SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
______________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 19, 1995
BEDFORD PROPERTY INVESTORS, INC.
(Exact name of Registrant as specified in its charter)
Maryland 1-8822 68-0306514
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
270 Lafayette Circle, Lafayette, California 94549
(Address of principal executive officer) (Zip Code)
Registrant telephone number, including area code: 510-283-8910<PAGE>
Item 5. Other
On May 18, 1995, Bedford Property Investors, Inc. (NYSE:BED) announced that
it had 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 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. Included herein is summary of the
transaction.
TABLE OF CONTENTS
Page
The Stock Purchase Agreement . . . . . . . . . . . . . . . 1
General . . . . . . . . . . . . . . . . . . . . . . . . 1
Use of Proceeds . . . . . . . . . . . . . . . . . . . . 2
Certain Rights Under the Stock Purchase Agreement . . . 2
Certain Ancillary Agreements. . . . . . . . . . . . . . 6
Conditions to Closing . . . . . . . . . . . . . . . . . 7
Listing of the Common Stock Issuable Upon Conversion of the AEW
Preferred Stock. . . . . . . . . . . . . . . . . . 8
Terms of the Series A Convertible Preferred Stock. . . . . 8
General . . . . . . . . . . . . . . . . . . . . . . . . 8
Ranking . . . . . . . . . . . . . . . . . . . . . . . . . 8
Dividends . . . . . . . . . . . . . . . . . . . . . . . . 9
Liquidation Preference. . . . . . . . . . . . . . . . . . 9
Redemption. . . . . . . . . . . . . . . . . . . . . . . 10
Voting Rights . . . . . . . . . . . . . . . . . . . . . 12
Conversion Rights . . . . . . . . . . . . . . . . . . . 13
Protective Provisions . . . . . . . . . . . . . . . . . 15
<PAGE>
The Stock Purchase Agreement
General
The Company has entered into a Series A Convertible Preferred
Stock Purchase Agreement dated as of May 18, 1995 with AEW Partners,
L.P., a Delaware limited partnership, or a single affiliate of AEW to
be designated prior to closing the sale (either of which is referred
to hereafter as "AEW") (the "Stock Purchase Agreement") pursuant to
which the Company has agreed to sell and issue on the date of closing
(the "Closing Date"), and AEW has agreed to purchase 8,333,334
shares of Series A Convertible Preferred Stock (the "AEW Preferred
Stock") for $6.00 per share, or in the aggregate, $50 million (the
"AEW Stock Sale"). Each share of AEW Preferred Stock will be
convertible after two years from the date of issuance into one share
of the Company's Common Stock (the "Common Stock"), which represents
a 5% premium over the average closing price of the Common Stock for
the 60 trading days prior to May 18, 1995. This conversion ratio is
subject to adjustment on certain events more fully described below.
Based on the conversion ratio, the AEW Preferred Stock would
represent approximately 58% of the outstanding shares of Common Stock
following conversion.
Pursuant to the rules of the New York Stock Exchange and the
Maryland General Corporation Law (the "MGCL"), the Company will be
required to obtain the approval of a majority of the votes entitled
to be cast by the holders of the outstanding shares of Common Stock
prior to the closing of the AEW Stock Sale (the "Closing"). The
Board of Directors of the Company (the "Board of Directors" or the
"Board") reserves its right to amend the provisions of the Stock
Purchase Agreement in accordance with its terms and without the
approval of the holders of the Common Stock (the "Stockholders"),
either before or after the approval of the Stock Purchase Agreement
by the Stockholders. The Board also reserves the right to terminate
the Stock Purchase Agreement in accordance with its terms,
notwithstanding Stockholder approval. The Board has no such right to
amend the terms of certain proposed amendments to the charter of the
Company (the "Charter") related to the AEW Stock Sale, as described
below, following Stockholder approval thereof.
Significantly, there can be no assurance that the AEW Stock
Sale will be consummated even if the Stockholders approve it. Under
the terms of the Stock Purchase Agreement, AEW will conduct a due
diligence review of the Company's business and properties, and in
certain instances AEW will have the right to terminate the Stock
Purchase Agreement. See "Conditions to Closing", hereafter.
Use of Proceeds
After payment of offering expenses (including a placement fee)
estimated to be approximately $3.75 million, the Company expects that
the proceeds of the AEW Stock Sale (the "Transaction Proceeds") will
be used to repay the outstanding borrowings under the Company's
current revolving credit facility (the "Credit Facility") with Bank
of America, N.T. & S.A. ("BofA") estimated to be approximately $19
million. The balance of the Transaction Proceeds will be used for
working capital and general corporate purposes, which will include
acquisitions of additional suburban office and industrial properties.
Certain Rights Under the Stock Purchase Agreement
The following is a description of certain of the rights of AEW,
its affiliates and its transferees under the Stock Purchase
Agreement. In addition to the rights set forth below, AEW and other
holders of the AEW Preferred Stock will have certain rights set forth
in the proposed amendment to the Charter defining the terms of the
AEW Preferred Stock. See "Terms of the Series A Convertible
Preferred Stock", hereafter.
Registration Rights. The AEW Preferred Stock will not be
registered under the Securities Act of 1933, as amended (the
"Securities Act"), and accordingly may not be re-offered or re-sold
in the United States absent registration under the Securities Act or
an applicable exemption from the registration requirements under the
Securities Act. Under the Stock Purchase Agreement, any stockholder
owning 40% or more of the Registrable Securities (as defined
hereafter) that have not been sold to the public will have the right,
after the second anniversary of the Closing, to require the Company
to use its best efforts to register under the Securities Act no fewer
than one million shares of Registrable Securities for resale in up to
five registrations upon demand, but not more than once in any 12
month period. In addition, the Company has agreed to include in up
to four incidental ("piggyback") registrations shares of Common Stock
held by AEW, its affiliates or by any transferee of the registration
rights as permitted under the Stock Purchase Agreement (any of which
is a "Holder"), provided that the number of shares of Common Stock
that such Holder requests to be included is not less than 500,000.
If the Company qualifies for the use of Form S-3 as promulgated by
the Securities and Exchange Commission (the "SEC"), then any Holder
will, at any time after the second anniversary and prior to the
seventh anniversary of the Closing, have the right to cause the
Company to use its best efforts to effect a shelf registration of not
fewer than one million shares of the Registrable Securities.
"Registrable Securities" means the shares of Common Stock issuable
upon the conversion of the AEW Preferred Stock and any Common Stock
which may be issued or distributed in respect thereof by way of
recapitalization, reclassification, stock dividend, stock split or
other distribution. The registration rights will be assignable by
any Holder to any transferee acquiring at least 500,000 Registrable
Securities. The Company will pay all registration expenses in
connection with each registration of Registrable Securities pursuant
to the Stock Purchase Agreement.
Right to Participate in Future Offerings. So long as AEW owns
shares of AEW Preferred Stock which represent 15% or more of the
Outstanding Shares (as defined hereafter), AEW will have the right to
purchase for cash its pro rata share of each issuance by the Company
of New Securities, as defined hereafter, on the same terms and
conditions as the New Securities are offered to third parties.
"Outstanding Shares" means the sum of all then outstanding shares of
Common Stock plus the shares of Common Stock that would be issued
upon the conversion of the then outstanding shares of AEW Preferred
Stock. "New Securities" means any voting securities sold and issued
for cash or cash equivalents other than (i) securities issuable upon
conversion of any convertible voting securities; (ii) securities
issuable upon exercise of any options or warrants; (iii) securities
issuable pursuant to the Directors' Stock Option Plan and the
Employee Stock Option Plan of the Company (the "Stock Option Plans");
(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.
Business Combination Provisions; Rights Plan. Among other
conditions to Closing, the Company is required (i) to exclude AEW,
any of its Affiliates, as defined in the Charter (an "AEW Affiliate")
and any transferee of AEW from a provision of the Charter which would
otherwise limit the Company's ability to enter into certain
transactions with AEW, (ii) to exempt any business combination
between the Company and AEW, any AEW Affiliates and any transferee
from the provisions of Section 3-602 of the MGCL, and (iii) to redeem
all Rights (as defined hereafter) outstanding under, and terminate,
the Stockholder Rights Plan between the Company and Mellon Bank, N.A.
originally dated as of July 18, 1989 (the "Rights Plan") (the Rights
Plan, the Charter provision, and Section 3-602 of the MGCL
collectively are referred to hereafter as the "Takeover Provisions").
Pursuant to the above conditions to Closing, the Board has
adopted an irrevocable resolution to exclude AEW, AEW's Affiliates,
and any transferees of AEW from the limitations on business
combinations set forth in the Charter, thereby enabling the Company
to enter into business combinations (as defined in the Charter) with
AEW, subject to any other applicable limitations imposed by law.
Similarly, the Board has also adopted an irrevocable resolution
exempting any business combination (as defined in the MGCL) with AEW,
any AEW Affiliates or AEW's transferees from the business combination
provisions set forth in Title 3 of the MGCL, which would otherwise
apply to transactions between the Company and AEW, AEW Affiliates or
AEW's transferees. Therefore, even if the proposed amendment to the
Charter deleting the business combination provisions therefrom is not
approved by the Stockholders, the Board of Directors has irrevocably
waived the application of the business combination provisions set
forth in the Charter and the MGCL to AEW, AEW Affiliates and AEW's
transferees.
Also pursuant to the above conditions to Closing, the Board of
Directors has adopted a resolution, subject to Stockholder approval,
to amend the Company's Charter to delete in its entirety Article
VIII, relating to certain business combinations. In the event that
this proposed amendment to the Charter is not approved by the
Stockholders, it is expected that the Board subsequently will call a
special meeting of the stockholders to consider amending the Charter
to delete Article VIII. Pursuant to the terms of the AEW Preferred
Stock, the holders thereof have the right to vote on such a
subsequent proposal to amend the Charter to delete Article VIII
therefrom. In addition, Mr. Bedford will enter into an agreement
with AEW pursuant to which he will agree to vote his shares of Common
Stock in favor of such an amendment.
On July 18, 1989, the Board of Directors of the Company
declared a distribution of one right (each, a "Right") for each then
outstanding share of Common Stock and for each share of Common Stock
issued by the Company thereafter and prior to a date specified
pursuant to the terms of the related Rights Agreement. Following
certain business combinations, the Rights generally entitle the
holders thereof to acquire shares of the Company's authorized but
unissued Series A Preferred Stock (which is a completely different
and unrelated class of security from the AEW Preferred Stock) or, if
the Company was not the surviving corporation, capital stock of the
surviving corporation. The Company has agreed to redeem all
outstanding Rights, at a cost of approximately $60,000, and to
terminate the Rights Plan as a condition to Closing.
Reporting Requirements. Pursuant to the Stock Purchase
Agreement, the Company will provide either AEW or certain transferees
of the AEW Preferred Stock certain monthly, quarterly, and annual
reports, as well as a business plan for each fiscal year.
Share Transfer Covenants. The proposed amendment to the
Charter to be submitted for Stockholder approval also includes an
amendment to the Charter which would limit the transferability of the
Common Stock. More specifically, it will provide certain limitations
on the number of shares of the Company's stock which any person may
beneficially own (generally 5% of the value of the outstanding
shares). The ownership limitations are related to the maintenance of
the Company's status as a real estate investment trust under the
Internal Revenue Code. This proposed amendment to the Charter, which
would replace existing Article VII of the Charter, provides that Mr.
Bedford and AEW will be subject to higher ownership limitations,
provided that Mr. Bedford and AEW furnish certain representations and
undertakings set forth in the proposed amendment to the satisfaction
of the Board. In addition, under the terms of the proposed amendment
to the Charter, the Board may, in its absolute discretion, withhold
its consent to a transfer which would result in the transferee
holding an amount in excess of such limitation. Under the Stock
Purchase Agreement, however, the Company has agreed that its consent
to such a transfer by AEW of all or a portion of the AEW Preferred
Stock held by it will not be unreasonably withheld, 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 status as a REIT. Therefore, AEW would
be subject to a standard different from that which would be
applicable to other holders of the Company's stock.
Bylaw Amendments. As a condition to the Closing, the Company
will amend Article II, Section 18 of its Bylaws, pursuant to which
the Company has opted out of the Control Share Acquisition Statute of
the MGCL. The amended Bylaws will provide that this "opt-out" will
not be amended without the consent of a majority of the holders of
the AEW Preferred Stock. Generally, the Control Share Acquisition
provisions are anti-takeover provisions which disenfranchise "Control
Shares" (as defined in the MGCL) of their voting rights. In
addition, the Board will amend the Bylaws to include an
acknowledgment 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.
Certain Ancillary Agreements
In connection with the Stock Purchase Agreement, and in order
to clarify the terms of their relationships, the Company, Mr. Bedford
and BPIA have agreed to enter into the following agreements:
Voting Agreement. Mr. Bedford will execute a Voting Agreement
(the "Voting Agreement") with AEW pursuant to which Mr. Bedford will
agree to vote his shares of Common Stock in favor of the AEW Stock
Sale.
Standstill Agreement. Mr. Bedford will execute a Standstill
Agreement with the Company which will provide, among other things,
that Mr. Bedford shall not sell or otherwise dispose of certain of
his shares of Common Stock, or any interest in any shares of Common
Stock, without the consent of the Board of Directors. The Board will
give such consent only if the proposed transaction will not cause Mr.
Bedford and his Affiliates' ownership interest in the Company to fall
below the levels specified in the Stock Purchase Agreement and the
proposed amendment to the Charter describing the terms of the AEW
Preferred Stock. See "Terms of the Series A Convertible Preferred
Stock - Voting Rights" and "- Protective Provisions", hereafter.
BPIA Agreement. Westminster Holdings, Inc. (doing business as
BPI Acquisitions ("BPIA"), a corporation wholly owned by Mr.
Bedford), provides certain services to the Company relating to
acquisitions and financings. The Company and BPIA will enter into a
written contract (the "BPIA Agreement") memorializing the terms of
the relationship between the parties. Pursuant to the terms of the
BPIA Agreement, upon the completion of a financing or acquisition,
the Company will pay BPIA a fee equal to the lesser of (a) 1-1/2% of
the gross proceeds of a financing or of the purchase price of the
property, as the case may be, and (b) an amount equal to the costs
funded by Mr. Bedford through the time of such financing or
acquisition minus the aggregate amount of fees previously paid.
Under the BPIA Agreement, the Company will pay a fee to BPIA in
connection with the closing of the AEW Stock Sale and the Amended
Credit Facility.
The Amended Credit Facility. Simultaneously with, and as a
condition to Closing, the Company will enter into an amended credit
facility with BofA (the "Amended Credit Facility"). As a condition
to closing on the Amended Credit Facility, the Company will be
required to have closed the AEW Stock Sale. The Amended Credit
Facility will, for the first two years of its three year term, permit
borrowings in an aggregate principal amount of up to $60 million at
any one time outstanding, subject to limitations as described below.
Thereafter, the amount available will be reduced monthly based on a
20 year amortization formula. No borrowing will be permitted after
the expiration of the first two years of the term. Outstanding loans
under the Amended Credit Facility will bear interest at a floating
rate equal to either BofA's published "reference" rate plus .50% or
the Inter Bank Offering Rate plus 2.25% per annum.
The Company's ability to borrow under the Amended Credit
Facility is limited to an amount (the "Borrowing Base") equal to the
lesser of (i) a specified percentage of the appraised value of the
properties which have been pledged as collateral under the facility
and (ii) an amount calculated quarterly by reference to net operating
income (as such will be defined in the Amended Credit Facility) from
properties pledged as collateral under the Amended Credit Facility.
The Amended Credit Facility will be secured by mortgages on certain
of the properties acquired with the proceeds of the Amended Credit
Facility. Before a new property can be pledged as collateral under
the Amended Credit Facility and, therefore, added to the Company's
Borrowing Base, the property must be approved by BofA. The Amended
Credit Facility will be a full recourse obligation.
The Amended Credit Facility contains various restrictive
covenants which include, among other things, limitations on quarterly
dividends, a minimum ratio of cash flow to scheduled maturities of
long-term debt, a maximum ratio of debt to tangible net worth , and
limitations on liens, mortgages, certain additional indebtedness and
a restriction on making loans.
Under the Amended Credit Facility, the following, among others,
will represent events of default: (i) the failure of Mr. Bedford to
remain as Chief Executive Officer and Chairman of the Board (unless
he is replaced by someone satisfactory to BofA) and (ii) the
Company's failure to pay two consecutive dividends owing to the
holders of the AEW Preferred Stock and the exercise by such holders
of any of their rights arising therefrom.
Conditions to Closing
Each of the Company's and AEW's obligations to effect the
closing of the AEW Stock Sale is subject to various conditions.
AEW's obligation to consummate the Closing is subject to, among
others, the following conditions: (i) that the Company shall have
closed, simultaneously with the Closing of the AEW Stock Sale, on the
Amended Credit Facility with BofA, the material terms of which shall
be reasonably satisfactory to AEW; (ii) that the average closing sale
price of the Common Stock as reported by the New York Stock Exchange
for the seven business days immediately preceding the Closing Date
shall be at least $5.25; (iii) AEW's review, inspection and approval,
within the due diligence period as set forth in the Stock Purchase
Agreement of all economic, legal, physical and environmental matters
relating to the Company and the assets of the Company; (iv) that the
Company shall have terminated its Rights Plan and redeemed all
outstanding rights for an aggregate consideration of no more than
$60,000; and (v) either (A) the amendment to the Charter to remove
Article VIII shall have been approved by 80% of the Stockholders or
(B) Mr. Bedford shall have entered into an agreement reasonably
satisfactory to AEW pursuant to which he will vote his shares in
favor of the proposal to delete Article VIII and will not assert,
directly or indirectly, against AEW or its affiliate the provisions
of Article VIII.
Listing of the Common Stock Issuable Upon Conversion of the AEW
Preferred Stock
The AEW Preferred Stock will not be listed for trading on any
exchange. The Common Stock issuable upon conversion of the AEW
Preferred Stock will be listed on the New York Stock Exchange and the
Pacific Stock Exchange.
Terms of the Series A Convertible Preferred Stock
General
Other than AEW, the holders of the AEW Preferred Stock will
have no preemptive rights with respect to any shares of stock of the
Company or any other securities of the Company convertible into or
carrying rights or options to purchase any such shares. See "Stock
Purchase Agreement - Certain Rights Under the Stock Purchase
Agreement - Right to Participate in Future Offerings," above.
Ranking
The AEW Preferred Stock will rank senior to the Common Stock
with respect to the payment of dividends and amounts upon
liquidation, dissolution or winding up of the Company. Until such
time as the outstanding shares of AEW Preferred Stock represent less
than 15% of the Outstanding Shares, the Company may not authorize any
class or series of stock that ranks equal or senior to the AEW
Preferred Stock with respect to the payments of dividends or amounts
upon liquidation, dissolution or winding up without the consent of
the holders of a majority of the outstanding shares of AEW Preferred
Stock, voting together as a single class.
Dividends
Holders of shares of AEW Preferred Stock will be entitled to
receive in each calendar quarter, when and as authorized and declared
by the Board of Directors, out of assets of the Company legally
available for payment, cumulative dividends in cash in an amount
equal to the greater of (i) an amount per share of $.135 and (ii) the
dividends payable with respect to such quarter in respect of the
Common Stock into which each share of the AEW Preferred Stock is
convertible plus, in both cases, the dividends accumulated but unpaid
on the AEW Preferred Stock. If the holders of the AEW Preferred
Stock shall have exercised the right to redeem such stock and the
redemption payment has not been made, then the rate at which
dividends shall accrue shall increase to $.165 per share until either
the redemption price with respect to the AEW Preferred Stock is paid
or the size of the Board is increased to eleven directors. See
"Voting Rights", hereafter. Dividends on the AEW Preferred Stock
will be payable quarterly in arrears, (commencing with the calendar
quarter ending September 30, 1995) on such dates as the Board of
Directors may determine, which shall not be later than the 45th day
after the end of the calendar quarter.
Dividends may be authorized, declared and paid on shares of
Common Stock in any fiscal quarter only if full cumulative dividends
shall have been paid on or declared and set apart on all shares of
AEW Preferred Stock at such quarterly rates for all prior dividend
periods through and including the end of such quarter. In the event
that the Company declares a distribution payable other than in cash,
then the holders of the AEW Preferred Stock will be entitled to a
proportionate share of such distribution as though the holders of AEW
Preferred Stock were holders of the number of shares of Common Stock
into which the AEW Preferred Stock is convertible.
Liquidation Preference
The holders of shares of AEW Preferred Stock will be entitled
to receive in the event of a Liquidation Event, as defined below,
$6.30 per share of AEW Preferred Stock plus an amount per share of
AEW Preferred Stock equal to all dividends (whether or not earned or
declared) accrued and unpaid thereon to the date of final
distribution to such holders (the "Liquidation Preference"), and no
more.
Until the holders of the AEW Preferred Stock have been paid the
Liquidation Preference in full, no payment will be made to any holder
of Common Stock upon the occurrence of a Liquidating Event, as
defined hereafter. If, upon the Liquidating Event, the assets of the
Company, or proceeds thereof, distributable among the holders of the
shares of AEW Preferred Stock are insufficient to pay in full the
Liquidation Preference, then such assets will be distributed pro rata
to the holders of the AEW Preferred Stock in accordance with their
respective holdings thereof.
A Liquidating Event is (a) any transaction, including without
limitation a consolidation or merger of the Company, or other
corporate reorganization of the Company, if, immediately after such
transaction, the stockholders of the Company (determined prior to
such event) hold fifty percent or less in interest of the outstanding
voting securities of the surviving corporation, (b) a sale of all or
substantially all of the assets of the Company to any person, or the
acquisition of a majority of the outstanding shares of Common Stock
of the Company by any person, other than (i) AEW and its Affiliates
(as defined in the Stock Purchase Agreement), (ii) Peter Bedford,
members of his immediate family, or his Affiliates (as defined in the
Stock Purchase Agreement), (iii) as a result of the conversion of
shares of AEW Preferred Stock, and (iv) any underwriter in either a
public or private offering.
Redemption
All redemption payments will be made in cash, unless the
holders of the AEW Preferred Stock agree, at their sole discretion,
to accept an alternative form of payment. If redemption is
prohibited under the MGCL or similar statute, redemption shall be pro
rata to the extent of funds legally available for distribution.
Redemption at the Option of the Company. Except as provided
below under "Automatic Redemption", shares of AEW Preferred Stock
will not be redeemable by the Company prior to the second anniversary
of the Closing Date. At any time thereafter, the AEW Preferred Stock
may be redeemed in whole (but not in part) at the option of the
Company. The redemption price will be equal to a price calculated by
determining an internal rate of return on the AEW Preferred Stock of
25% per annum (treating the purchase price paid by AEW as investment
"out-flows", and all dividends and other distributions paid on the
AEW Preferred Stock from the date of issuance as "in-flows") for the
first two years commencing with the Closing Date until the date of
redemption and an internal rate of return on the AEW Preferred Stock
of 20% per annum from and after the second anniversary of the Closing
Date until the date of redemption, but not beyond the fifth
anniversary of the Closing Date.
At any time after the fifth anniversary of the Closing Date, or
at any time prior thereto if there are less than 400,000 shares of
AEW Preferred Stock outstanding, the AEW Preferred Stock may be
redeemed in whole or in part at the option of the Company. The
redemption price at such time will be $6.30 per share (declining $.06
in each of the first five full years commencing on the fifth
anniversary of the Closing) plus all accrued and unpaid dividends.
Prior to any redemption by the Company, the holders of AEW
Preferred Stock will have the right to convert the AEW Preferred
Stock into Common Stock of the Company provided that the holder of
AEW Preferred Stock shall have surrendered his or her certificates
for conversion and given written notice of the election to convert
not later than the close of business on the fifth day prior to the
redemption date.
Redemption at Preferred Stockholders Option. After the first
anniversary of the Closing, the Company will be required, at the
option of the holders of the AEW Preferred Stock, to redeem the AEW
Preferred Stock 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: (a) failure to pay
required dividends on the AEW Preferred Stock for two consecutive
quarters, including all dividends accumulated but unpaid for all
prior quarters; (b) a default in the payment of principal or interest
on any institutional debt (or debts) having an outstanding balance
(or balances aggregating) greater than (i) $5 million for non-
recourse debt, and (ii) $2 million for recourse debt (which default,
in either case, shall not have been cured by the Company within 30
business days from the time the Company receives written notification
of the default); (c) the failure of the Company to obtain any consent
of AEW or other holder of AEW Preferred Stock prior to completing any
Major Transaction, as and if required pursuant to the terms of the
proposed amendment to the Charter; (d) for calendar year 1996, the
Company's Funds Available for Distribution, as defined in the
proposed amendment to the Charter, ("FAD") fails to reach at least a
break-even dividend coverage equal to the full dividend payable on
the AEW Preferred Stock; (e) for calendar year 1997, the Company's
FAD fails to reach at least a break-even dividend coverage equal to
the full dividend payable on the AEW Preferred Stock and annual
dividends on the Common Stock equal to a seven percent (7%) yield on
$5.72 (rounded to the nearest whole cent); and (f) for calendar year
1998 and subsequent years, the Company'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 an
eight percent (8%) yield on $5.72 (rounded to the nearest whole
cent).
Automatic Redemption; Cancelable at the Option of the Non-
Series A Directors. In the event that the size of the Board of
Directors has been increased to eleven pursuant to the terms of the
proposed Charter amendment (See "Voting Rights", hereafter), and the
holders of AEW Preferred Stock have elected four Directors to fill
the newly created vacancies, then the Company shall be deemed to have
approved a redemption at the option of the Company, unless a majority
of the directors who are elected by the Stockholders cancel such
redemption. This Automatic Redemption provision, however, will have
no effect on the ability of a majority of the Board of Directors to
effect a redemption at any time following the second anniversary of
the Closing. See "Redemption at the Option of the Company", above.
Voting Rights
Except as indicated below, the holders of shares of AEW
Preferred Stock will have no voting rights. On those matters for
which the holders of the AEW Preferred Stock have the right to vote,
each share will have one vote.
Election of Directors. The holders of the AEW Preferred Stock
as a class initially will have the right to elect two directors. If
(i) the Company has failed in two consecutive quarters to pay in full
and in a timely manner the quarterly dividends on the AEW Preferred
Stock (including all dividends accumulated but unpaid for all prior
quarters), (ii) Mr. Bedford ceases to serve substantially full-time
as Chief Executive Officer of the Company, (iii) Mr. Bedford, his
Affiliates and members of his immediate family beneficially own fewer
than 1,198,278 shares of Common Stock of the Company, as adjusted for
any stock splits or similar transactions, or (iv) the Company fails
to pay the full redemption price payable to the holders of the AEW
Preferred Stock pursuant to a demand for redemption made by the
holders of a majority of the AEW Preferred Stock, then immediately
thereafter, and regardless of any subsequent cure, the holders of the
AEW Preferred Stock will be entitled to elect the smallest number of
directors constituting a majority of the Board of Directors. The
number of members of the Board after Closing will be seven. In order
to facilitate the effective control of the Board by the holders of
the AEW Preferred Stock, upon the occurrence of any such event, the
number of directors then constituting the Board of Directors of the
Company will be increased to eleven members, and the holders of the
AEW Preferred Stock will have the exclusive right to elect four
persons to fill such newly created vacancies on the Board.
In the event that the number of outstanding shares of AEW
Preferred Stock represents less than 15% but at least 7% of the
Outstanding Shares, then the holders of AEW Preferred Stock will be
entitled to elect only one member of the Board; should such number
represent less than 7% of the Outstanding Shares of Common Stock,
such right to elect directors will terminate altogether.
Senior Securities; Amendments to Charter. The approval of
holders of a majority of the outstanding shares of AEW Preferred
Stock, voting as a single class, will be required in order to amend
the Charter in a way that would materially and adversely affect the
rights or preferences of the holders of AEW Preferred Stock or to
authorize any class or series of stock having rights equal or senior
to the AEW Preferred Stock with respect to the payment of dividends
or amounts upon liquidation, dissolution or winding up of the
Company. The right of the holders of the AEW Preferred Stock to vote
on the foregoing matters will terminate if the outstanding shares of
AEW Preferred Stock represent less than 15% of the Outstanding
Shares.
Business Combination Provisions. If the Stockholders do not
approve the removal of the business combination provisions currently
set forth in Article VIII of the Charter, the holders of the AEW
Preferred Stock will have the right to vote on a proposal to delete
Article VIII of the Charter.
Conversion Rights
Shares of AEW Preferred Stock will be convertible at the option
of the holder at any time after the second anniversary of the Closing
into such number of shares of Common Stock as is determined by
dividing $6.00 by the then effective conversion price in respect of
the AEW Preferred Stock (the "Conversion Price") as then in effect.
The initial Conversion Price will be $6.00 per share and, therefore,
each share of AEW Preferred Stock initially will be convertible into
one share of Common Stock. The Conversion Price is subject to
adjustment as described below. The right to convert shares of AEW
Preferred Stock called for redemption will terminate at the close of
business on the fifth business day prior to any redemption date.
Fractional shares of Common Stock will not be issued upon
conversion but, in lieu thereof, the Company will pay a cash amount
equal to the fair market value of such fractional interests as
determined in good faith by the Board.
Conversion Price Adjustments. The Conversion Price is subject
to adjustments in the event that the Company issues Additional Stock
(as defined hereafter) for consideration which, on a per share basis,
is less than the Conversion Price as then in effect. Prior to the
second anniversary of the Closing, if the Company issues Additional
Stock for a consideration per share less than the Conversion Price,
then the Conversion Price shall be reduced, concurrently with such
issue, to a price equal to the consideration per share received by
the Company for such Additional Stock.
On or after the second anniversary of the Closing, if the
Company issues Additional Stock for consideration in an amount per
share which is less than the Conversion Price, then the Conversion
Price will be reduced. Such reduction will be proportionate to the
amount by which the Conversion Price exceeds the per share
consideration for the Additional Stock, taking into account the
amount of Additional Stock issued relative to the total outstanding
shares of Common Stock.
For purposes hereof, "Additional Stock" shall mean all Common
Stock issued by the Company after the Closing Date, other than Common
Stock issued or issuable at any time: (a) upon conversion of the AEW
Preferred Stock; (b) upon exercise of options outstanding on the
Closing Date; (c) upon issue of options granted pursuant to the Stock
Option Plans in amounts not exceeding the aggregate reserved for
issuance under such plans on the Closing Date, as increased from time
to time upon approval by a majority of the Directors elected by the
holders of the AEW Preferred Stock; (d) upon issue of warrants to
underwriters in any firm commitment public offering of securities by
the Company; (e) as a dividend or distribution on AEW Preferred Stock
or any subdivision, combination, or consolidation of the Common
Stock; or (f) by way of dividend or other distribution on shares of
Common Stock the issuance of which was excluded from the definition
of Additional Stock by clauses (a) through (f) of this paragraph, or
on shares of Common Stock so excluded.
The Conversion Price is also subject to adjustment upon certain
events including subdivisions, combinations and consolidation of
Common Stock. In addition, in the event that the Company makes a
distribution of securities of the Company other than Common Stock,
then provision shall be made such that holders of the AEW Preferred
Stock will receive, upon conversion thereof, in addition to Common
Stock, that amount of securities which they would have received had
their shares of AEW Preferred Stock been converted as of the date of
such distribution.
If the Common Stock issuable upon conversion of the AEW
Preferred Stock will 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 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 AEW Preferred Stock
shall be convertible into, 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 holders upon conversion of
the AEW Preferred Stock immediately before that change.
Protective Provisions
Pursuant to the terms of the proposed amendment to the Charter,
the consent of AEW or any transferee of AEW holding more than 50% of
the outstanding shares of AEW Preferred Stock will be required in
order for the Company to effect any of the following transactions
(the "Major Transactions"): (i) the sale, consolidation or merger of
the Company; (ii) the issuance or modification of any debt in a
principal amount which exceeds $10 million; (iii) the making of new
investments, including a purchase of real estate operating companies
or real estate investment trusts, 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; (iv)
the issuance of any equity securities, other than pursuant to the
Company's stock option plans with respect to compensation of
employees, directors and consultants, and the issuance of equity
securities the proceeds of which will be used to redeem the AEW
Preferred Stock; (v) the sale of any asset or assets with a sale
price in excess of $10 million, or any series of sales within any 90
day period with aggregate sales prices exceeding $25 million; (vi)
the modification of any executive employment contracts; (vii) the
modification of executive compensation including awards of any shares
or options; (viii) the modification of the BPIA Agreement or any
other agreement between the Company and Mr. Bedford or any of his
Affiliates (as defined in the Charter) which would make any of the
agreements less favorable to the Company, or entering into any new
agreement with Mr. Bedford or any of his Affiliates (except for the
Standstill Agreement); (ix) the termination of the Company's status
as a real estate investment trust (a "REIT"); (x) any substantial
change in the Company's current business strategies (as approved by
the Board of Directors); (xi) permitting Mr. Bedford to cease serving
as a full-time chief executive officer of the Company or permitting
Mr. Bedford to dispose of his shares of Common Stock so that Mr.
Bedford, his Affiliates (as defined in the Charter) and members of
his immediate family beneficially own less than 1,198,278 shares of
Common Stock (as adjusted for stock splits or similar transactions);
(xii) the issuance of awards of any shares or options other than
those permitted in paragraph (iv); and (xiii) any amendment to the
resolution of the Board of Directors exempting any transaction
between AEW or an AEW Affiliate and the Company from the provisions
of the business combination provisions set forth in the Charter and
in Section 3-602 of the MGCL, and exempting therefrom any transaction
contemplated by or resulting from the exercise of any redemption
right of the AEW Preferred Stock which may constitute a business
combination. See "Certain Rights Under the Stock Purchase Agreement
- - Business Combination Provisions". The foregoing right to approve
the Major Transactions will remain effective until such time as the
total outstanding shares of AEW Preferred Stock represent less than
15% of the Outstanding Shares.
In addition, for so long as the outstanding shares of AEW
Preferred Stock represent at least 15% of the Outstanding Shares, the
Company must obtain the approval of holders of a majority of the
outstanding shares of AEW Preferred Stock prior to filing or
assenting to or in any other way participating in the filing of an
involuntary petition in bankruptcy or seek similar protection from
creditors under federal or state bankruptcy or insolvency laws.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned, hereunto duly authorized.
BEDFORD PROPERTY INVESTORS, INC.
By: /s/ JAY SPANGENBERG
Jay Spangenberg
Chief Financial Officer
Date: May 19, 1995
