created by these Articles or by the Board of Directors pursuant to
Section 7.2.7.
Excepted Holder Limit. The term "Excepted Holder Limit" shall
mean, provided that the affected Excepted Holder agrees to comply with
the requirements established by the Board of Directors pursuant to
Section 7.2.7, and subject to adjustment pursuant to Section 7.2.8:
(a) for Peter B. Bedford, fifteen percent of the lesser of the number
or value of the outstanding shares of Common Stock, (b) for AEW
Partners, L.P. a Delaware limited partnership ("AEW") together with a
partnership or limited liability company that is 100% owned directly
or indirectly by AEW, (i) fifty-eight percent of the lesser of the
number or value of the outstanding shares of Common Stock and (ii) one
hundred percent of the outstanding shares of Series A Preferred Stock
and (c) for other, subsequently designated Excepted Holders, as to any
class or series of the outstanding Capital Stock, the percentage limit
established by the Board of Directors pursuant to Section 7.2.7. For
these purposes, the outstanding Common Stock shall include the shares
of Common Stock into which outstanding shares of Series A Preferred
Stock are convertible, and if shares of the Series A Preferred Stock
are redeemed by the Corporation, (a) the percentage limit applicable
to Peter B. Bedford shall be automatically increased so as to permit
his continued ownership after the redemption of that number of shares
Common Stock that he was permitted to own under the applicable
Excepted Holder Limit immediately before the redemption, and (b)
notwithstanding Section 7.2.7(d), the percentage limit with respect to
shares of Common Stock applicable to AEW shall be automatically
decreased by the same amount as the increase in (a).
Initial Date. The term "Initial Date" shall mean the date upon
which the Articles of Amendment containing this Article VII are filed
with the State Department of Assessments and Taxation of Maryland.
Market Price. The term "Market Price" on any date shall mean,
with respect to any class or series of outstanding shares of Capital
Stock, the "Closing Price" for such Capital Stock on such date. The
"Closing Price" on any date shall mean the last sale price for such
Capital Stock, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, regular
way, for such Capital Stock, in either case as reported in the
principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the NYSE or, if such
Capital Stock is not listed or admitted to trading on the NYSE, as
reported on the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities
exchange on which such Capital Stock is listed or admitted to trading
or, if such Capital Stock is not listed or admitted to trading on any
national securities exchange, the last quoted price, or, if not so
quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System or, if such system
is no longer in use, the principal other automated quotation system
that may then be in use or, if such Capital Stock is not quoted by
any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in such
Capital Stock selected by the Board of Directors of the Corporation
or, in the event that no trading price is available for such Capital
Stock, the fair market value of the Capital Stock, as determined in
good faith by the Board of Directors of the Corporation.
MGCL. The term "MGCL" shall mean the Maryland General Corporation
Law, as amended from time to time.
NYSE. The term "NYSE" shall mean the New York Stock Exchange.
Person. The term "Person" shall mean an individual, corporation,
partnership, estate, trust (including a trust qualified under Sections
401(a) or 501(c)(17) of the Code), a portion of a trust permanently
set aside for or to be used exclusively for the purposes described in
Section 642(c) of the Code, association, private foundation within the
meaning of Section 509(a) of the Code, joint stock company or other
entity and also includes a group as that term is used for purposes of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended,
and a group to which an Excepted Holder Limit applies.
Prohibited Owner. The term "Prohibited Owner" shall mean, with
respect to any purported Transfer, any Person who, but .for the
provisions of Section 7.2.1, would Beneficially Own or Constructively
Own shares of Capital Stock, and if appropriate in the context, shall
also mean any Person who would have been the record owner of the
shares that the Prohibited Owner would have so owned.
REIT. The term "REIT" shall mean a real estate investment trust
within the meaning of Section 856 of the Code.
Restriction Termination Date. The term "Restriction Termination
Date" shall mean the first day after the Initial Date on which the
Corporation determines pursuant to Article VI, Section 9 of the
Charter that it is no longer in the best interests of the Corporation
to attempt to, or continue to, qualify as a REIT or that compliance
with the restrictions and limitations on Beneficial Ownership,
Constructive Ownership and Transfers of shares of Capital Stock set
forth herein is no longer required in order for the Corporation to
qualify as a REIT.
Transfer. The term "Transfer" shall mean any issuance, sale,
transfer, gift, assignment, devise or other disposition, as well as
any other event that causes any Person to acquire Beneficial Ownership
or Constructive Ownership, or any agreement to take any such actions
or cause any such events, of Capital Stock or the right to vote or
receive dividends on Capital Stock, including (a) the granting or
exercise of any option (or any disposition of any option), (b) any
disposition of any securities or rights convertible into or
exchangeable for Capital Stock or any interest in Capital Stock or any
exercise of any such conversion or exchange right and (c) Transfers of
interests in other entities that result in changes in Beneficial or
Constructive Ownership of Capital Stock; in each case, whether
voluntary or involuntary, whether owned of record, Constructively
Owned or Beneficially Owned and whether by operation of law or
otherwise. The terms "Transferring" and "Transferred" shall have the
correlative meanings.
Trust. The term "Trust" shall mean any trust provided for in
Section 7.3.1.
Trustee. The term "Trustee" shall mean the Person unaffiliated
with the Corporation and a Prohibited Owner, that is appointed by the
Corporation to serve as trustee of the Trust.
Section 7.2 Capital Stock.
Section 7.2.1 Ownership Limitations. During the period commencing
on the Initial Date and prior to the Restriction
Termination Date:
(a) Basic Restrictions.
(i) (1) No Person, other than an Excepted Holder, shall
Beneficially Own or Constructively Own shares of Capital Stock in
excess of the Aggregate Stock Ownership Limit, (2) no Person, other
than an Excepted Holder, shall Beneficially Own or Constructively Own
shares of Common Stock in excess of the Common Stock Ownership Limit
and (3) no Excepted Holder shall Beneficially Own or Constructively
Own shares of Capital Stock in excess of the Excepted Holder Limit for
such Excepted Holder.
(ii) No Person shall Beneficially or Constructively Own shares of
Capital Stock to the extent that such Beneficial or Constructive
Ownership of Capital Stock would result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Code
(without regard to whether the ownership interest is held during the
last half of a taxable year), or otherwise failing to qualify as a
REIT (including, but not limited to, Beneficial or Constructive
Ownership that would result in the Corporation owning (actually or
Constructively) an interest in a tenant that is described in Section
856(d)(2)(B) of the Code if the income derived by the Corporation from
such tenant would cause the Corporation to fail to satisfy any of the
gross income requirements of Section 856(c) of the Code).
(iii) Notwithstanding any other provisions contained herein, any
Transfer of shares of Capital Stock (whether or not such Transfer is
the result of a transaction entered into through the facilities of the
NYSE or any other national securities exchange or automated inter
dealer quotation system) that, if effective, would result in the
Capital Stock being beneficially owned by less than 100 Persons
(determined under the principles of Section 856(a)(5) of the Code)
shall be void ab initio, and the intended transferee shall acquire no
rights in such shares of Capital Stock.
(b) Transfer in Trust. If any Transfer of shares of Capital Stock
(whether or not such Transfer is the result of a transaction entered
into through the facilities of the NYSE or any other national
securities exchange or automated inter-dealer quotation system) occurs
which, if effective, would result in any Person Beneficially Owning or
Constructively Owning shares of Capital Stock in violation of Section
7.2.1(a)(i) or (ii),
(i) then that number of shares of the Capital Stock the
Beneficial or Constructive Ownership of which otherwise would cause
such Person to violate Section 7.2.1(a)(i) or (ii)(rounded to the
nearest whole shares) shall be automatically transferred to a Trust
for the benefit of a Charitable Beneficiary, as described in Section
7.3, effective as of the close of business on the Business Day prior
to the date of such Transfer, and such Person shall acquire no rights
in such shares; or
(ii) if the transfer to the Trust described in clause (i) of this
sentence would not be effective for any reason to prevent the
violation of Section 7.2.1(a)(i) or (ii), then the Transfer of that
number of shares of Capital Stock that otherwise would cause any
Person to violate Section 7.2.1(a)(i) or (ii) shall be void ab initio,
and the intended transferee shall acquire no rights in such shares of
Capital Stock.
Section 7.2.2 Remedies for Breach. If the Board of Directors of
the Corporation or any duly authorized committee thereof shall at any
time determine in good faith that a Transfer or other event has taken
place that results in a violation of Section 7.2.1 or that a Person
intends to acquire or has attempted to acquire Beneficial or
Constructive Ownership of any shares of Capital Stock in violation of
Section 7.2.1 (whether or not such violation is intended), the Board
of Directors or a committee thereof shall take such action as it deems
advisable to refuse to give effect to or to prevent such Transfer or
other event, including, without limitation, causing the Corporation to
redeem shares, refusing to give effect to such Transfer on the books
of the Corporation or instituting proceedings to enjoin such Transfer
or other event; provided, however, that any Transfers or attempted
Transfers or other events in violation of Section 7.2.1 shall
automatically result in the transfer to the Trust described above,
and, where applicable, such Transfer (or other event) shall be void ab
initio as provided above irrespective of any action (or non-action) by
the Board of Directors or a committee thereof.
Section 7.2.3 notice of Restricted Transfer. Any Person who
acquires or attempts or intends to acquire Beneficial Ownership or
Constructive Ownership of shares of Capital Stock that will or may
violate Section 7.2.1(a), or any Person who would have owned shares of
Capital Stock that resulted in a transfer to the Trust pursuant to the
provisions of Section 7.2.l(b) shall immediately give written notice
to the Corporation of such event, or in the case of such a proposed or
attempted transaction, give at least 15 days prior written notice, and
shall provide to the Corporation such other information as the
Corporation may request in order to determine the effect, if any, of
such Transfer on the Corporation's status as a REIT.
Section 7.2.4 Owners Required To Provide Information. From the
Initial Date and prior to the Restriction Termination Date:
(a) every owner of more than five percent (or such lower
percentage as required by the Code or the Treasury Regulations
promulgated thereunder) of the outstanding shares of Capital Stock,
within 30 days after the end of each taxable year, shall give written
notice to the Corporation stating the name and address of such owner,
the number of shares of Capital Stock and other shares of the Capital
Stock Beneficially Owned and a description of the manner in which such
shares are held. Each such owner shall provide to the Corporation such
additional information as the Corporation may request in order to
determine the effect, if any, of such Beneficial Ownership on the
Corporation's status as a REIT and to ensure compliance with the
Capital Stock Ownership Limit.
(b) each Person who is a Beneficial or Constructive Owner of
Capital Stock and each Person (including the stockholder of record)
who is holding Capital Stock for a Beneficial or Constructive Owner
shall provide to the Corporation such information as the Corporation
may request, in good faith, in order to determine the Corporation's
status as a REIT and to comply with requirements of any taxing
authority or governmental authority or to determine such compliance.
Section 7.2.5 Remedies Not Limited. Subject to Article VI,
Section 9 of the Charter, nothing contained in this Section 7.2 shall
limit the authority of the Board of Directors of the Corporation to
take such other action as it deems necessary or advisable to protect
the Corporation and the interests of its stockholders in preserving
the Corporation's status as a REIT.
Section 7.2.6 Ambiguity. In the case of an ambiguity in the
application of any of the provisions of this Section 7.2, Section 7.3,
or any definition contained in Section 7.1, the Board of Directors of
the Corporation shall have the power to determine the application of
the provisions of this Section 7.2 or Section 7.3 with respect to any
situation based on the facts known to it. In the event Section 7.2 or
7.3 requires an action by the Board of Directors and the Charter fails
to provide specific guidance with respect to such action, the Board of
Directors shall have the power to determine the action to be taken so
long as such action is not contrary to the provisions of Sections 7.1,
7.2 or 7.3.
Section 7.2.7 Exceptions.
(a) Subject to Section 7.2.1(a)(ii), the Board of Directors of
the Corporation, in its sole discretion, may exempt a Person from the
Aggregate Stock Ownership Limit and the Common Stock Ownership Limit,
as the case may be, and may establish or increase an Excepted Holder
Limit for such Person if:
(i) the Board of Directors obtains such representations and
undertakings from such Person as are reasonably necessary to ascertain
(to the extent practicable and prudent) that no individual's
Beneficial or Constructive Ownership of such shares of Capital Stock
will violate Section 7.2.1(a)(ii);
(ii) the Board of Directors obtains such representations and
undertakings from such Person as are reasonably necessary to ascertain
(to the extent practicable and prudent) that such Person does not and
represents that it will not own, actually or Constructively, an
interest in a tenant of the Corporation (or a tenant of any entity
owned or controlled by the Corporation) that would cause the
Corporation to own, actually or Constructively, more than a 9.9%
interest (as set forth in Section 856(d)(2)(B) of the Code) in such
tenant and the Board of Directors obtains such representations and
undertakings from such Person as are reasonably necessary to ascertain
this fact (for this purpose, a tenant from whom the Corporation (or an
entity owned or controlled by the Corporation) derives (and is
expected to continue to derive) a sufficiently small amount of revenue
such that, in the opinion of the Board of Directors of the
Corporation, rent from such tenant would not adversely affect the
Corporation's ability to qualify as a REIT, shall not be treated as a
tenant of the Corporation); and
(iii) such Person agrees that any violation or attempted
violation of such representations or undertakings (or other action
which is contrary to the restrictions contained in Sections 7.2.1
through 7.2.6) will result in such shares of Capital Stock being
automatically transferred to a Trust in accordance with Sections
7.2.1(b) and 7.3.
(b) Prior to granting any exception pursuant to Section 7.2.7(a),
the Board of Directors of the Corporation may require a ruling from
the Internal Revenue Service, or an opinion of counsel, in either case
in form and substance satisfactory to the Board of Directors in its
sole discretion, as it may deem necessary or advisable in order to
determine or ensure the Corporation's status as a REIT.
Notwithstanding the receipt of any ruling or opinion, the Board of
Directors may impose such conditions or restrictions as it deems
appropriate in connection with granting such exception.
(c) Subject to Section 7.2.1(a)(ii), an underwriter which
participates in a public offering or a private placement of Capital
Stock (or securities convertible into or exchangeable for Capital
Stock) may Beneficially Own or Constructively Own shares of Capital
Stock (or securities convertible into or exchangeable for Capital
Stock) in excess of the Aggregate Stock Ownership Limit, the Common
Stock Ownership Limit, or both such limits, but only to the extent
necessary to facilitate such public offering or private placement.
(d) The Board of Directors may only reduce the Excepted Holder
limit for an Excepted Holder: (1) with the written consent of such
Excepted Holder at any time, or (2) pursuant to the terms and
conditions of the agreements and undertakings entered into with such
Excepted Holder in connection with the establishment of the Excepted
Holder Limit for that Excepted Holder. No Excepted Holder Limit shall
be reduced to a percentage that is less than the Common Stock
Ownership Limit.
Section 7.2.8. Increase in Aggregate Stock Ownership and Common
Stock Ownership Limits. The Board of Directors may from time to time
increase the Common Stock Ownership Limit and the Aggregate Stock
Ownership Limit.
Section 7.2.9 Legend. Each certificate for shares of Capital
Stock shall bear the following legend:
The shares represented by this certificate are subject to
restrictions on Beneficial and Constructive Ownership and
Transfer for the purpose of the Corporation's maintenance of its
status as a Real Estate Investment Trust under the Internal
Revenue Code of 1986, as amended (the "Code"), Subject to certain
further restrictions and except as expressly provided in the
Corporation's Charter, (i) no Person may Beneficially or
Constructively Own shares of the Corporation's Common Stock in
excess of five percent (in value or number of shares) of the
outstanding shares of Common Stock of the Corporation unless
such Person is an Excepted Holder (in which case the Excepted
Holder Limit shall be applicable); (ii) no Person may
Beneficially or Constructively Own Shares of Capital Stock of the
Corporation in excess of five percent of the value of the total
outstanding shares Capital Stock of the Corporation, unless such
Person is an Excepted Holder (in which case the Excepted Holder
Limit shall be applicable); (iii) no Person may Beneficially or
Constructively Own Capital Stock that would result in the
Corporation being "closely held" under Section 856(h) of the Code
or otherwise cause the Corporation to fail to qualify as a REIT;
and (iv) no Person may Transfer shares of Capital Stock if such
Transfer would result in the Capital Stock of the Corporation
being owned by fewer than 100 Persons. Any Person who
Beneficially or Constructively Owns or attempts to Beneficially
or Constructively Own shares of Capital Stock which causes or
will cause a Person to Beneficially or Constructively Own shares
of Capital Stock in excess or in violation of the above
limitations must immediately notify the Corporation. If any of
the restrictions on transfer or ownership are violated, the
shares of Capital Stock represented hereby will be automatically
transferred to a Trustee of a Trust for the benefit of one or
more Charitable Beneficiaries. In addition, upon the occurrence
of certain events, attempted Transfers in violation of the
restrictions described above may be void ab initio. All
capitalized terms in this legend have the meanings defined in the
charter of the Corporation, as the same may be amended from time
to time, a copy of which, including the restrictions on transfer
and ownership, will be furnished to each holder of Capital Stock
of the Corporation on request and without charge.
Section 7.3 Transfer of Capital Stock in Trust.
Section 7.3.1 Ownership in Trust. Upon any purported Transfer or
other event described in Section 7.2.1(b) that would result in a
transfer of shares of Capital Stock to a Trust, such shares of Capital
Stock shall be deemed to have been transferred to the Trustee as
trustee of a Trust for the exclusive benefit of one or more Charitable
Beneficiaries. Such transfer to the Trustee shall be deemed to be
effective as of the close of business on the Business Day prior to the
purported Transfer or other event that results in the transfer to the
Trust pursuant to Section 7.2.1(b). The Trustee shall be appointed by
the Corporation and shall be a Person unaffiliated with the
Corporation and any Prohibited Owner. Each Charitable Beneficiary
shall be designated by the Corporation as provided in Section 7.3.6.
Section 7.3.2 Status of Shares Held by the Trustee. Shares of
Capital Stock held by the Trustee shall be issued and outstanding
shares of Capital Stock of the Company. The Prohibited Owner shall
have no rights in the shares held by the Trustee. The Prohibited Owner
shall not benefit economically from ownership of any shares held in
trust by the Trustee, shall have no rights to dividends and shall not
possess any rights to vote or other rights attributable to the shares
held in the Trust.
Section 7.3.3 Dividend and Voting Rights. The Trustee shall have
all voting rights and rights to dividends or other distributions with
respect to shares of Capital Stock held in the Trust, which rights
shall be exercised for the exclusive benefit of the Charitable
Beneficiary. Any dividend or other distribution paid prior to the
discovery by the Corporation that the shares of Capital Stock have
been transferred to the Trustee shall be paid with respect to such
shares of Capital Stock to the Trustee upon demand and any dividend or
other distribution authorized but unpaid shall be paid when due to the
Trustee. Any dividends or distributions so paid over to the Trustee
shall be held in trust for the Charitable Beneficiary. The Prohibited
Owner shall have no voting rights with respect to shares held in the
Trust and, subject to Maryland law, effective as of the date that the
shares of Capital Stock have been transferred to the Trustee, the
Trustee shall have the authority (at the Trustee's sole discretion)
(i) to rescind as void any vote cast by a Prohibited Owner prior to
the discovery by the Corporation that the shares of Capital Stock have
been transferred to the Trustee and (ii) to recast such vote in
accordance with the desires of the Trustee acting for the benefit of
the Charitable Beneficiary. Notwithstanding the provisions of this
Article VII, until the Corporation has received notification that
shares of Capital Stock have been transferred into a Trust, the
corporation shall be entitled to rely on its share transfer and other
stockholder records for purposes of preparing lists of stockholders
entitled to vote at meetings, determining the validity and authority
of proxies and otherwise conducting votes of stockholders.
Section 7.3.4 Sale of Shares by Trustee. Within 20 days of
receiving notice from the Corporation that shares of Capital Stock
have been transferred to the Trust, the Trustee of the Trust shall
sell the shares held in the Trust to a person, designated by the
Trustee, whose ownership of the shares will not violate the ownership
limitations set forth in Section 7.2.1(a). Upon such sale, the
interest of the Charitable beneficiary in the shares sold shall
terminate and the Trustee shall distribute the net proceeds of the
sale to the Prohibited Owner and to the Charitable Beneficiary as
provided in this Section 7.3.4. The Prohibited Owner shall receive the
lesser of (1) the price paid by the Prohibited Owner for the shares
or, if the Prohibited Owner did not give value for the shares in
connection with the event causing the shares to be held in the Trust
(e.g., in the case of a gift, devise or other such transaction), the
Market Price of the shares on the day of the event causing the shares
to be held in the Trust and (2) the price per share received by the
Trustee from the sale or other disposition of the shares held in the
Trust. Any net sales proceeds in excess of the amount payable to the
Prohibited Owner shall be immediately paid to the Charitable
Beneficiary. If, prior to the discovery by the Corporation that shares
of Capital Stock have been transferred to the Trustee, such shares are
sold by a Prohibited Owner, then (i) such shares shall be deemed to
have been sold on behalf of the Trust and (ii) to the extent that the
Prohibited Owner received an amount for such shares that exceeds the
amount that such Prohibited Owner was entitled to receive pursuant to
this Section 7.3.4, such excess shall be paid to the Trustee upon
demand.
Section 7.3.5 Purchase Right in Stock Transferred to the
Trustee. Shares of Capital Stock transferred to the Trustee shall be
deemed to have been offered for sale to the Corporation, or its
designee, at a price per share equal to the lesser of (i) the price
per share in the transaction that resulted in such transfer to the
Trust (or, in the case of a devise or gift, the Market Price at the
time of such devise or gift) and (ii) the Market Price on the date the
Corporation, or its designee, accepts such offer. The Corporation
shall have the right to accept such offer until the Trustee has sold
the shares held in the Trust pursuant to Section 7.3.4. Upon such a
sale to the Corporation, the interest of the Charitable Beneficiary in
the shares sold shall terminate and the Trustee shall distribute the
net proceeds of the sale to the Prohibited Owner.
Section 7.3.6 Designation of Charitable Beneficiaries. By
written notice to the Trustee, the Corporation shall designate one or
more nonprofit organizations to be the Charitable Beneficiary of the
interest in the Trust such that (i) the shares of Capital Stock held
in the Trust would not violate the restrictions set forth in Section
7.2.1(a) in the hands of such Charitable Beneficiary and (ii) each
such organization must be described in Section 501(c)(3) of the code
and contributions to each such organization must be eligible for
deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the
Code.
THIRD: The charter of the Corporation is further amended by
replacing Article VIII, Section 3, Paragraph (c) in its entirety with
the following:
(c) A person shall be a "beneficial owner" or shall
"beneficially own" stock of the Corporation:
(i) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
(ii) which such person or any of its Affiliates or Associates has
(a) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise,
or (b) the right to vote pursuant to any agreement, arrangement or
understanding; or
(iii) which is beneficially owned. directly or indirectly, by any
other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
Voting Stock.
FOURTH: The charter of the Corporation is further amended by
replacing Article VIII, Section 3, Paragraph (e) in its entirety with
the following:
(e) "Affiliate" or "Associates" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on
April 5, 1993.
FIFTH: The amendments to the charter of the Corporation as
hereinabove set forth have been duly advised by the Board of Directors
and approved by the stockholders of the Corporation as required by law
and by the Charter of the Corporation.
SIXTH: The total number of shares of stock which the Corporation
had authority to issue immediately prior to this amendment was
40,000,000, of which 30,000,000 were shares of Common Stock, $.01 par
value per share, and 10,000,000 were Preferred Stock, $.01 par value
per share. The aggregate par value of all authorized shares of stock
having a par value was $400,000.00.
SEVENTH: The total number of shares of which stock the
Corporation has authority to issue, pursuant stock to the charter of
the Corporation as hereby amended, is 50,000,000, of which 30,000,000
are shares of Common Stock, $.01 par value per share, 10,000,000 are
shares of Preferred Stock, $.01 par value per share, and 10,000,000
are shares of Series A Convertible Preferred Stock. The aggregate par
value of all authorized shares of stock having a par value is
$500,000.00.
EIGHTH: The undersigned President acknowledges these Articles of
Amendment to be the corporate act of the Corporation and as to all
matters or facts required to be verified under oath, the undersigned
President acknowledges that to the best of his knowledge, information
and belief, these matters and facts are true in all material respects
and that this statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these presents to be
signed in its name and on its behalf by its President and attested to
by its Secretary on this day of , 1995.
ATTEST: BEDFORD PROPERTY INVESTORS, INC.
Secretary By:
President (Seal)
<PAGE>
EXHIBIT 3.2B
ARTICLES OF AMEND MENT OF
CHARTER OF
BEDFORD PROPERTY INVESTORS, INC.
THIS IS TO CERTIFY THAT:
FIRST: The charter of Bedford Property Investors, Inc., a
Maryland corporation (the "Corporation"), is hereby amended by
deleting existing Article VIII in its entirety.
SECOND: The charter of the Corporation is further amended by
deleting the remainder of the penultimate sentence of Article IX
following the phrase "entitled to be cast on the matters.
THIRD: The amendment to the charter of the Corporation as set
forth above has been duly advised by the board of directors and
approved by the stockholders of the Corporation as required by law.
FOURTH: The undersigned President acknowledges these Articles of
Amendment to be the corporate act of the Corporation and as to all
matters or facts required to be verified under oath, the undersigned
President acknowledges that to the best of his knowledge, information
and belief, these matters and facts are true in all material respects
and that this statement is made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles to
be signed in its name and on its behalf by its President and attested
to by its Secretary on this day of , 1995.
ATTEST: BEDFORD PROPERTY INVESTORS,
INC.
Secretary By:
President (seal)
<PAGE>
Exhibit 3.12 - Property
Property Sq. Ft./Acres
CONTRA COSTA DIABLO #3 21,840 Sq. Ft.
4040 Pike Lane
Concord, California 94520
CONTRA COSTA DIABLO #8 31,800 Sq. Ft.
4095 Pike Lane
Concord, California 94520
MASON INDUSTRIAL PARK 28,836 Sq. Ft.
BUILDING #18
140 Mason Circle
Concord, California 94520
CODY STREET, BUILDING #6 37,856 Sq. Ft.
9242 - 9251 Bond Street
Overland Park, Kansas 66214
99th STREET, BUILDING #3 50,000 Sq. Ft.
15731 - 15745, West 100 Terrace
Lenexa Kansas 66215
IBM BUILDING 87,514 Sq. Ft.
6360 I-55 North
Jackson, Mississippi 39226
WOODLANDS II 114,000 Sq. Ft.
4021 - 4041 South, 700 East
Salt Lake City, Utah 84107
WOODLANDS LAND Approx. 3.6 Acres
MARINER COURT 105,673 Sq. Ft.
3625 Del Amo Boulevard
Torrance, California 90503
1000 TOWN CENTER 109,611 Sq. Ft.
1000 Town Center Drive
Oxnard, California 93030
DUPONT INDUSTRIAL CENTER 451,192 Sq. Ft.
1595 Dupont Avenue
Ontario, California 91761
VILLAGE GREEN 16,895 Sq. Ft.
250-260-270 Lafayette Circle
Lafayette, California 94549
MILPITAS TOWN CENTER 102,620 Sq. Ft.
542-568 Gibraltar Drive
Milpitas, California 95035
MILPITAS LAND Approx. 3.1 Acres
<PAGE>
Exhibit 6.4
CONTACT: FOR IMMEDIATE RELEASE:
Peter B. Bedford
Chairman of the Board and Chief Executive Officer May __, 1995
Jay Spangenberg
Chief Financial Officer
Telephone: (510) 283-8910
BEDFORD PROPERTY INVESTORS ANNOUNCES
$50 MILLION PLANNED PRIVATE PLACEMENT
LAFAYETTE, CA -- May __, 1995, Bedford Property Investors, Inc.
(NYSE:BED) announced that it has entered into a stock purchase
agreement with an investment fund managed by Aldrich Eastman Waltch
("AEW") to sell $50 million of the Company's series A cumulative
convertible preferred stock.
The preferred shares pay quarterly dividends equal to a 9% yield per
annum. The preferred shares will be convertible after two years by
AEW into common share at a conversation price of $6.00 per common
share. From and after the fifth anniversary of the closing, the
Company may redeem the series A shares for cash at a redemption
premium of 5%, with the premium declining by 1% each year thereafter
for five years. In addition, holders of the preferred shares have the
right to cause the Company to redeem their shares at par, upon the
occurrence of certain events.
The Company intends to use the proceeds from the offering to retire
floating-rate debt outstanding on the Company's line of credit with
Bank of America, for working capital and for general corporate
purposes, including acquisitions of suburban office and industrial
properties in the western United States. Concurrently with the sale
of the preferred shares, the Company's line of credit with Bank of
America will be increased from $23 million to $60 million.
The closing of the proposed stock sale is subject to completion of due
diligence by AEW, regulatory clearance of proxy materials, approval by
the shareholders of the Company, and other customary conditions.
"This transaction will more than double our equity capitalization,"
said Peter B. Bedford, Chairman and Chief Executive Officer. "After
paying off the outstanding balance on our line of credit, the Company
will have approximately $80 million dollars available to invest in the
western United States. We have been working hard for many months on
this private placement. Now we are focusing on the many acquisition
opportunities in the west."
Bedford Property Investors, Inc. is a self-administered equity
investment trust with investments in industrial and suburban office
buildings concentrated in the western United States. It is traded on
the New York and Pacific Stock Exchanges under its symbol "BED".
Aldrich Eastman Waltch is a Boston-based investment advisor.
<PAGE>
EXHIBIT 9.2(b)(ii)
Form of Opinion of
Greene, Radovsky, Maloney & Share
_______ , 1995
AEW Partners, L. P.
c/o Aldrich Eastman Waltch
225 Franklin Street
Boston, MA 02110
Attn: J. Grant Monahan, Jr.
Re: Bedford Property Investors, Inc.
Ladies and Gentlemen:
We have acted as counsel to Bedford Property Investors, Inc., a
Maryland corporation (the "Company"), in connection with that certain
Series A Preferred Stock Purchase Agreement dated April __, 1995 (the
"Agreement"), between the Company and AEW Partners, L.P. We are
furnishing this opinion pursuant to Section 9.2(b)(ii) of the
Agreement. Capitalized terms used in this opinion are defined in the
Agreement, unless otherwise defined herein.
In connection with this opinion, we have reviewed the Agreement
executed and delivered by the Company, and the Co-Sale Agreement
executed and delivered by Peter Bedford.
We have also examined originals or copies certified to our
satisfaction of such corporate records, certificates of public
official, officers of the Company and others and other documents as we
have deemed necessary as the basis for the opinions hereinafter
expressed. When relevant facts were not independently established, we
have relied on such certificates and documents. In connection with
such examination, we have assumed the genuineness of all signatures
and the authenticity of all documents submitted to us as originals,
and the conformity with the originals of all documents submitted to us
as copies. We have also assumed, without investigation, the accuracy
of the representations, warranties, and covenants as to factual
matters made in the Agreement, although we have no knowledge of the
inaccuracy thereof. We have not examined any records of any court,
administrative tribunal or other similar entity.
Based upon and subject to the foregoing, we are of the opinion
that:
1. The Company is duly qualified to do business and is in good
standing as a foreign corporation in the States of California, Kansas,
Mississippi and Utah.
2. The Agreement is a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
subject, as to enforcement, to:(i) the effect of bankruptcy,
insolvency, reorganization, arrangement, moratorium, fraudulent
reconveyance, and other similar laws now or hereinafter in effect
relating to or affecting the rights of creditors generally; (ii) the
application of equitable principles and the effect thereof upon the
validity, binding effect, or enforceability of any of the remedies,
covenants, or other provisions of the Agreement, and upon the
availability of injunctive relief or other equitable remedies,
including, without limitation, the effect of California and federal
court decisions invoking statutes or principles of equity which have
held that certain covenants and provisions of agreements are
unenforceable where (A) there are burdens upon the debtor, and it
cannot be demonstrated that the enforcement of such restrictions or
burdens is reasonably necessary for the protection of the creditor, or
(B) the enforcement of covenants or provisions under circumstances
which would violate the enforcing party's implied covenant of good
faith and fair dealing; and (iii) the power of federal and state
courts to refuse to enforce (or to stay the enforcement of) any
provision of the Agreement that purports to waive the rights of the
Company by statute, common law, or equity.
3. No governmental consents, approvals, authorizations,
registrations, declarations or filings are required for the execution
and delivery of the Agreement on behalf of the Company and performance
of the Agreement by the Company, including the issuance of the Shares,
except (i) the filing of the Articles of Amendment in the Department
of Assessment and Taxation of the State of Maryland, which filing has
been accomplished, (ii) the governmental consents, approvals,
authorizations, registrations, declarations and filings required to
perform the provisions of Section 8 of the Agreement, and (iii) Form D
pursuant to Regulation D of the Securities Exchange Act of 1934, [and
any additional state law filings].
4. Neither the execution and delivery of the Agreement on
behalf of the Company nor the performance of the Agreement by the
Company (i) is prohibited by or would subject the Company to a fine,
penalty or similar sanction that would be materially adverse to the
Company under any statute or regulation, or (ii) results in a breach
or violation of, or constitutes a default under, any term of any
agreement or instrument identified in Exhibit A to this opinion.
[Exhibit A to contain a list, certified by officers of the Company, of
each material agreement and material instrument to which the Company
is a party or by which its assets are bound.]
5. Subject to the accuracy of AEW's representations in Section
4 of the Agreement, the offer, sale, and issuance of the Shares (and
the Common Shares issuable upon conversion thereof) in conformity with
the terms of the Agreement constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act and the
registration or qualification requirements of applicable blue sky
laws.
6. The Common Shares issuable upon conversion of the Shares
have been accepted for listing on the New York Stock Exchange and the
Pacific Stock Exchange.
7. The Co-Sale Agreement is a valid and binding obligation of
Peter Bedford, enforceable against Peter Bedford in accordance with
its terms, subject, as to enforcement, to: (i) the effect of
bankruptcy, insolvency, reorganization, arrangement, moratorium,
fraudulent conveyance, and other similar laws now or hereinafter in
effect relating to or affecting the rights of creditors generally;
(ii) the application of equitable principles and the effect thereof
upon validity, binding effect, or enforceability of any of the
remedies, covenants, or other provisions of the Co-Sale Agreement, and
upon the availability of injunctive relief or other equitable
remedies, including, without limitation, the effect of California and
federal court decisions invoking statutes or principles of equity
which have held that certain covenants and provisions of agreements
are unenforceable where (A) there are burdens upon the debtor, and it
cannot be demonstrated that the enforcement of such restrictions or
burdens is reasonably necessary for the protection of the creditor, or
(B) the enforcement of covenants or provisions under circumstances
which would violate the enforcing party's implied covenant of good
faith and fair dealing; and (iii) the power of federal and state
courts to refuse to enforce (or to stay the enforcement of) any
provision of the Co-Sale Agreement that purports to waive the rights
of Mr. Bedford to assert claims or defenses available to Mr. Bedford
by statute, common law, or equity.
8. To our knowledge, there is no pending or threatened action,
suit or proceeding against the Company, except as set forth in the
Disclosure Schedule.
9. All Common Shares issued since ___________, 1994 have been
issued and sold in compliance with state and federal securities laws.
The foregoing opinions will be subject to customary
qualifications, including the following:
(a) Our opinion in the paragraph 1 above as to the good
standing of the Company as a foreign corporation transacting business
in the States of California, Kansas, Mississippi and Utah is based
solely upon certificates from Secretaries of State of California,
Kansas, Mississippi and Utah dated ________, __________, __________
and __________, respectively. For purposes of such opinion, we have
assumed the Company's due organization and good standing under
Maryland law based solely on the opinion of Ballard, Spahr, Andrews &
Ingersoll set forth in a letter dated _________, 1995, to you.
(b) Whenever a statement is qualified by "known to us," "to our
knowledge," or a similar phrase, it is intended to indicate that,
during the course of our representation of the Company, no information
that would give us current, actual knowledge of the inaccuracy of such
statement has come to the attention of those attorneys in this firm
who have rendered legal services in connection with the representation
of the Company. We have not, however, other than a review of our
legal files, undertaking any independent investigation to determine
the accuracy of such statement, and any limited inquiry undertaken by
us during the preparation of this opinion letter should not be
regarded as such an investigation.
(c) We express no opinion as to compliance with the anti-fraud
provisions of applicable securities laws, or as to the enforceability
of the indemnification provisions of Section 8.6 of the Agreement to
the extent such provisions may be subject to limitations of public
policy and the effect of applicable statutes and judicial decisions.
(d) We are members of the Bar of the State of California and,
except as set forth in paragraph 5 with respect to the securities laws
of other states, we express no opinion as to any matter relating to
the laws of any jurisdiction other than the federal laws of the United
States of America and the laws of the State of California. To the
extent this opinion addresses applicable securities laws of states
other than the State of California, we have not retained nor relied on
the opinion of counsel admitted to the bar in such states, but rather
have relied on compilations of the securities laws of such states
contained in reporting services presently available to us.
Very truly yours,
GREENE, RADOVSKY, MALONEY & SHARE
<PAGE>
EXHIBIT 9.2(b)(iii)
The Company (which for purposes of this opinion shall also refer to
the Company's predecessor, ICM Property Investors Incorporated) was
organized in conformity with the requirements for qualification as a
REIT, the Company has operated in a manner so as to qualify as a REIT
at all-times since its organization, and, based on its current and
anticipated status and operations, and assuming completion of the
transactions contemplated by the Agreement, the company will be able
to meet the requirements for qualification and taxation as a REIT in
the current and subsequent taxable years.
For purposes of this opinion, it is assumed that no individual who
directly or indirectly owns an interest in AEW will be treated as an
owner of more than 8.2% of the value of the outstanding shares of the
Company. Section 856(h) of the Code shall apply for purposes of
determining stock ownership in connection with this assumption.
<PAGE>
EXHIBIT 9.2(B)(IV)
[LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL]
[THIS OPINION IS SUBJECT TO AMENDMENT DEPENDING ON
THE APPROVAL OF THE ARTICLES OF AMENDMENT
BY THE STOCKHOLDERS OF THE COMPANY]
_______, 1995
AEW PARTNERS, L.P.
c/o Aldrich Eastman Waltch
225 Franklin Street
Boston, Massachusetts 02110
Attn: J. Grant Mohanon, Jr.
Re: Bedford Property Investors, Inc.
Ladies and Gentlemen:
We have acted as Maryland counsel to Bedford Property Investors,
Inc., a Maryland corporation (the "Company"), in connection with
certain matters of Maryland law arising out of the sale and issuance
of _________ shares (the "Shares") of Series A Convertible Preferred
Stock, $.01 par value per share (the "Series A Preferred Stock"), by
the Company pursuant to a Series A Convertible Preferred Stock
Purchase Agreement, dated May ___, 1995 (the "Agreement"), by and
among the Company, AEW Partners, L. P., a Delaware limited partnership
("AEW"), and, for the purposes of Section 8.2.2.2 of the Agreement,
Peter B. Bedford, individually ("Bedford"). Although we have had the
opportunity to review and comment on the Agreement, we did not
participate in the negotiation or drafting of the Agreement.
This opinion is being delivered to you pursuant to Section
9.2(b)(iv) of the Agreement. Unless otherwise defined herein,
capitalized terms used herein shall have the meanings given to them in
the Agreement.
In connection with our representation of the Company, and as a
basis for the opinions hereinafter set forth, we have examined
originals, or copies certified or otherwise identified to our
satisfaction, of the following documents (hereinafter collectively
referred to as the "Documents"):
1. The charter of the Company (the "Charter"), [including
Articles of Amendment which (a) replace Section 1 of Article V of the
Charter and add a new Section 5 to existing Article V of the Charter,
(b) replace Article VII of the Charter, (c) amend Article VIII,
Section 3, Paragraph (c) of the Charter and (d) amend Article VIII,
Section 3, Paragraph (e) of the Charter (the "First Articles of
Amendment") and including Articles of Amendment which (a) delete
Article VIII of the Charter and (b) amend certain provisions of
Article IX of the Charter (the "Second Articles of Amendment"),]
certified as of a recent date by the State Department of Assessments
and Taxation of Maryland (the "SDAT");
2. The Bylaws of the Company (the "Bylaws"), certified as of a
recent date by its Secretary;
3. Resolutions adopted by the Board of Directors of the Company
(the "Board of Directors") relating to (a) the organization of the
Company, (b) the sale and issuance of the outstanding shares of stock
of the Company, (c) the execution and delivery by the Company of, and
the Company's performance under, the Agreement and any additional
agreements contemplated in the Agreement and (d) the sale and issuance
of the Shares, certified as of a recent date by the Secretary of the
Company;
4. A certificate as of a recent date of the SDAT as to the good
standing of the Company;
5. A certificate executed by __________, Secretary of the
Company, dated ___________, 1995;
6. Specimens of the certificates representing shares of the
Series A Preferred Stock and the Common Stock, $.01 par value per
share, of the Company (the "Common Stock");
7. A copy of the executed Agreement, certified as of a recent
date by the Secretary of the Company;
8. A copy of an executed Voting Agreement by and between
Bedford and AEW, dated ___________, 1995 and certified as of a recent
date by the Secretary of the Company;
9. A copy of an executed Co-Sale Agreement by and between
Bedford and AEW, dated ________, 1995 and certified as of a recent
date by the Secretary of the Company; and
10. Such other documents and matter as we have deemed necessary
or appropriate to express the opinions set forth in this letter,
subject to the assumptions, limitations and qualifications noted
below.
In expressing the opinions set forth below, we have assumed, as
so far as is known to us there are no facts inconsistent with, the
following:
1. Each of the parties (other than the Company executing any of
the Documents has duly and validly executed and delivered each of the
Documents to which such party is a signatory, and such party's
obligations set forth therein (other than the obligations of the
Company and Bedford on which we opine below) are legal, valid and
binding and are enforceable in accordance with all stated terms except
as limited (a) by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other laws relating to or affecting the
enforcement of creditors' rights or (b) by general equitable
principles, whether applied in law or in equity.
2. Each individual executing any of the Documents on behalf of
a party (other than the Company) is duly authorized to do so.
3. Each individual executing any of the Documents is legally
competent to do so.
4. All Documents submitted to us as originals are authentic.
All Documents submitted to us as certified or photostatic copies
conform to the original documents. All signatures on all documents
are genuine. All public records reviewed or relied upon by us or on
our behalf are true and complete. All statements and information
contained in the Documents are true and complete as to factual
matters.
5. The Agreement and the Co-Sale Agreement, if duly executed
and delivered by all parties thereto, are legal, valid and binding and
are enforceable under the laws of the State of California in
accordance with all stated terms (except to the extent that actions of
the Company or its Board of Directors or stockholders are governed by
the Maryland General Corporation Law (the "MGCL")) except as limited
(a) by bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other laws relating to or affecting the enforcement of
creditors' rights or (b) by general equitable principles, whether
applied in law or in equity.
6. The Company (which for purposes of this assumption shall
also include the Company's predecessor, ICM Property Investors
Incorporated, a Delaware corporation ("ICM")), was organized in
conformity with the requirements for qualification as a real estate
investment trust (a "REIT"), under the Internal Revenue Code of 1986,
as amended (the "Code"). The Company has operated in a manner so as
to qualify as a REIT under the Code at all times since its
organization, and, based on its current and anticipated status and
operations, and assuming completion of the transactions contemplated
by the Agreement, the Company will be able to meet the requirements
for qualification and taxation as a REIT under the Code in the current
and subsequent taxable years. The Shares will not be transferred in
violation of any restriction or limitation contained in the Charter.
7. Immediately prior to the effective date of the merger of ICM
into the Company, as the surviving entity (the "Merger"), all of the
outstanding shares of Common Stock, $1.00 par value per share, of ICM
were duly authorized, validly issued, fully paid and nonassessable
under the laws of the State of Delaware. The Merger was duly
authorized and approved by the Board of Directors and stockholders of
ICM and by any other person required to approve the Merger. the
Merger was legal, valid and binding under the laws of the State of
Delaware.
In expressing our opinion set forth below in paragraph 3 as to
the delivery of the Agreement, we have solely relied upon the oral
representation of Joseph S. Radovsky, Esquire of Greene, Radovsky,
Maloney & Share, counsel to the Company, that the Agreement has been
duly delivered on behalf of the Company.
In expressing our opinion set forth below in paragraph 7, we have
made no investigation of any court dockets or governmental records in
any jurisdiction, including the State of Maryland.
The phrase "known to us" is limited to the actual knowledge,
without independent inquiry, of the lawyers at our firm who have
performed legal services in connection with the issuance of this
opinion. For the purposes of this opinion, the terms "Affiliate" and
"Business Combination" shall have the meanings given to them in the
Charter, as in effect prior to the approval of the Second Articles of
Amendment by the stockholders of the Company.
Based upon the foregoing, and subject to the assumptions,
limitations and qualifications stated herein, it is our opinion that:
1. The Company is a corporation duly incorporated and existing
under the laws of the State of Maryland and is in good standing with
the SDAT.
2. The Company has all requisite corporate power to enter into
and perform the Agreement, to own its properties and to carry on its
business, substantially as presently owned or conducted.
3. The execution and delivery of the Agreement and the sale and
issuance of the Shares to AEW have been duly authorized by all
necessary corporate action on the part of the Company, and the
Agreement has been duly executed and delivered on behalf of the
Company.
4. No governmental consents, approvals, authorizations,
registrations, declarations or filings of or with any Maryland court
or governmental agency are required for the execution and delivery of
the Agreement on behalf of the Company and performance of the
Agreement by the Company, including the issuance of the Shares, except
[(a) the filing for record of the First Articles of Amendment and the
Second Articles of Amendment with the State Department of Assessment
and Taxation of Maryland, which filing has been accomplished, and (b)]
the governmental consents, approvals, authorizations, registrations,
declarations and filings required to perform the provisions of Section
8 of the Agreement.
5. Neither the execution and delivery of the Agreement on
behalf of the Company nor the performance of the Agreement by the
Company (a) conflicts with any provision of the Charter or Bylaws or
(b) violates any Maryland law applicable to the Company.
6. The Voting Agreement is a valid and binding obligation of
Bedford, enforceable against Bedford in accordance with its terms,
except as limited (a) by bankruptcy, insolvency, reorganization,
arrangement, moratorium, fraudulent conveyance and other laws relating
to or affecting the enforcement of creditors' rights, (b) by general
equitable principles, whether applied in law or in equity, and (c) by
the doctrine of commercial reasonableness or any implied covenant of
good faith or fair dealing. We express no opinion as to the provision
set forth in Section 1(i) of the Voting Agreement, whereby Bedford
agrees in his capacity as a director of the Company to recommend to
the stockholders of the Company approval of the sale of the Shares to
AEW and the related transaction called for in the Agreement, and any
provisions thereof relating to the enforcement of or remedies arising
from Section 1(i).
7. So far as is known to us, there is no pending or threatened
action, suit or proceeding against the Company, except as set forth in
the Disclosure Schedule.
8. The authorized stock of the Company consists of 30,000,000
shares of Common Stock [10,000,000 shares of Preferred Stock, $.01 par
value per share] and 10,000,000 shares of Series A Preferred Stock.
As of the date hereof, ______ shares of Common Stock are issued and
outstanding. All outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable.
So far as is known to us, there are no options, warrants, conversion
privileges, preemptive rights or other rights outstanding granted by
the Company to purchase or otherwise acquire any authorized but
unissued shares of stock or other securities of the Company, except as
set forth in the Agreement [, the First Articles of Amendment] or the
Disclosure Schedule.
9. The Shares, when issued in compliance with the Agreement,
will be duly authorized, validly issued, fully paid and
nonassessable. The shares of Common Stock issuable upon conversion of
the Shares have been duly reserved for issuance, and, when issued
in compliance with the provisions of the Charter, will be validly
issued, fully paid and nonassessable.
10. The certificate representing the Shares is in due and proper
form and has been duly executed by the officers of the Company named
thereon.
11. The restrictions in Article VII, Section 7.2.1 of the
Charter concerning the ownership and transfer of stock are valid and
enforceable under Maryland law, and except as otherwise specified in
the Charter, an intended transferee or purported owner of shares in
excess of the ownership limitations stated in Article VII, Section
7.2.1 of the Charter will acquire no voting or dividend rights with
respect to such shares, nor any right to benefit from the appreciation
in the value of such shares. However, a court may not enforce the
retroactive application of Article VII as to any matter submitted to
an approved by the stockholders of the Company.
12. The Shares have the rights, preferences and privileges set
forth in Article V, Section 5 of the Charter.
13. Resolutions adopted by the Board of Directors at a special
meeting on May ______, 1995 and prior to the execution of the
Agreement (the "Special Meeting"), have effectuated an irrevocable
exemption of (a) any business combination (as defined in the MGCL)
between the Company and AEW or any of its Affiliates and (b) any
transaction contemplated by or resulting from the exercise of any
redemption right of the Series A Preferred Stock which may constitute
a business combination (as defined in the MGCL), from the provisions
of Section 3-602 of the MGCL. Resolutions adopted by the Board of
Directors at the Special Meeting [, prior to the adoption by the
stockholders of the Company of the Second Articles of Amendment,] have
effectuated an irrevocable approval, pursuant to [the former] Article
VIII, Section 2(b) of the Charter, of (a) any Business Combination
between the Company and AEW or any of its Affiliates and (b) any
transaction contemplated by or resulting from the exercise of any
redemption right of the Series A Preferred Stock which may constitute
a Business Combination.
14. To the extent that actions of the Company, its Board of
Directors or the stockholders of the Company required under the
Agreement are governed by the MGCL, such required actions are valid
and binding obligations enforceable against the Company in accordance
with their terms, except as limited (a) by bankruptcy, insolvency,
reorganization, arrangement, moratorium, fraudulent conveyance and
other laws relating to or affecting the enforcement of creditors'
rights, (b) by general principles of equity, whether applied in law or
in equity, and (c) by the doctrine of commercial reasonableness or any
implied covenant of good faith or fair dealing.
15. To the extent that actions of Bedford, in his capacity as a
stockholder of the Company, required under the Co-Sale Agreement are
governed by the MGCL, such required actions are valid and binding
obligations of Bedford, in such capacity, enforceable against Bedford
in acordance with their terms, except as limited (a) by bankruptcy,
insolvency, reorganization, arrangement, moratorium, fraudulent
conveyance and other laws relating to or affecting the enforcement of
creditors' rights, (b) by general principles of equity, whether
applied in law or in equity, and (c) by the doctrine of commercial
reasonableness or any implied covenant of good faith or fair dealing.
16. Section 2-507(a) of the MGCL provides:
Unless the charter provides for a greater or lesser number of
votes per share or limits or denies voting rights, each
outstanding share of stock, regardless of class, is entitled to
vote on each matter submitted to a vote at a meeting of
stockholders....
Article V, Section 5, Paragraph 3 of the Charter provides:
Except as expressly provided in this Charter, the holders of
Series A Preferred shall have no voting rights.
(a) Directors. The holder of shares of Series A Preferred as a
class shall have the right to elect two members of the Board of
Directors (which right to elect such two directors shall be
construed for the purposes of this Charter as the right to vote
generally in the election of directors) and the holders of shares
of Common Stock shall have the right to elect the remaining
directors;...
(b) Senior Securities. Authorization of any series or class of
equity securities ranking senior or equal to the Series A
Preferred with respect to the payment of dividends or amounts
upon liquidation, dissolution or winding up of the Corporation,
must be approved by the affirmative vote of holders of at least a
majority of the outstanding shares of Series A Preferred, voting
together as a single class.
(c) Amendment. Any amendment to the Charter of the Corporation
which would materially adversely affect the preferences or rights
of the Series A Preferred must be approved by affirmative vote of
the holders of at lease a majority of the outstanding shares of
Series A Preferred, voting together as a single class.
(d) Termination. The voting rights set forth at (b) and (c)
above shall terminate if the Common Shares issuable upon
conversion of the outstanding shares of Series A Preferred shall
represent less than 15% of the total of (i) outstanding shares of
Common Stock and (ii) the number of shares of Common Stock that
would be outstanding upon conversion of the outstanding Series A
Preferred. If the Common Shares issuable upon conversion of the
outstanding Series A Preferred represent less than 15% but 7% or
more of such total, the voting rights set forth at (a) above
shall provide that the holders of shares of Series A Preferred
Stock as a class shall only have the right to elect one member of
the Board of Directors rather than two; and provided further that
the voting rights set forth at (a) above shall terminate if the
Common Shares issuable upon conversion of the outstanding shares
of Series A Preferred Stock represent less than 7% of such total.
(Emphasis added.) Article VIII, Section 1 of the Charter provides:
In addition to any vote otherwise required by law or these
Articles of Incorporation, a Business Combination ,as hereunder
defined, shall require the affirmative vote of the holders of at
lease eighty percent (80%) of the voting power of the then
outstanding shares of capital stock of the Corporation entitle to
vote generally in the election of directors (the "Voting Stock"),
voting together as a single class.
Article IX of the Charter provides:
... eighty percent (80%) of the outstanding voting stock of the
Corporation, voting together as a single class shall be required
to amend or adopt any provisions inconsistent with Article VIII
of these Articles of Incorporation...
Based on the foregoing provisions in the Charter, we believe that
so long as the Common Stock issuable upon conversion of the
outstanding shares of Series A Preferred Stock represents at lease 15%
of the total of (a) outstanding shares of Common Stock and (b) the
number of shares of Common Stock that would be outstanding upon
conversion of the outstanding Series A Preferred Stock (such total
referred to hereinafter as the "Outstanding Stock"), the holders of
Series A Preferred Stock are "entitled to vote generally in the
election of directors." We interpret the phrase "voting generally in
the election of directors" to mean the ability to vote for two or more
directors of the Company. This phrase does not appear to mean the
right to elect all of the members of the Board of Directors for two
reasons, first, the phrase does not state, "generally in the election
of the directors." (Emphasis added.) Second, if this phrase referred
to the election of all of the members of the Board of Directors, the
holders of the Common Stock also could not be classified as being
"entitled to vote generally in the election of directors" because of
the present voting rights of the holders of the Series A Preferred
Stock.
Thus, if as we believe to be the case, the holders of Series A
Preferred Stock are "entitled to vote generally in the election of
directors" as described in the prior paragraph, the Series A Preferred
Stock is "Voting Stock" as defined in Article VIII, Section I of the
Charter. Although "Voting Stock" as used in Article IX of the Charter
is not defined specifically, we believe that a Maryland court should
look to the definition of "Voting Stock" in Article VIII for guidance
and, if so, "Voting Stock" (as defined in Article VIII) should have
the right, pursuant to Article IX, to vote on provisions which are
"inconsistent with Article VIII" of the Charter. We wish to interpret
such "inconsistent" provisions to include an amendment to the Charter
to delete Article VIII therefrom.
There is not Maryland statute and no case known to us applying
Maryland law directly on point relating to the aforementioned
combination of statutory law and Charter provisions. However, for the
reasons specified above, it is our opinion that if the facts described
herein were properly presented and argued before a Maryland court, a
Maryland court should find that so long as the Common Stock issuable
upon conversion of the outstanding shares of Series A Preferred Stock
represents more than 15% of the Outstanding Stock, the holders of the
Series A Preferred Stock have the right to vote with the other holders
of Voting Stock (as defined in the Charter) of the Company on an
amendment to the Charter to delete Article VIII therefrom. We have
stated our opinion on this matter to your Maryland counsel, George S.
Lawler of Whiteford, Taylor & Preston, and he has stated that he does
not disagree with it.
The foregoing opinions are limited to the substantive laws of the
State of Maryland and we do not express any opinion herein concerning
any other law. We express no opinion as to compliance with the
Securities (or "blue sky") laws or the real estate syndication laws of
the State of Maryland or as to federal or state laws regarding
fraudulent transfers. We note that the Agreement and the Co-Sale
Agreement provide that, except to the extent that actions of the
Company or its Board of Directors or stockholders are governed by the
MGCL, they are to be governed by the laws of the State of California.
To the extent that any matter as to which our opinions expressed
herein would be governed by the laws of the State of California or any
other jurisdiction (other than the State of Maryland), we do not
express any opinion on such matter. The opinions expressed herein are
subject to the effect of judicial decisions which may permit the
introduction of parol evidence to modify the terms or the
interpretation of agreements.
As to the opinion expressed in paragraph 11 above, we note that
there is no Maryland statute and no case known to us applying Maryland
law directly on point. You should be aware that although this letter
represents our opinion concerning the matters specifically discussed
herein, an opinion of counsel is not binding on the courts or on the
Internal Revenue Service ("IRS") and a court or the IRS may hold or
act contrary to our opinion.
We assume no obligation to supplement these opinions if any
applicable law changes after the date hereof or if we become aware of
any fact that might change any of the opinions expressed herein after
the date hereof.
This letter is being furnished to you solely for your benefit.
Accordingly, it may not be relied upon by, quoted in any manner to or
delivered to any other person or entity (other than the Company and
Greene, Radovsky, Maloney & Share) without, in each instance, our
prior written consent.
Very truly yours,
<PAGE>
CO-SALE AGREEMENT
EXHIBIT 9.2(h)
THIS CO-SALE AGREEMENT (the "Agreement") is made as of the day
of_____, 1995, by and between AEW Partners, L.P., a Delaware limited
partnership, ("AEW"), and Peter B. Bedford.
R E C I T A L S
A. Bedford is the Chairman of the Board of and a substantial
stockholder of Bedford Property Investors, Inc., a Maryland
corporation (the "Company").
B. AEW has executed a Series A Convertible Preferred Stock
Purchase Agreement (the "Purchase Agreement") with the Company,
pursuant to which AEW will acquire 8,333,334 shares of Series A
Convertible Preferred Stock of the Company (the "Shares").
C. In order to induce AEW to consummate the acquisition of the
Shares and in consideration of the benefit that will accrue to Bedford
as a stockholder of the Company if the Purchase Agreement is
consummated, Bedford desires to execute this Agreement.
THE PARTIES AGREE AS FOLLOWS:
1. CO-SALE RIGHTS IN SALES BY BEDFORD
1.1 Grant of Co-Sale Rights. If Bedford proposes to enter into a
transaction regarding the sale of Common Stock of the Company (the
shares of Common Stock subject to such sale being referred to as the
"Target Stock") other than to the Company or in an open market sale in
a brokers transaction or pursuant to an underwritten secondary
offering, Bedford shall promptly deliver to AEW written notice of the
intended sale (the "Sale Notice") and the basic terms and conditions
thereof, including the identity of the proposed purchaser. AEW shall
have the right, exercisable upon written notice to Bedford within ten
days after receipt of the Sale Notice, to participate pro rata in such
sale of the Target Stock on the same terms and conditions as those set
forth in the Sale Notice. To the extent that AEW exercises such right
of participation, the number of shares of Target Stock that Bedford
may sell in the transaction shall be correspondingly reduced. The
above right of participation by AEW shall be subject to the terms and
conditions set forth in this Section 1.1.
a. AEW shall be deemed to own the number of shares of Common
Stock that AEW beneficially owns plus the number of shares of Common
Stock that are issuable upon conversion of any shares of Preferred
Stock that AEW beneficially owns.
b. AEW may sell all or any part of a number of shares of Common
Stock of the Company equal to the product obtained by multiplying (i)
the aggregate number of shares of Common Stock covered by the Sale
Notice by (ii) a fraction, the numerator of which is the number of
shares of Common Stock of the Company issued upon conversion of the
Shares at the time beneficially owned by AEW and the shares of Common
Stock issuable upon conversion of any Shares at the time beneficially
owned by AEW and the denominator of which is the numerator plus the
number of shares of Common Stock of the Company beneficially owned by
Bedford.
c. AEW may effect its participation in the sale by delivering to
Bedford a notice of its intent to participate in the sale, indicating
the number of shares of Common Stock it wishes to sell, together with
one or more certificates, properly endorsed for transfer, which
represent:
(i) the number of shares of Common Stock that AEW elects to sell
pursuant to this Section 1.1; or
(ii) That number of Shares that is at such time convertible into
the number of shares of Common Stock that AEW elects to sell pursuant
to this Section 1.1; provided, however, that if the purchase offeror
objects to the delivery of Preferred Stock in lieu of Common Stock,
AEW may either (x) convert and deliver Common Stock as provided in
subparagraph (i) above if the Shares are then convertible or (y)
exercise its put option with respect to the Shares pursuant to Section
3.2 below if the Shares are not then convertible.
1.2 Payment of Proceeds. The stock certificates that AEW
delivers pursuant to Section 1.1 shall be transferred by Bedford to
the purchase offeror in consummation of the sale of the Common Stock
pursuant to the terms and conditions specified in the Sale Notice to
AEW, and Bedford shall promptly thereafter remit to AEW that portion
of the sale proceeds to which AEW is entitled by reason of its
participation in such sale.
1.3 Non-exercise. The exercise or non-exercise of the rights of
AEW hereunder to participate in one or more sales of Common Stock made
by Bedford shall not adversely affect its rights to participate in
subsequent Common Stock sales by Bedford.
2. PERMITTED TRANSFERS
Notwithstanding the terms of Section 1, the co-sale rights of AEW
shall not apply to any transfer or successive transfer to the
ancestors, descendants, siblings or spouse of Bedford or to trusts for
the benefit of such persons or to any executor or administrator;
provided that the transferee shall furnish AEW with a written
agreement to be bound by and comply with all provisions of this
Agreement. Such transferred Stock shall remain "Target Stock"
hereunder, and such transferee shall be treated as a party to this
Agreement for the purposes of those co-sale rights and all such
transferred Stock will be treated as held by Bedford for all purposes
of this Agreement.
3. PROHIBITED TRANSFERS
3.1 Grant. If Bedford sells any Target Stock in contravention of
the co-sale rights of AEW under this Agreement (a "Prohibit Transfer),
AEW shall have the put option provided in Section 3.2 below.
3.2 Put Option. If a Prohibited Transfer occurs, or if pursuant
to Section 1.1(c)(ii)(y) above the Preferred Stock is not then
convertible, AEW shall have the option to sell to Bedford a number of
shares of Common Stock of the Company (either directly or through
delivery of Shares) equal to the number of shares that AEW would have
been entitled to sell had such Prohibited Transfer been effected in
accordance with Article 1 hereof (or, in the case of Shares being
delivered pursuant to Section 1.1(c)(ii) the number of shares that AEW
would have been entitled to sell pursuant to Section 1.1(c)(ii)(x) if
the Shares were then convertible), on the following terms and
conditions:
a. The price per Share at which the Shares are to be sold to
Bedford shall be equal to the price per share paid to Bedford by the
third party purchaser or purchasers of Bedford's Common Stock.
b. AEW shall deliver to Bedford, within 30 days after it has
received notice from Bedford or otherwise become aware of the
Prohibited Transfer (or of the proposed sale by Bedford giving rise to
AEW's rights under 1.1(c)(ii)), the certificate or certificates
representing Shares to be sold, each certificate to be properly
endorsed for transfer.
c. Bedford shall, upon receipt of the certificates for the
repurchased Shares, pay the aggregate Section 3.2 purchase price
therefor, by certified check or bank draft made payable to the order
of AEW, and shall reimburse AEW for any additional expenses, including
legal fees and expenses, incurred in effecting such purchase and
resale.
4. LEGEND REQUIREMENTS.
4.1 Legend. Certificates representing at least 1,198,278 shares
of the Common Stock owned by Bedford shall be endorsed with a legend
which provides substantially as follows:
"THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN
CO-SALE AGREEMENT DATED ____________, 1995 (AS SUCH AGREEMENT MAY
BE AMENDED) BY AND BETWEEN THE REGISTERED HOLDER AND CERTAIN
INVESTORS IN THE CAPITAL STOCK OF THE COMPANY. A COPY OF SUCH
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY, A
COPY OF WHICH WILL BE SENT WITHOUT CHARGE TO EACH STOCKHOLDER WHO
SO REQUESTS. SUCH REQUEST MUST BE MADE TO THE SECRETARY OF THE
COMPANY AT ITS PRINCIPAL OFFICE OR TO THE TRANSFER AGENT."4.2
Removal. This Section 4.1 legend shall be removed upon
termination of this Agreement in accordance with the provisions
of Section 5.1.
5. MISCELLANEOUS PROVISIONS
5.1 Termination. The rights of AEW and the obligations of
Bedford under this Agreement shall terminate at the earliest of (a)
such time as AEW (or any permitted assignee pursuant to Section 5.4)
shall no longer be the owner of shares of Common Stock (or shares of
Preferred Stock convertible into such number of shares of Common
Stock) that represent at least 15% of the total of (i) outstanding
shares of Common Stock and (ii) the number of shares of Common Stock
that would be outstanding upon conversion of the outstanding shares of
Preferred Stock, (b) such time as Bedford shall no longer be the owner
of at least 1,198,278 shares of Common Stock (treating Bedford as the
owner of any shares he disposed of in a Prohibited Transfer) and
(c)______, 1998. Unless sooner terminated in accordance with the
preceding sentence, this Agreement shall terminate immediately prior
to any one of the following events: (a) any transaction or series of
related transactions (including, without limitation, any
reorganization, merger or consolidation) that will result in the
Company's stockholders immediately prior to such transaction not
holding (by virtue of such shares or securities issued solely with
respect thereto) at least fifty percent (50%) of the voting power of
the surviving or continuing entity; or (b) a sale of all or
substantially all of the assets of the Company, unless the Company's
stockholders immediately prior to such sale will, as a result of such
sale, hold (by virtue of securities issued as consideration for the
Company's sale) at least fifty percent (50%) of the voting power of
the purchasing entity.
5.2 Notices. All notices, requests and other communications to
any party hereunder shall be in writing and shall be given (and shall
be deemed to have been given upon receipt) if delivered in person and
shall be deemed to have been given (a) two business days after
transmission of a facsimile, telegram, telex, or (b) four business
days after deposit in United States registered or certified mail
(postage prepaid, return receipt requested) or (c) two business days
after delivery to a reputable overnight courier, to the respective
parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this
Section 5.2):
If to AEW, to:
AEW PARTNERS, L.P.
c/o Aldrich Eastman Waltch
225 Franklin Street
Boston, Massachusetts 02110
Attn: J. Grant Mohanon, Jr.
Fax: (617) 261-9555
With a copy to:
Thomas H. Nolan, Jr.
Aldrich Eastman Waltch
225 Franklin Street
Boston, Massachusetts 02110
Facsimile: (617) 261-9555
and
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94104
Attention: Brian Smith
Facsimile: (415) 772-6268
If to Bedford, to:
Peter B. Bedford
Chairman and CEO
Bedford Property Investors, Inc.
270 Lafayette Circle
Lafayette, CA 94549
With a copy to:
Greene, Radovsky, Maloney & Share
Spear Street Tower, #4200
One Market
San Francisco, CA 94105
Facsimile: (415) 777-4961
5.3 Amendments: No Waivers. Any provision of this Agreement
may be amended or waived if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by Bedford and
AEW or in the case of a waiver, by the party against whom the waiver
is to be effective. No failure or delay by any party in exercising
any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by
law.
5.4 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto
and, subject to the provisions of this Section 5.4, their respective
successors and assigns. AEW may only assign its rights and
obligations hereunder (by operation of law or otherwise) to one or
more Affiliates (as defined in the Purchase Agreement) and only so
long as such Affiliate would own not less than 15% of the Outstanding
Shares (as defined in the Purchase Agreement). This Agreement shall
be binding upon and is solely for the benefit of each of the parties
hereto, and subject to the provisions of this Section 5.4, their
respective successors and assigns, and nothing in this Agreement is
intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
5.5 Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of California
applicable to agreements made and to be performed entirely within
such state, except to the extent that actions of the Company or its
Board of Directors or stockholders are governed by the Maryland
General Corporation Law.
5.6 Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement shall become effective when
each party hereto shall have received counterparts hereof signed by
all of the other parties hereto.
5.7 Severability. In the event one or more of the provisions
of this Agreement should, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this
Agreement, and this Agreement shall be construed and interpreted in
such manner as to be effective and valid under applicable law.
5.8 Specific Performance. The parties acknowledge that they
would be irreparably damaged in the event any of the provisions of
this Agreement were not performed by the parties in accordance with
their specific terms or were otherwise breached. Accordingly, it is
agreed that the parties shall be entitled to an injunction to prevent
breaches of this Agreement and to specifically enforce this Agreement
and the terms and provisions hereof, in addition to any other remedy
to which the parties may be entitled at law or in equity.
5.9 Aggregation of Stock. For the purpose of determining the
availability of any rights under this Agreement, the holdings of
transferees and assignees of AEW partners or retired partners of AEW
(including spouses and ancestors, lineal descendants and siblings of
such partners or spouses who acquire Common Stock by gift, will or
intestate succession) shall be aggregated together with AEW, for the
purpose of exercising any rights or taking any action under this
Agreement.
5.10 Costs and Expenses of Litigation. In the event that any
dispute arises between the parties hereto and the parties resort to
litigation to settle such dispute, then the nonprevailing party in
such litigation shall pay the costs and expenses incurred by the
prevailing party in connection with such litigation, including,
without limitation, attorney and witness fees.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the day and year first indicated above.
Peter Bedford
AEW PARTNERS, L.P.,
a Delaware limited partnership
By: AEW/L.P., a Delaware limited partnership,
Its General Partner
By: AEW, Inc.,
a Delaware corporation Its General Partner
By:
Patrick J. Sullivan
Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,115
<SECURITIES> 0
<RECEIVABLES> 1,017
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,630
<PP&E> 58,674
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<BONDS> 0
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0
0
<OTHER-SE> 36,955
<TOTAL-LIABILITY-AND-EQUITY> 58,674
<SALES> 0
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<OTHER-EXPENSES> 3,167
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