SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant X
Filed by a party other than the registrant
Check the appropriate box:
Preliminary proxy statement X
Definitive proxy statement
Definitive additional materials
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Bedford Property Investors, Inc.
(Name of Registrant as Specified in Its Charter)
Donald A. Lorenz
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
X $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
$500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)
(3).
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
<PAGE>
Dear Shareholder:
The directors and officers join me in extending to you a cordial invitation to
attend our Annual Meeting of Stockholders. This meeting will be on
____________ at __________ __.m., at the ______________________in _________,
California.
Enclosed please find the Proxy Statement. We apologize for the length of the
Proxy Statement, but it reflects the proposed sale of $50 million of Series A
Convertible Preferred Stock, a transaction your management recommends FOR
approval. In addition, the Proxy includes the customary election of directors
and two proposals amending the Charter of the Company. One proposal creates
an new class of stock to be known as Series A Convertible Preferred Stock, and
also limits the transferability of shares of Common Stock which is intended to
protect the Company from failing to meet one of the conditions to qualify as a
REIT. The other proposal deletes Article VIII of the Charter relating to
certain business combinations.
The sale of $50 million of Series A Convertible Preferred Stock will enable
the Company to grow in the near term. Your careful review of this transaction
and your support will be greatly appreciated.
Your management and Board of Directors unanimously recommend that you vote FOR
all of the proposals.
Please take time to review and vote on each proposal. Your vote is important.
Please remember to return your Proxy cards.
Hope to see you at the Annual Meeting.
Very truly yours,
Peter B. Bedford
Chairman of the Board and
Chief Executive Officer
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
270 Lafayette Circle
Lafayette, CA 94549
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held _____________________, 1995
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of Bedford Property Investors, Inc., a
Maryland corporation (the "Company"), will be held at
on _______________, 1995, at _______________________,
local time, to consider the following proposals:
1. To elect five Directors to serve until the next annual meeting of the
stockholders and until their successors are duly elected and qualify;
2. To consider for approval the sale and issuance of 8,333,334 shares
of Series A Convertible Preferred Stock of the Company to AEW Partners, L.P.
for an aggregate purchase price of $50 million;
3. To amend the charter of the Company (the "Charter") (i) to create a
new class of stock of the Company to be known as "Series A Convertible Preferred
Stock", and to state the terms of such class and (ii) to substitute a new
Article VII, containing provisions limiting the transferability of shares of
Common Stock intended to reduce the risk that the Company would fail to
satisfy one of the requirements for qualifying as a real estate investment
trust for federal income tax purposes;
4. To amend the Charter to delete in its entirety Article VIII, relating
to certain business combinations; and
5. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on _______________,
1995 are entitled to notice of and to vote at the meeting and any adjournment
thereof.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN
PERSON. THE
PRESENCE AT THE MEETING, IN PERSON OR BY PROXY, OF STOCKHOLDERS
HOLDING SHARES ENTITLED TO CAST A MAJORITY OF ALL VOTES ENTITLED TO BE CAST AT
THE MEETING SHALL CONSTITUTE A QUORUM. IF YOU CANNOT ATTEND THE MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENCLOSED
ENVELOPE AS PROMPTLY AS POSSIBLE.
By Order of the Board of Directors
JENNIFER I. MORI
Secretary
___________________, 1995
Lafayette, California
<PAGE>
PROXY STATEMENT
TABLE OF CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
PROPOSAL 1 ELECTION OF DIRECTORS. . . . . . . . . . . . . . . . . . . . 3
Executive Officers of the Company . . . . . . . . . . . . . . . 6
Compensation of Executive Officers. . . . . . . . . . . . . . . 7
Compensation of Directors . . . . . . . . . . . . . . . . . . . 10
Committees and Meetings of the Board of Directors . . . . . . . 11
Compensation Committee Interlocks and Insider Participation . . 12
Certain Other Matters . . . . . . . . . . . . . . . . . . . . . 12
Option Grants . . . . . . . . . . . . . . . . . . . . . . . . . 13
Aggregate Option Values at Year-End 1994. . . . . . . . . . . . 14
Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . . . . 14
Certain Relationship and Related Transactions . . . . . . . . . 15
Cost of Acquisitions . . . . . . . . . . . . . . . . . . . . 15
Other Transactions . . . . . . . . . . . . . . . . . . . . . 16
Vote Required; Recommendation of the Board of Directors . . . . 17
PROPOSAL 2 APPROVAL OF THE SALE AND ISSUANCE OF 8,333,334 SHARES OF
SERIES A CONVERTIBLE PREFERRED STOCK . . . . . . . . . . . . 18
The Series A Convertible Preferred Stock Purchase Agreement . . 18
General. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Reasons for AEW Stock Sale . . . . . . . . . . . . . . . . . 18
Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . 19
Certain Rights Under the Stock Purchase Agreement. . . . . . 20
Certain Ancillary Agreements . . . . . . . . . . . . . . . . 24
Fees and Expenses Payable in Connection with the Offering. . 26
Conditions to Closing. . . . . . . . . . . . . . . . . . . . 27
Listing of the Common Stock Issuable Upon Conversion of
the AEW Preferred Stock. . . . . . . . . . . . . . . . . . 27
Certain Considerations. . . . . . . . . . . . . . . . . . . . . 28
Vote Required; Recommendation of the Board of Directors . . . . 33
PROPOSAL 3 AMENDMENT OF CHARTER TO CREATE A NEW CLASS OF STOCK OF
THE COMPANY TO BE KNOWN AS "SERIES A CONVERTIBLE
PREFERRED STOCK", TO STATE THE TERMS OF SUCH STOCK AND TO
SUBSTITUTE A NEW ARTICLE VII REGARDING THE
TRANSFERABILITY OF THE COMPANY'S STOCK . . . . . . . . . . . 34
Terms of the Series A Convertible Preferred Stock . . . . . . . 34
General. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Ranking. . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . 35
Liquidation Preference . . . . . . . . . . . . . . . . . . . 36
Redemption . . . . . . . . . . . . . . . . . . . . . . . . . 37
Voting Rights. . . . . . . . . . . . . . . . . . . . . . . . 39
Conversion Rights. . . . . . . . . . . . . . . . . . . . . . 41
Protective Provisions. . . . . . . . . . . . . . . . . . . . 43
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . 45
Limitations on Transferability of the Company's Stock . . . . . 45
The Current Charter Provision. . . . . . . . . . . . . . . . 45
The Articles of Amendment. . . . . . . . . . . . . . . . . . 45
Vote Required; Recommendation of the Board of Directors . . . . 49
PROPOSAL 4 AMENDMENT OF CHARTER TO DELETE THE PROVISIONS OF
ARTICLE
VIII REGARDING CERTAIN BUSINESS COMBINATIONS . . . . . . . . 50
Vote Required; Recommendation of the Board of Directors . . . . 52
INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . 52
OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE. . . . . . . . . . . . 53
STOCKHOLDER PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . . 53
EXHIBITS
EXHIBIT A Articles of Amendment Defining the Terms of the Series
A Convertible Preferred Stock and Amending the
Limitations on the Transferability of the Company's
Stock
EXHIBIT B Articles of Amendment Deleting Article VIII (relating
to Certain Business Combinations) from the Charter
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
270 Lafayette Circle
Lafayette, CA 94549
_____________________
PROXY STATEMENT
_____________________
__________________, 1995
Annual Meeting of Stockholders
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board of Directors" or the "Board") of Bedford Property
Investors, Inc., a Maryland corporation (the "Company"), of proxies from the
holders (the "Stockholders") of the Company's issued and outstanding shares of
Common Stock, par value $.01 per share (the "Common Stock"), to be exercised at
the Annual Meeting of Stockholders to be held on _______________, 1995, at
, at ____________, local time,
and at any adjournment(s) or postponement(s) of such meeting (the "Annual
Meeting"), for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders.
This Proxy Statement and the enclosed Proxy Card are being mailed to the
Stockholders on or about _______________, 1995.
Only the holders of record of the shares of Common Stock at the close of
business on _______________, 1995 (the "Record Date") are entitled to notice of
and to vote at the Annual Meeting. As of the Record Date, ______________ shares
of Common Stock were outstanding, each of which is entitled to cast one vote.
The presence at the Annual Meeting, in person or by proxy, of Stockholders
holding shares entitled to cast a majority of all the votes entitled to be cast
at the Annual Meeting shall constitute a quorum for the transaction of business
at the Annual Meeting. Abstentions and broker non-votes (i.e., votes not cast
by a broker or other record holder in "street" or nominee name solely because
such record holder does not have discretionary authority to vote on the matter)
will be counted toward the presence of a quorum. Abstentions and broker non-
votes will not be counted as votes cast and will have no effect on the result of
the election of directors (Proposal 1). With respect to the approval of the
sale of Series A Convertible Preferred Stock (Proposal 2), abstentions and
broker non- votes will have no effect on the result of the vote, assuming
that the number of votes cast represents over 50% of all outstanding shares
of Common Stock. With respect to the amendments to the Charter of the
Company (the "Charter") (Proposals 3 and 4), abstentions and broker non-votes
will have the same effect
as votes against those Proposals.
The approval of each of Proposals 2 and 3 is contingent on the approval of
the other. Unless both proposals are approved by the Stockholders, neither
proposal will be permitted to become effective by the Company.
All expenses in connection with the solicitation of proxies will be borne by
the Company. In addition to solicitation by mail, officers and directors of the
Company may also solicit proxies by mail, telephone, facsimile or in person.
Additionally, the Company may retain the services of a professional proxy
solicitation firm to assist in the solicitation of proxies, at a cost of
approximately $_______________ plus expenses, which would be borne by the
Company.
The shares of Common Stock represented by all properly executed Proxy Cards
will be voted at the Annual Meeting as indicated or, if no instruction is given,
in favor of all of the Proposals. As to any other business which may properly
come before the Annual Meeting, all properly executed Proxy Cards will be voted
by the persons named therein in accordance with their best judgment. The
Company does not presently know of any other business which may come before
the Annual Meeting. Any person giving a proxy has the right to revoke it
at any time before it is exercised (a) by filing with the Secretary of the
Company a duly signed revocation or Proxy Card bearing a later date or (b) by
voting in person at the Annual Meeting.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
Stockholders are not permitted to cumulate votes in the election of
directors. The nominees for election as directors of the Company and their
principal occupations for the past five years, their ages and the number of
shares of Common Stock beneficially owned by them on April 28, 1995 are set
forth below.
If any nominee is unable or unwilling to serve as director at the time of the
Annual Meeting, the proxies will be voted for another nominee designated by the
Nominating Committee. It is not expected that any nominee will be unable or
unwilling to serve as director. All directors are elected to serve until the
next annual meeting of Stockholders and their successors are duly elected and
qualify.
Shares Percent
Business Experience Director Beneficially of
Name Age During Past Five Years Since Owned Class
Claude M.
Ballard 65 Chairman (1992-1994) and a member 1992 71,000(1) 1.1%
(1987-1994) of the Board of Rocke-
feller Center Properties, Inc. (a
real estate investment trust);
Limited Partner of The Goldman Sachs
Group, L.P. (since 1989); Limited
Partner of Goldman Sachs & Co. (1988-
1989); Director of American Building
Maintenance Industries, Inc. (1981-
1994) (building maintenance);
Director of CBL & Associates (since
1993) (a real estate investment
trust); Director of Taubman Centers,
Inc. (since 1993) (a real estate
investment trust); Trustee of Mutual
Life Insurance Company of New York
(1989-1994); Chairman of Merit Equity
Partners, Inc. (since 1989) (property
acquisition and management); Director
of Horizon Hotels, Inc. (since 1990)
(hotel ownership and management).
Peter B.
Bedford 57 Chairman of the Board and Chief 1992 1,606,825(2) 25.2%
Executive Officer of the Company
(since 1992); Director of Bank
America Corporation (since 1987);
Director of Bixby Ranch Company
(since 1985) (a real estate invest-
ment company); Chairman of the Real
Estate Center Advisory Board of the
Wharton School at the University of
Pennsylvania (1992-1994); Chairman of
the Board of Kingswood Realty Advi-
sors, Inc. (1990-1994) (investment
and asset management); President of
Bedford Properties Holdings, Ltd.
(formerly Bedford Properties, Inc.)
(since 1962) (real estate development
and property management).
Anthony
Downs 64 Director of General Growth Proper- 1992 70,500(1) 1.1%
ties, Inc. (since 1992) (a real
estate investment trust); Senior
Fellow at the Brookings Institution
(since 1977) (non-profit policy
research organization); Director of
Massachusetts Mutual Life Insurance
Co. (since 1993); Director of Pittway
Corporation (since 1971) (manufac-
turing company); Director of the
Urban Land Institute (since 1979);
Director of Urban Institute (since
1977); Director of NAACP Legal
Educational & Defense Fund, Inc.
(since 1986); Director of NHP
Foundation (since 1991) (a housing
fundation); Executive Consultant to
Salomon Brothers (1986-1994) and
Aetna Realty Investors (since 1977).
Anthony M.
Frank 63 Chairman of Acrogen, Inc. (since 1992 78,000(1) 1.2%
1992) (a bio-tech company); Director
of Charles Schwab & Co., Inc. (since
1993); Director of Irvine Apartment
Communities, Inc. (since 1993) (a
real estate investment trust);
Director of Capital Guaranty
Corporation (since 1993) (a municipal
bond insurance company); Director of
General American Investors (since
1992); Director of Living Centers of
America (since 1992) (retirement
centers); Director of Adia Temporary
Services (since 1994); Director of
Temple-Inland (since 1992) (a forest
products company); Postmaster General
of the United States (1988-1992);
Chief Executive Officer of First
Nationwide Bank (1971-1988).
Martin I.
Zankel,
Esq. 60 Senior Partner at the law firm of 1992 90,000(1) 1.4%
Bartko, Zankel, Tarrant & Miller and
predecessor firms (since 1979);
Chairman of the Board and Chief
Executive Officer of Landsing Pacific
Funds, Inc. (since 1992) (a real
estate investment trust).
(1) Number of shares beneficially owned includes, for each of these directors,
exercisable options to acquire 70,000 shares each. Voting power and
investment power are not shared with others.
(2) Includes 100,000 shares owned by Mr. Bedford's daughter and 95,000 shares of
Common Stock subject to exercisable options. Mr. Bedford has sole voting
power with respect to all of said shares. Additionally, Mr. Bedford has
sole voting power with respect to 200,000 shares owned by his two sons.
The following persons have been chosen by the prospective purchasers of the
Series A Convertible Preferred Stock to serve as directors of the Company
contingent on the closing of the sale of the Series A Convertible Preferred
Stock. See Proposal 2 and Proposal 3 - "Terms of the Series A Convertible
Preferred Stock - Voting Rights". The following persons have not been nominated
for election by the Stockholders, and, accordingly, their names do not appear on
the enclosed Proxy Card. Rather, they will serve at the election of the holders
of Series A Convertible Preferred Stock.
Thomas G. Eastman is a founder and co-chairman of Aldrich Eastman Waltch
("AEW"). He is a board member and former Chairman of the National Association
of Real Estate Investment Managers. He is a Member of the Urban Land
Institute and its Finance and Membership Committees. He is a Member of the
Executive Committee of the Institutional Real Estate Clearinghouse. Mr.
Eastman is a graduate of Stanford University (B.A.) and Harvard University
(M.B.A.).
Thomas H. Nolan, Jr. directors the management of several commingled investment
fund portfolios. Mr. Nolan joined AEW in 1984 and has specialized in multi-
asset portfolios. Prior to that, Mr. Nolan spent five years with Coopers &
Lybrand where he specialized in real estate and financial service
organizations. He is a Certified Public Accountant and a member of the
American Institute of Certified Public Accountants. Mr. Nolan is a graduate
of the University of Massachusetts (B.B.A.).
Executive Officers of the Company
The following four (4) persons serve as executive officers of the Company:
Shares
Business Experience Beneficially
Name Age During Past Five Years Owned
Peter B.
Bedford 57 Chairman of the Board and Chief Executive 1,606,825(3)
Officer of the Company (since 1992); Director
of Bank America Corporation (since 1987);
Director of Bixby Ranch Company (since 1985) (a
real estate investment company); Chairman of
the Real Estate Center Advisory Board of the
Wharton School at the University of
Pennsylvania (1992-1994); Chairman of the Board
of Kingswood Realty Advisors, Inc. (1990-1994)
(investment and asset management); President
of Bedford Properties Holdings, Ltd. (formerly
Bedford Properties, Inc.) (since 1962) (real
estate development and property management).
Donald A.
Lorenz 45 Executive Vice President of the Company (since 0(1)
September 1994); Chief Executive Officer of
Tri-Ox (1993-1994) (a manufacturing company);
Executive Vice President of Bedford Holdings
Ltd. (1989-1993); Managing Partner of
Armstrong, Gilmour & Associates (1979-1989) (a
certified public accounting firm).
Jay
Spangenberg
32 Chief Financial Officer of the Company (since 14,650(1)(2)
1993);
Project Manager of Kemper Real Estate
Management Company (1992-1993); Assistant
Treasurer of Bedford Properties Holdings, Ltd.
(1990-1992); Assistant Vice President of Bank
of America (1985-1990).
Hanh Kihara 47 Controller of the Company (since 1993); 8,750(1)(2)
Controller (1991-1993) and Assistant Controller
(1990-1991) of Bedford Properties Holdings,
Ltd. ; Manager of Armstrong, Gilmour &
Associates (1988-1990); Certified Public
Accountant (since 1989).
(1) The percentage of the shares of Common Stock beneficially owned by each
of these executive officers is less than 1% of the Common Stock outstanding.
(2) Includes, for each of these two executive officers, exercisable options
to acquire 8,750 shares of Common Stock.
(3) Includes 100,000 shares owned by Mr. Bedford's daughter and 95,000 shares
of Common Stock subject to exercisable options. Mr. Bedford has sole voting
power with respect to all of said shares. Additionally, Mr. Bedford has sole
voting power with respect to 200,000 shares owned by his two sons. As noted
above, Mr. Bedford beneficially owns 25.3% of the outstanding shares of
Common Stock.
Compensation of Executive Officers
The following table sets forth information regarding compensation paid by the
Company for services rendered during the past three years for the Company's
Chief Executive Officer and the two most highly compensated executive
officers of the Company who were
employed by the Company as of December 31, 1994 (collectively, the "Named
Executive Officers"). No executive officer other than the Named Executive
Officers earned more than $100,000 in any year. The salaries of the two Vice
Presidents-Acquisitions were, as of
December 31, 1994, paid by BPI Acquisitions, then a separate division of the
Company which was funded by Mr. Bedford. The acquisition personnel are now
employed directly by a separate corporation, wholly-owned by Peter Bedford.
See "Certain Relationships and
Related Transactions -- Cost of Acquisitions". Prior to July 1992, the
Company's affairs were managed by Kingswood Realty Advisors, Inc., and the
Company had no salaried employees.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation(1) Compensation
Securities Underlying
Options/SARS
Name and Principal Position Year Salary Options SARs
Management of Bedford
Property Investors:
Peter B. Bedford,
Chief Executive Officer(2) 1994 $156,013 10,000(3) -0-
50,000(4)
1993 $129,615 10,000(3) -0-
1992 -0- 50,000(3) -0-
Management of BPI Acquisitions:
John Papini,
Vice President-
Acquisitions(5) 1994 $147,988 20,000(6) 10,000
1993 $ 86,135 10,000(4) -0-
Robert E. Pester,
Vice President-
Acquisitions(7) 1994 $131,195 30,000(6) 10,000
(1) The Company did not pay any bonuses to any of the Named Executive
Officers during the fiscal years covered by the table.
(2) Mr. Bedford did not commence employment with the Company until February
1993. He began serving as a director of the Company in December 1990.
(3) Represents stock options granted pursuant to the Directors' Stock
Option Plan.
(4) Represents stock options granted pursuant to the Employee Stock Option
Plan.
(5) Mr. Papini commenced employment with the Company in February 1993;
however, as of March 1995, he was no longer employed by the Company.
(6) 10,000 of which represent either stock options or stock appreciation
rights ("SARs"), at the option of holder thereof, granted under the
Employee Stock Option Plan.
(7) Mr. Pester commenced employment with the Company in February 1994.
Employment Contract. On February 16, 1993, the Company entered into an
employment agreement with Mr. Bedford, Chairman of the Board and Chief
Executive Officer. Concurrently with the closing of the sale of the Series A
Convertible Preferred Stock, the Company will amend its employment agreement
(the "Amended Employment Agreement") with
Mr. Bedford. Pursuant to the Amended Employment Agreement, Mr. Bedford has
agreed to serve as Chief Executive Officer and Chairman of the Board on a
substantially full-time basis
for a term of five years from the date of the closing of the sale of Series A
Convertible Preferred Stock. Under the contract, both currently and as
amended, the Company agrees to pay Mr. Bedford $150,000 per annum. If the
Company fails to give Mr. Bedford one year
notice of termination of his employment, he will be entitled to severance pay
equal to one year's salary. The Amended Employment Agreement expires in
2000, but will be automatically renewable for an additional one-year term
unless either party notifies the other of termination thereof.
Employee Stock Option Plan. A total of 1,800,000 shares of the Company's
Common Stock have been reserved for issuance under the Company's 1985 Stock
Option Plan (the "Employee
Stock Option Plan"). The Employee Stock Option Plan expires by its own terms
in 2003.
The Employee Stock Option Plan provides for the grant of "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), non-qualified stock options and SARs to
officers, key employees and consultants
of the Company. Incentive stock options may be granted only to employees.
The Employee Stock Option Plan is administered by the Compensation Committee,
which determines the terms of options and SARs granted, including the
exercise price, the number of shares subject to an option, and an option's
exercisability. Options granted to employees are
exercisable upon vesting, which typically occurs over a four-year period.
The Employee Stock Option Plan requires that the exercise price of incentive
stock options be at least equal to the fair market value of such shares on
the date of grant and that the exercise price of non-qualified stock options
be equal to at least 85% of the fair market value of such shares on the date
of grant. The maximum term of options granted under the Employee Stock
Option Plan is ten years. Incentive stock options may
not be granted to any participant who owns stock possessing more than 10% of
the voting rights of the Company's outstanding capital stock.
SARs may be granted in conjunction with stock options granted under the
Employee Stock Option Plan and entitle the holder to receive the difference
between the fair market value and the exercise price of the Common Stock
receivable upon exercise of the underlying option. The value of a SAR may be
paid in cash or Common Stock, at the option of the Company. A SAR granted in
tandem with an incentive stock option may not be exercised if
a previously issued incentive stock option or related SAR held by such person
remains outstanding. The exercise of a SAR results in the termination of the
related option on a share-for-share basis. Shares covered by such terminated
options are not eligible for reissuance under the Employee Stock Option Plan.
Compensation of Directors
Members of the Board of Directors who are not employees of the Company are
currently paid an annual retainer fee of $12,500 and an additional fee of
$2,500 for each Board meeting attended. Any Director attending in person a
duly constituted meeting of a committee of the Board of Directors of which
such Director is a member shall receive, in
addition to any other fees to which he may be entitled, a separate meeting
attendance fee equal to $2,500 for his or her attendance in person at any
such committee meeting not held on the same day, the day preceding or the day
following a regular or special meeting of
the Board of Directors. Any member of the Board of Directors who
participates in a regular or special meeting of the Board of Directors by
conference telephone or similar communications equipment shall receive $600
for each such meeting. Directors are reimbursed for out-of-pocket expenses
in connection with attendance at meetings. If a Director travels to conduct
a site inspection of a property to be acquired by the Company,
such Director is paid $1,000 per day and reimbursed for related travel
expenses. Directors receive no other compensation for their services on
behalf of the Company (except under the 1992 Directors' Stock Option Plan).
1992 Directors' Stock Option Plan. Under the Company's 1992 Directors' Stock
Option Plan (the "Directors' Plan"), members of the Board of Directors are
granted non-qualified stock options. The aggregate number of shares of
Common Stock reserved for issuance under the Directors' Plan is 500,000. The
Directors' Plan is administered by the Compensation
Committee of the Board of Directors of the Company. Pursuant to the
Directors' Plan, each first year director is granted an option for 50,000
shares of Common Stock effective on the date on which such person becomes a
director, and an additional option for 10,000
shares on the date of each successive annual meeting, provided they are re-
elected to the Board. On May 20, 1992, subject to subsequent approval of the
Directors' Plan by the Company's Stockholders, each of the five Directors was
granted an option for 50,000 shares of Common Stock at an exercise price of
the then market price (as defined in the Directors' Plan) of $2.665 per share.
On June 9, 1993, each of the same five Directors was granted an additional
option for 10,000 shares of Common Stock at the then market
price of $3.856 per share. On May 18, 1994, each of the same five Directors
was granted an additional option for 10,000 shares of Common Stock at the
then market price of $6.483 per share. Options granted under the Directors'
Plan are exercisable six months from the date of grant. As of November 18,
1994, all options granted under the Directors' Plan were exercisable. As of
April 28, 1995, no options granted under the Directors' Plan had
been exercised. As of April 28, 1995, the market value of Common Stock
subject to options under the Directors' Plan, as measured by the closing
price on the New York Stock Exchange, was $5.50 per share.
Committees and Meetings of the Board of Directors
The Board of Directors held four regular meetings and no special meetings
during the 1994 fiscal year. During that period, no director was absent from
any meeting of the Board or of any committee on which he served.
The Company has an Audit Committee which consists of Messrs. Ballard
(Chairman), Downs and Frank. The Audit Committee reviews the internal
controls of the Company and reviews the services performed and to be
performed by the independent auditors of the Company
during the year. The Audit Committee also meets regularly with the
independent auditors to review the quarterly financial statements of the
Company and to review the scope and results of the annual audit. The Audit
Committee held one meeting during 1994.
The Company has a Compensation Committee which consists of Messrs. Downs
(Chairman), Frank and Zankel. The Compensation Committee is responsible,
with respect to stock options, for the administration of stock option plans
of the Company, including the Employee Stock Option Plan and the 1992
Directors' Stock Option Plan. A description of the Employee Stock Option
Plan, the 1992 Directors' Stock Option Plan and the 1989 Share
Equivalent Incentive Plan is included under "Compensation of Directors and
Executive Officers". The Compensation Committee met once during 1994.
The Company also has a Nominating Committee which consists of Messrs. Frank
(Chairman) and Ballard. The Nominating Committee is responsible for
submitting nominations for the various officers and for directors which
elections are to be held at the Annual Meeting
of Stockholders. The Nominating Committee does not consider nominees proposed
by Stockholders. The Nominating Committee held one meeting in 1994.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee during 1994 were Messrs. Downs,
Frank and Zankel. None of these individuals were officers or employees of
the Company at any time during the year ended December 31, 1994, nor have any of
these individuals ever been an officer of the Company or any of its
subsidiaries. In addition, none of the executive
officers of the Company served on the compensation committee of another entity
or as a director of an entity which employs any of the members of the
Compensation Committee.
Certain Other Matters
Mr. Bedford did not file a Form 4 in connection with certain transactions
involving the sale of shares held by Kingswood Realty Advisors, Inc., which is
now subject to bankruptcy proceedings. In addition, Mr. Bedford did not file a
Form 4 with respect to the transfer of shares in certain other transactions.
Mr. Bedford filed a Form 5 at year end reporting all of such sales.
Option Grants
The following table sets forth certain information concerning options/SARs
granted during 1994 to the Named Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Number of % of Total Exer-
Securities Options/SARs cise
Underlying Granted to or Base Expira-
Options/SARs Employees in Base Price tion
Name Granted Fiscal Year ($/Share) Date
Peter B. Bedford 10,000(1) 5.2% 6.483 11/18/99
50,000(2) 26.2% 7.00 5/18/99
John Papini 10,000(2) 5.2% 7.00 5/18/99
10,000(2) 5.2% 6.875 9/23/04
Robert E. Pester 10,000(2) 5.2% 7.00 5/18/99
10,000(2) 5.2% 6.875 3/16/04
10,000(2) 5.2% 6.875 9/23/04
(1) Stock Options granted pursuant to 1992 Directors Stock Option Plan, which
options vest and become exercisable six months from the date of grant.
(2) Stock Options granted pursuant to Employee Stock Option Plan, which
options vest and become exercisable at a rate of 25% per year either from the
date of employment or the date of grant.
In addition to the options indicated above, on May 18, 1994, options to
purchase up to 51,000 shares of Common Stock were granted to officers and
employees other than the Named Executive Officers under the Company's
Employee Stock Option Plan (the "Employee Plan") at the then market price of
$7.00 per share. Additionally on September 23, 1994, options
to purchase up to 30,000 shares of Common Stock (or SARs, at the option of the
holders) were granted at the then market price of $6.875 per share. Such
options vest and become exercisable at a rate of 25% per year from either the
date of employment or the date of grant. In general, the Employee Plan
provides that all options held by an officer or employee shall be cancelled
upon termination of employment and after the expiration of
specified time periods during which the optionee may exercise his or her
options. As of April 28, 1995, the market value of Common Stock subject to
options under the Employee Plan, as measured by the closing price on the New
York Stock Exchange, was $5.50 per share. No stock options or SARs were
exercised in 1994.
Aggregate Option Values at Year-End 1994
The Named Executive Officers did not exercise any stock options or SARs in
1994. The following table sets forth the number and aggregate dollar value
of Named Executive
Officers' unexercised options at the end of 1994.
AGGREGATED OPTION/SAR
EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Value of Securities
Number of Securities Unexercised in-the-
Underlying Unexercised Money Options at
Options/SARs at FY-End FY-End
Name Exercisable Unexercisable Exercisable Unexercisable
Peter B. Bedford 82,500 37,500 $158,190 $0
John Papini 5,000 25,000 $3,125 $9,375
Robert E. Pester 0 30,000 $0 $0
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of April 28, 1995, with respect
to each person who is known by the Company to own beneficially more than 5%
of the shares of its Common Stock, and with respect to shares owned
beneficially by all directors and officers of the Company as a group:
Number of Shares Percent
Name and Address Beneficially Owned Outstanding Shares
Peter B. Bedford 1,606,825(1) 25.2%
270 Lafayette Circle
Lafayette, CA 94549
All Directors and Officers 1,950,566(2) 30.6%
as a group (10 persons)
(1) Includes 100,000 shares owned by Mr. Bedford's daughter and 95,000 shares
of Common Stock subject to exercisable options. Mr. Bedford has sole voting
power with respect to all of said shares. Additionally, Mr. Bedford has
sole voting power with respect to 200,000 shares owned by his two sons.
(2) Includes exercisable options to purchase 397,500 shares.
Certain Relationship and Related Transactions
Cost of Acquisitions
From February 1993 until December 31, 1994, all of the Company's activities
relating to debt and equity financings and the acquisition of new properties
(the "Acquisition Services") were handled under an arrangement with Mr. Bedford
whereby he provided acquisition and financing personnel (the "Acquisition
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 was paid a fee by
the Company equal to the lesser of (a) 1-1/2% of the gross amount raised or
of the purchase price of a property, as the case may be, or (b) an amount
equal to (i) the aggregate amount of costs funded by Mr. Bedford through the
time of such acquisition or financing minus (ii) the aggregate amount of fees
previously paid to Mr. Bedford pursuant to such arrangement. In no event
would the aggregate amount of fees paid to Mr. Bedford
exceed the aggregate amount of costs funded by Mr. Bedford. Such fees were
capitalized by the Company as part of the direct costs of acquisition and
financing activities. As of December 31, 1994, the Company had paid Mr.
Bedford an aggregate amount of $903,000 pursuant to this arrangement, which
was $712,000 less than the amount of total acquisition
and financing costs funded by Mr. Bedford. Commencing as of January 1, 1995,
the Acquisition Services have been performed by Bedford Acquisitions, Inc.
d/b/a/ BPI Acquisitions ("BPIA"), a California corporation wholly owned by
Mr. Bedford, pursuant to a written contract. Accordingly, the Acquisition
Personnel previously employed by the Company are now employed by BPIA, and
all amounts previously owed to Mr. Bedford
personally are now owed to BPIA. The substantive financial terms of the
arrangement remain unchanged. See Proposal 2 - "The Series A Convertible
Preferred Stock Purchase Agreement - Certain Ancillary Agreements".
Upon closing of the sale of Series A Convertible Preferred Stock, the Company
will pay $750,000 to BPIA for its services and expenses in connection with
the sale. In addition, upon closing of the Amended Credit Facility, as
defined hereafter, the Company will pay
BPIA $555,000 in connection therewith. Amounts paid will be in accordance with
the agreement between BPIA and the Company, and will not exceed the actual
costs incurred by BPIA.
Other Transactions
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.
During 1994, furniture and equipment was purchased from a company wholly
owned by Mr. Bedford. The purchase price of approximately $69,000 was based
on independent valuations.
Martin I. Zankel, a director of the Company, and his associates provided legal
services to the Company for which his firm was paid, in the aggregate,
$82,666, in 1994.
Mr. Bedford is the President and sole director of Kingswood Realty
Advisors, Inc.("Kingswood Realty"), a real estate investment advisory
company. Kingswood Realty, a former advisor of the Company, ceased
operations on January 26, 1994. Following the
termination of its operations, Kingswood Realty retained as its sole asset
44,250 shares of the Company's Common Stock while its liabilities consisted
of its obligations under three long-term office leases. Although Kingswood
Realty was able to negotiate the early termination of one of these leases,
the landlords under the other two leases refused to negotiate an early
termination of such leases, and as a result Kingswood Realty filed a
petition under Chapter 11 of the United States Bankruptcy Code on June 8,
1994. The sole creditors in the bankruptcy proceeding are Kingswood Realty's
prior two landlords.
Vote Required; Recommendation of the Board of Directors
Election as a Director requires the approval of a plurality of all of the
votes cast at the meeting. THE BOARD RECOMMENDS THAT YOU VOTE "FOR" ALL OF THE
NOMINEES. IN THE ABSENCE OF INSTRUCTIONS TO THE CONTRARY, PROXIES SOLICITED IN
CONNECTION WITH THIS PROXY STATEMENT WILL BE SO VOTED.
<PAGE>
PROPOSAL 2
APPROVAL OF THE SALE AND ISSUANCE OF 8,333,334 SHARES
OF SERIES A CONVERTIBLE PREFERRED STOCK
THE APPROVAL OF THE SALE OF THE SERIES A CONVERTIBLE PREFERRED STOCK
PURSUANT TO THIS PROPOSAL 2 IS CONTINGENT UPON THE APPROVAL OF THE PROPOSED
CHARTER AMENDMENT IN PROPOSAL 3. UNLESS BOTH PROPOSALS ARE APPROVED, NEITHER
PROPOSAL WILL BE PERMITTED TO BECOME EFFECTIVE BY THE COMPANY.
The Series A Convertible Preferred Stock Purchase Agreement
General
As required by the rules of the New York Stock Exchange (the "NYSE"), the
Stockholders are being asked to approve the sale and issuance of Series A
Convertible Preferred Stock to AEW Partners, L.P., a Delaware limited
partnership, or to a single affiliate of AEW to be identified prior to
Closing (either of which is referred to hereafter as "AEW"). The
Company has entered into a Series A Convertible Preferred Stock Purchase Agree-
ment with AEW dated as of May 18, 1995 (the "Stock Purchase Agreement")
pursuant to which the Company has agreed to sell and issue on the date of
closing of the sale (the "Closing
Date"), and AEW has agreed to purchase, each subject to the conditions set
forth in the Stock Purchase Agreement, 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, at the
option of holder, after two years from the date of issuance into one share of
Common Stock. The initial Conversion Price (as hereinafter defined)
represents a 5% premium over the average closing price of the Common Stock
for the 60 trading days prior to May 18, 1995. The
conversion price is subject to adjustment on certain events as 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.
Reasons for AEW Stock Sale
The Board of Directors believes that the AEW Stock Sale is in the best
interest of the Company because it will enable the Company to (i) increase
its market capitalization which may, in the future, enable the Company to
raise additional equity capital, (ii) increase the amount available under
its Credit Facility from $23 million to $60 million and (iii)
increase its asset base by using a portion of the proceeds of the AEW Stock Sale
to finance real estate acquisitions. Moreover, the Board believes that the
consummation of the AEW Stock Sale would be advantageous to the Company
because the price of the AEW Preferred Stock, based on its conversion price,
represents a 5% premium over the average closing price of the Common Stock
for the 60 trading days prior to May 18, 1995 and a 12%
premium to the closing price of the Common Stock on May 18, 1995.
The Board of Directors reserves its right, pursuant to the Stock Purchase
Agreement, to amend the provisions of the Stock Purchase Agreement in
accordance with its terms and without Stockholder approval, 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.
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 (i) to repay in full
outstanding borrowings under the Company's current revolving credit facility
with Bank of America, N.T. & S.A. ("BofA") (see "Certain Ancillary Agreements -
Amended Credit Facility") estimated to be approximately $19 million, (ii) to
finance acquisitions of additional suburban office and industrial properties,
and (iii) for general corporate purposes, including working capital. The
Stock Purchase Agreement provides that no more than $20 million of the
Transaction Proceeds may be used to repay amounts due under the current
credit facility. Management believes, however, that the total amount
outstanding under the current credit facility at the Closing Date will not
exceed $20 million.
Certain Rights Under the Stock Purchase Agreement
The following summarizes certain 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 Proposal 3 - "Terms of the Series
A Convertible Preferred Stock".
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 at least
one million shares of Registrable Securities for resale in up to five
registrations upon demand, but not more than one
demand registration 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 at
any time after the second anniversary and prior to the seventh anniversary of
the Closing, any Holder will have the right to cause the Company to use its
best efforts to effect a registration of at least one million shares
of the Registrable Securities on behalf of such Holder and other Holders.
"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 (together, 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 of the AEW Stock Sale (the "Closing"), the Company is required to (i)
exclude AEW, any of its
Affiliates, as defined in the Charter (the "AEW Affiliates"), 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 (the "Charter
Provision"), (ii) exempt any business combination between the Company and
AEW, any AEW Affiliates and any transferee from the
provisions of Section 3-602 of the Maryland General Corporation Law ("MGCL"),
and (iii) 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 as the "Takeover Provisions"). See "Certain
Considerations - Takeover Provisions".
Pursuant to the above conditions to Closing, the Board 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. See Proposal 4. In
the event that Proposal 4 is not approved by the Stockholders, it is expected
that the Board will submit for stockholder approval at a subsequent stockholder
meeting an amendment to 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 remove the current
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.
Also pursuant to the above conditions to Closing, the Board has adopted an
irrevocable resolution to exclude AEW, any AEW Affiliate, and any transferee
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 Affiliate or any transferee of AEW from the application
of the limitations set forth in the MGCL which would otherwise apply to
transactions between the Company and
AEW, any AEW Affiliate or any transferee of AEW. Therefore, even if the
proposed amendment to the Charter deleting Article VIII is not approved by
the Stockholders, the Board 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.
On July 18, 1989, the Board of Directors of the Company declared a distri-
bution 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 in Proposal 3 includes an amendment to the
Charter which would amend the limitations of 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). These
ownership limitations are related to the maintenance of the Company's status as
a real estate investment trust (a "REIT") under the 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
this 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 10 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
antitakeover 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. The Bylaws, as amended, will provide that these
provisions may not be amended without the consent of a majority of the
outstanding shares of AEW Preferred Stock.
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 has executed 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 will 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 Proposal 3 -"Terms of the Series A Convertible Preferred Stock - Voting
Rights" and "- Protective Provisions". In addition, the Standstill Agreement
will contain certain representations and undertakings concerning the ownership
limitations set forth in the proposed amendment to the Charter. See Proposal
3 - "Limitations on the Transferability of the Company's Stock".
BPIA Agreement. BPIA, a corporation wholly-owned by Mr. Bedford, provides
certain services relating to acquisitions and financings by the Company. As
a condition to Closing, the Company and BPIA will enter into a written
contract (the "BPIA Agreement") memorializing the terms of that unwritten
arrangement 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. In no event would the
aggregate amount of fees paid to BPIA exceed the aggregate amount of costs
funded by BPIA. See Proposal 1 - "Certain Relationships and Related
Transactions".
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.
Fees and Expenses Payable in Connection with the Offering
Pursuant to an agreement between the Company and Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("Merrill Lynch"), the Company's Financial Advisor, the
Company has agreed to pay at Closing to Merrill Lynch five percent of the
gross offering proceeds, or
$2.5 million. The Company has agreed to pay all reasonable due diligence and
legal expenses incurred by AEW, but not more than $500,000, if the
transaction closes or if the
transaction fails to close for any reason other than breach by AEW. In
addition, pursuant to the BPIA Agreement, the Company will pay a fee of
$750,000 to BPIA for the services and expenses incurred in connection with
the AEW Stock Sale.
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, including that the AEW Stock
Sale shall have been approved by the Stockholders.
AEW's obligation to consummate the Closing is subject to certain additional
conditions, including the following: (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 NYSE 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) that either (a) the amendment to the Charter to remove Article VIII
shall have been approved by 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.
Effective upon Closing, 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.
Certain Considerations
While the Board is of the opinion that the AEW Stock Sale is in the best
interest of the Company and its Stockholders, Stockholders should consider
the following possible effects when evaluating the transaction.
Takeover Effect. The consent of AEW and of any transferee holding 50% or more
of the outstanding AEW Preferred Stock, will be required to effect any Major
Transactions (as defined hereafter), including, among others, any merger or
consolidation of the Company, and the sale of assets with a purchase price of
more than $10 million. See Proposal 3 - "Terms of the Series A Convertible
Preferred Stock - Protective Provisions". Such veto right remains in effect
for so long as the outstanding AEW Preferred Stock represents 15%
or more of the Outstanding Shares. In addition, in connection with the
agreement, the Board of Directors has submitted for Stockholder approval
additions to the Charter which would amend the limitations on the
transferability of the Company's stock in certain
circumstances. See Proposal 3 - "Limitations on Transferability of the
Company's Stock". Such provisions will reduce the amount of shares of Common
Stock which a potential purchaser may acquire. This ownership limitation
and/or the veto right could delay, defer
or prevent a transaction or a change in control of the Company that might
involve a premium price for the Company's stock or otherwise be in the best
interest of the Stockholders.
Approval Rights with Respect to Certain Transactions. Subject to certain
limitations, the consent of AEW, and of any transferee holding 50% or more of
the outstanding AEW Preferred Stock, will be required for the Company to make
substantial investments, issue substantial amounts of debt, to modify the
executive compensation or employment contracts,
or to change the Company's business plan. As a result, although the Board of
Directors and the Company's management will continue to manage the ordinary
business affairs of the Company, AEW will have the power to exercise a
controlling influence over most substantial transactions. Moreover, absent
any redemption of the AEW Preferred Stock by the Company,
AEW will have the right to maintain its percentage ownership interest in the
Company, and therefore to preserve its ability to exercise a controlling
influence over the Company's affairs. Although the Board of Directors
generally owes a fiduciary duty to the Company, there can be no assurance
that the interests of AEW, and indirectly the directors elected
by the holders of the AEW Preferred Stock, will not differ from or conflict with
the interests of the holders of Common Stock. See "- Certain Rights Under
the Stock Purchase Agreement - Right to Participate in Future Offerings" and
Proposal 3 - "Terms of the
Series A Convertible Preferred Stock - Approval of Major Transactions" and -
"Terms of the Series A Convertible Preferred Stock - Redemption".
Right to Cause Redemption. In the event that the Company (i) fails to pay
dividends on the AEW Preferred Stock for two consecutive quarters following
the first anniversary of the Closing, (ii) defaults in the payment of any
institutional debt, (iii) fails to obtain the consent of AEW prior to taking
certain actions, or (iv) fails to reach certain
financial performance levels, then the holders of the AEW Preferred Stock
will have the right, subject to applicable laws regarding legal distributions,
to cause the Company to redeem all of the then outstanding shares of AEW
Preferred Stock at a price of $6.00 per
share plus all accrued dividends payable thereon. In that case, the Company
could experience substantial difficulty in financing such redemption and may
be required to liquidate a substantial portion of its properties to that end.
In addition, it is likely that the resultant financial strain on the
Company's capital resources would adversely affect the market price of the
Common Stock.
Amended Credit Facility; Event of Default. Under the terms of the Amended
Credit Facility, the failure of the Company to pay two consecutive dividends
payable to the holders of the AEW Preferred Stock and the exercise by such
holders of their rights arising therefrom will constitute an event of
default. Therefore, the Credit Facility
will not provide a source of funds to finance any redemption of the AEW
Preferred Stock. In addition, the Company expects to rely on the Amended
Credit Facility as a primary source of capital to finance both acquisitions
as well as its day-to-day operations. The
absence of the availability of the Credit Facility would have a material adverse
effect on the operations of the Company, and, ultimately, on an investment
in the Company's Stock.
Removal of Certain Takeover Provisions. As a condition to Closing, the Board
of Directors has agreed to waive the application of the provisions of the
Company's Charter and the MGCL which would otherwise limit the Company's ability
to enter into transactions
with AEW, and to terminate the Rights Plan. See "Certain Rights Under the
Stock Purchase Agreement - Business Combination Provisions; Rights Plan".
In addition, in the event that the Stockholders do not approve the proposed
amendment to the Charter which would remove the business combination
provisions in the Charter (Proposal 4), the holders of the AEW
Preferred Stock will thereafter be entitled to vote on proposals to delete such
provisions. Because of the number of shares of AEW Preferred Stock which likely
will be outstanding at the time of such a vote, it is likely that such a
subsequent proposal would
be adopted. Moreover, Mr. Bedford will enter into an agreement pursuant to
which he will agree to vote his shares in favor of any such proposed
amendment. The removal of all of these Takeover Provisions would, absent the
right of AEW and certain of its transferees to veto most substantial
transactions, meaningfully increase the Company's vulnerability
to (i) coercive two-tiered, front-end loaded or partial offers which may not
offer full value to all Stockholders; and (ii) market accumulators who
through open market or private
purchases would be able to exercise a controlling influence over the policies of
the Company without paying to selling or remaining Stockholders a fair and
adequate price, including a sufficient premium for such controlling interest,
or who are simply interested
in putting the Company into "play". The Board believes that the Company will
not be subject to any such unsolicited takeovers until such time as AEW's
right to veto any Major Transaction lapses, although there can be no
assurance in this regard. See Proposal 3 - "Terms of the Series A
Convertible Preferred Stock - Voting Rights - Approval of Major Transactions".
In addition, the removal of the Takeover Provisions would permit AEW, if it
then controlled a majority of the Board (and subject, in certain cases, to
stockholder approval), to cause the Company to liquidate, dissolve, redeem
the outstanding shares of
AEW Preferred Stock, or enter into transactions with the Company, including,
without limitation, mergers, consolidations, and sales of assets. Any of
such transactions could result in a greater return to holders of AEW
Preferred Stock than to the other Stockholders. In certain of such events,
the holders of AEW Preferred Stock would be
entitled to preferential amounts prior to any distribution to the Stockholders.
See Proposal 3 - "Terms of the Series A Convertible Preferred Stock -
Liquidation Preference" and - " Redemption".
Registration Rights. AEW and certain of its transferees will have the right
to cause the Company to register certain shares of Common Stock for sale to
the public. The right of the holders of the shares of Common Stock issuable
upon conversion of the AEW Preferred Stock to register such shares and sell
them in the public market could have a material
adverse effect on both the market price for the Common Stock and the Company's
ability to raise additional equity capital in the future. See "Certain
Rights Under the Stock Purchase Agreement - Registration Rights".
Preferential Dividends; Liquidation Preferences. The holders of the AEW
Preferred Stock will be entitled to receive, prior to any distribution to the
holders of Common Stock, dividends in an amount equal to $0.135 per quarter.
Such amounts will reduce the amount otherwise distributable to holders of
Common Stock as dividends. In addition, upon
liquidation, the holders of the AEW Preferred Stock will be entitled to receive
$6.30 per share plus accrued dividends payable thereon. Such amounts would
likewise reduce amounts distributable to the Stockholders on liquidation.
See Proposal 3 - "Terms of the Series A Convertible Preferred Stock -
Dividends" and "- Liquidation Preference".
Dilution. The issuance of 8,333,334 shares of Common Stock on conversion of
the AEW Preferred Stock will substantially dilute the voting rights and the
percentage ownership interest of then existing Stockholders. In addition,
conversion of the AEW Preferred Stock to Common Stock could have the effect
of diluting the economic interests of the existing Stockholders, depending
on the market price of the Common Stock on the date of conversion. The
dilutive effect on per-share earnings of the issuance of the AEW
Preferred Stock will depend, in part, on the actual earnings generated by the
Transaction Proceeds.
Board Representation; Veto Rights. The holders of the AEW Preferred Stock
will vote separately as a class for directors and initially will elect a
number of Directors (two) that is less than the number of Directors that such
holders could elect assuming conversion of the shares of AEW Preferred Stock.
Upon the occurrence of certain events, the holders of the AEW Preferred Stock
would be entitled to elect a majority of the Board,
which is roughly proportionate to the voting power that the Common Stock
issuable upon conversion of the AEW Preferred Stock would be entitled to
exercise. Under certain circumstances, even if a substantial portion of the
shares of AEW Preferred Stock originally sold have been converted into shares
of Common Stock, the holders of AEW Preferred Stock will nonetheless be
entitled to elect a specified number of directors, despite the fact that the
number of shares of Common Stock into which the remaining outstanding shares
of AEW Preferred Stock are convertible may have declined to a level at
which such shares would no longer have the votes necessary to elect that
number of directors. See Proposal 3 - "Terms of the Series A Convertible
Preferred Stock - Voting Rights".
So long as the outstanding shares of AEW Preferred Stock represent at least
15% of the Outstanding Shares, AEW or any transferee holding more than 50% of
the outstanding shares of AEW Preferred Stock will be entitled to a veto
right in respect of most substantial
transactions proposed by the Company, including the merger, sale or
consolidation of the Company and acquisitions, investments, and dispositions
in excess of specified amounts.
Such rights exceed the rights which the holders of the AEW Preferred Stock would
otherwise have as holders of Common Stock upon conversion of the outstanding
shares of AEW Preferred Stock to Common Stock.
Effect on Market Price of the Common Stock. The issuance of the AEW Preferred
Stock could adversely affect the market price of the Common Stock, because
the AEW Preferred Stock may be perceived as detracting from the "upside"
potential of an investment in the
Common Stock, without fully participating in the potential "downside" attendant
to an investment in the Common Stock.
Limitation on Use of Net Operating Loss Carryovers. Under the Code, the
acquisition of the AEW Preferred Stock by AEW will cause an "ownership change"
(as defined in the Code) with respect to the Company. As a result, use of the
Company's net operating loss
carry forward will generally be restricted to an amount per year equal to the
long term tax exempt rate for the month in which the change occurs (5.96% for
April 1995) times the value of all the Company's Common Stock outstanding
immediately prior to the change
(approximately $31 million). As long as the Company maintains its qualification
as a REIT, the Section 382 limitation will not have a material effect on the
Company since, as a REIT, it is entitled to deduct from its taxable income
dividends paid to its
shareholders. Although no assurance can be given in this regard, the Company
believes that the amount of dividends it will pay in the foreseeable future
will exceed its taxable income from all sources. If, however, the Company
were for any reason to cease to be qualified as a REIT or elected to retain
the proceeds attributable to the sale of any asset which was sold at a gain
for income tax purposes, the limitation on its use of its
net operating loss carryovers could result in its owing substantially more
federal income tax than it would have otherwise owed.
Vote Required; Recommendation of the Board of Directors
Approval of the AEW Stock Sale requires the affirmative vote of holders of a
majority of the votes cast on the matter, provided that the number of votes
cast represents over 50% of all outstanding shares of Common Stock. In
addition, the approval of this Proposal 2 is contingent on the approval of
Proposal 3, which requires approval by holders of a
majority of the outstanding shares of Common Stock. THE BOARD UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THE AEW STOCK SALE. IN THE ABSENCE OF
INSTRUCTIONS TO THE CONTRARY, PROXIES SOLICITED IN CONNECTION WITH THIS PROXY
STATEMENT WILL BE SO VOTED.
There can be no assurance that even if the AEW Stock Sale is approved hereby,
such sale will be consummated. This proxy statement does not constitute an
offer to sell or a
solicitation of an offer to buy the shares of AEW Preferred Stock.
<PAGE>
PROPOSAL 3
AMENDMENT OF CHARTER TO CREATE A NEW CLASS OF STOCK
OF THE COMPANY TO BE KNOWN AS "SERIES A
CONVERTIBLE PREFERRED STOCK", TO STATE THE TERMS OF
SUCH STOCK AND TO SUBSTITUTE A NEW ARTICLE VII
REGARDING THE TRANSFERABILITY OF THE COMPANY'S STOCK
THE APPROVAL OF THE PROPOSED CHARTER AMENDMENT PURSUANT TO THIS
PROPOSAL 3 IS CONTINGENT UPON THE APPROVAL OF THE SALE OF THE SERIES A
CONVERTIBLE PREFERRED STOCK IN PROPOSAL 2. UNLESS BOTH PROPOSALS ARE APPROVED,
NEITHER PROPOSAL WILL BE PERMITTED TO BECOME EFFECTIVE BY THE COMPANY.
Terms of the Series A Convertible Preferred Stock
On May 11, 1995, the Board of Directors of the Company adopted a resolution
declaring that it was advisable and in the best interest of the Company for
the Charter of the
Company to be amended as set forth in the Articles of Amendment attached hereto
as Exhibit
A (the "Articles of Amendment") and directed that the proposed amendment to the
Charter
as set forth in the Articles of Amendment be submitted for consideration by the
Stockholders at the Annual Meeting. The following discussion of the proposed
amendment which is contained in the Articles of Amendment is not intended to be
complete and is subject to, and qualified in its entirety by, the full text
of the Articles of Amendment.
General
The Board of Directors, subject to Stockholder approval, created a new class
of stock of the Company to be known as the "Series A Convertible Preferred
Stock". 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 Proposal 2 -
"Certain Rights
Under the Stock Purchase Agreement - Right to Participate in Future Offerings".
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, create or
increase the
authorized amount of 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 $0.135 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 will increase to $0.165 per
share until either the redemption price payable 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 will begin to accrue on the Closing Date and
will be cumulative from
such date, whether or not in any dividend period or periods there shall be
funds of the Company legally available for the payment thereof.
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
authorized 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
authorizes 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.
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 MGCL, amounts that
would be needed, if the Company 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 Company's total liabilities.
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 Stockholder upon the
liquidation, dissolution or winding up of the Company. If, upon the Liquidating
Event (as defined hereafter), 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, or the proceeds thereof, will be
distributed pro rata to the holders of shares of 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 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) Mr. 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 shall be made in cash, unless the holders of the AEW
Preferred Stock agree, at their sole discretion, to accept some alternative
payment. If redemption is prohibited under the MGCL or similar statute,
redemption shall be pro rata to the extent of funds legally available therefor.
Redemption at the Option of the Company. Except as provided below under
"Automatic Redemption Cancellable at the Option of the Non-Series A
Directors", 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 $0.06 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 business 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 Cancellable 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 amendment to the Charter (See
"-Voting Rights") and the holders of AEW Preferred Stock have elected four
directors to fill the newly created vacancies, then
the Corporation shall be deemed to have approved a redemption at the option
of the Company, unless a majority of the directors who are not elected by the
holders of AEW Preferred Stock 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 be entitled to 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 (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 a majority 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 shall be entitled to elect the smallest number of directors
constituting a majority of the Board of Directors. The number of members of
the Board is currently 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 the 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 holders of AEW Preferred Stock hold
less than 15% of the Outstanding Shares.
Business Combination Provisions. If the Stockholders do not approve the
deletion of Article VIII of the Charter, containing provisions relating to
certain business combinations, the holders of the AEW Preferred Stock will
have the right to vote on a subsequent 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
conversion price in respect of the
AEW Preferred Stock (the "Conversion Price"). 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. See "- Redemption" above.
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 concurrently
with such issue to a price
determined by multiplying the Prior Conversion Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance, assuming conversion of all outstanding
shares of AEW Preferred Stock at the Prior Conversion Price plus the number
of shares of Common Stock which the aggregate consideration received by the
Company for the total number of shares of Additional Stock
so issued would purchase at the Prior Conversion Price; and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issue, assuming conversion of the outstanding shares of AEW
Preferred Stock at the Prior Conversion Price plus the number of shares of
such Additional Stock so issued. The effect
of the foregoing formula is to reduce the Conversion Price in an amount
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" means 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 with respect to employees, directors, and consultants of the
Company 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 (e) 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 is
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 Articles of Amendment, 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 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 (the "Stock Option Plans"), 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
agreement; (vii) 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; (viii) the termination of the Company's status as a
REIT; (ix) any substantial change in the Company's current business
strategies or annual operating plan (as approved by the
Board of Directors); (x) permitting Mr. Bedford to cease serving as the
substantially 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 Articles of Amendment) 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; (xi) the
issuance of awards of any shares or options other than those permitted in
paragraph (iv); and (xii) any amendment to the resolution of the Board of
Directors exempting AEW and any affiliate of AEW from the provisions of the
business combination provisions set forth in Section 3-602 of the MGCL, and
exempting therefrom any transaction resulting from the exercise of a
redemption right of the AEW Preferred Stock which may constitute a business
combination. See Proposal 2 - "Certain Rights Under the Stock Purchase
Agreement - Business Combination Provisions" and "Certain Considerations -
Takeover Effect".
In order to protect the Company from violating one of the foregoing
provisions, Mr. Bedford will enter into an agreement with the Company
pursuant to which he will agree not to sell certain of his shares of Common \
Stock without prior approval from the Company.
See Proposal2 - "Certain Ancillary Agreements - Standstill Agreement".
The foregoing right to approve the Major Transactions shall remain effective
until such time as the total outstanding shares of AEW Preferred Stock
represents 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 seeking similar protection from creditors under federal or state
bankruptcy or insolvency laws.
Transfer Agent
The transfer agent for the Common Stock and the AEW Preferred Stock is
Chemical Mellon Shareholder Services LLC.
Limitations on Transferability of the Company's Stock
The Current Charter Provision
For the Company to qualify as a REIT under the Code, among other conditions,
not more than 50% in value of the outstanding stock of the Company may be owned,
actually or constructively, by five or fewer individuals (defined in the Code to
include certain entities) during the last half of a taxable year and the stock
of the Company must be beneficially owned by 100 or more persons during at
least 335 days of a taxable year of twelve months (or during a proportionate
part of a shorter taxable year). To reduce the risk that the Company would
not fail to meet these conditions, the Charter currently
authorizes the Company to refuse to accept for transfer or to issue a new
certificate for any shares of stock delivered for transfer if the Board of
Directors in good faith concludes that such sale, transfer or issuance will
or could result in the loss of the Company's REIT status.
The Articles of Amendment
The proposed amendment set forth in the Articles of Amendment would change the
transferability restrictions in the Charter. The transferability provisions in
the proposed amendment relative to the current Charter provisions are
intended to provide the Company with greater flexibility in reducing the risk
that the Company would fail to qualify as a REIT.
Under the proposed amendment and subject to certain exceptions, no holder
would be permitted to own, either actually or constructively under the
applicable attribution rules of the Code, more than five percent (in value) of
the aggregate of the outstanding shares
of stock of the Company (the "Aggregate Stock Ownership Limit") and more than
five percent (in number or value, whichever is more restrictive) of the
outstanding shares of Common Stock (the "Common Ownership Limit").
In addition to any of the foregoing ownership limits, no holder under the
proposed amendment would be permitted to own, either actually or
constructively under the applicable attribution rules of the Code, any shares
of any class of the Company's stock if such ownership or acquisition (i)
would cause more than 50% in value of the Company's
outstanding stock to be owned, either actually or constructively under the
applicable attribution rules of the Code, by five or fewer individuals (as
defined in the Code to include certain entities) or (ii) would result in the
Company's stock being beneficially owned by less than 100 persons (determined
without reference to any rules of attribution).
Acquisition or ownership (actual or constructive) of the Company's stock in
violation of these restrictions would result in automatic transfer of such
stock to a trust for the benefit of a charitable beneficiary, automatic
repurchase of the violative shares by the
Company or the violative transfer would be deemed void ab initio.
As noted above, the Articles of Amendment provide that if any transfer of
stock occurs which, if effective, would result in any person (a "Prohibited
Owner") beneficially or constructively owning (under the applicable attribution
rules of the Code) shares of stock in excess of an applicable ownership
restriction, such shares would be automatically
transferred to a trust for the benefit of a charitable beneficiary, effective as
of the close of business on the business day prior to the date of the
purported transfer to the Prohibited Owner. While such shares of stock are
held in trust, the trustee would have all voting rights with respect to such
shares, and all dividends or distributions paid on
such shares would be paid to the trustee of the trust for the benefit of the
charitable beneficiary (any dividend or distribution paid on such stock prior to
the discovery by the Company that such shares have been automatically
transferred to the trust would, upon demand, be paid over to the trustee for
the benefit of the charitable beneficiary).
Within 20 days of receiving notice from the Company of the transfer of shares to
the trust, the trustee of the trust would be required to sell the shares held in
the trust to a person, designated by the trustee, who may own such shares
without violating the ownership restrictions (a "Permitted Holder"). Upon
such sale, the price paid for the
shares by the Permitted Holder would be distributed to the Prohibited Owner to
the extent of the lesser of (i) the price paid by the Prohibited Owner for
the shares or, if the Prohibited Owner did not give value for the above
(e.g., in the case of a gift, devise or other such transaction), the market
price as defined in the Articles of Amendment on the
date of the event which caused the shares to be held in the trust and (ii) the
price received by the Trustee from the sale or other disposition of the shares.
Any net sales proceeds in excess of this amount would be paid immediately to
the charitable beneficiary.
The proposed amendment would exempt Mr. Bedford and AEW from the Aggregate
Stock Ownership Limit and the Common Stock Ownership Limit and would create
separate ownership limitations for each of these two parties. Mr. Bedford
would be limited to the ownership of no more than 15% of the lesser of the
number or value of the outstanding shares of
Common Stock. Since AEW would own all of the outstanding shares of AEW
Preferred Stock immediately after the AEW Stock Sale, it would be limited to
the ownership of 100% of the
outstanding shares of AEW Preferred Stock and 58% of the lesser of the number or
value of outstanding shares of Common Stock. If shares of the AEW Preferred
Stock are redeemed pursuant to the redemption rights of the AEW Preferred
Stock, the percentage limit applicable to Mr. Bedford would increase
automatically so as to permit his continued ownership after the redemption
of the number of shares of Common Stock that he was
permitted to own pursuant to his ownership limitation immediately prior to the
redemption, and AEW's ownership limitation percentage with respect to shares of
Common Stock would be decreased by the same amount of Mr. Bedford's increase.
Mr. Bedford and AEW's exemption from the Aggregate Stock Ownership Limit
and the Common Stock Ownership Limit and the imposition of the aforementioned
stock limitations for Mr. Bedford and AEW are subject to
Mr. Bedford and AEW providing certain representations and undertakings with
respect to the preservation of the REIT status of the Company. Mr. Bedford
will make such representations and undertakings in the Standstill Agreement,
and AEW will make them in the Stock Purchase Agreement. See Proposal 2 -
"The Series A Convertible Preferred Stock Purchase Agreement".
In addition, the proposed amendment would permit the Board of Directors to
waive, under certain conditions set forth in the Articles of Amendment, the
Aggregate Stock Ownership Limit and the Common Stock Ownership Limit for
other stockholders as to any class or series of the outstanding stock of the
Company and to establish an ownership limitation
relating to such stockholders' stock ownership. The Company has agreed in
the Stock Purchase Agreement that it will not unreasonably withhold its consent
to any transfer by AEW, 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.
If the Board of Directors at any time determines in good faith that a transfer
or other event has taken place that results in a violation of the above-
described ownership limits or that a person intends to acquire or has
attempted to acquire constructive or beneficial
ownership of stock of the Company in violation of the above described limits,
the Board of Directors would be required to take such action as it deems
advisable to refuse to give effect or to prevent such transfer or other event,
including but not limited to causing
the Company to repurchase stock, refusing to give effect to such ownership or
acquisition on the books of the Company or instituting proceedings to enjoin
such transfer or event.
The constructive ownership rules are complex and may cause Common Stock or AEW
Preferred Stock owned beneficially or constructively by a group of related
individuals and/or entities to be constructively owned by one individual or
entity. As a result, the acquisition of less than five percent of the number or
value of outstanding Common Stock or of less than five percent of the value
of outstanding AEW Preferred Stock (or the acquisition of an interest in an
entity which owns Common Stock or AEW Preferred Stock)
by an individual or entity could cause that individual or entity (or another
individual or entity) to constructively own Common Stock or AEW Preferred
Stock in excess of the limits described above, and thus subject such stock to
the Common Ownership Limit or the Aggregate Stock Ownership Limit set forth
in the proposed amendment to the Charter set forth in the Articles of Amendment.
The proposed amendment to the Charter set forth in the Articles of Amendment
also would require all persons who own five percent (or such lower percentage
as required by the Code or the Treasury Regulations promulgated thereunder
which, in the case of the Company, is one percent) of the outstanding shares
of the stock of the Company to file each year a
completed questionnaire with the Company containing information regarding their
ownership of such shares, as set forth in the Treasury Regulations. In
addition, upon demand, each beneficial or constructive owner of stock of the
Company would be required to disclose to the Company in writing such
information as the Company in good faith deems necessary to
determine the Company's status as a REIT or to comply with the requirements of
any taxing authority or governmental agency or to determine such compliance.
These ownership limitations could have the effect of discouraging a takeover
or other transaction in which holders of some, or a majority, of shares of
Common Stock or AEW Preferred Stock might receive a premium for their shares
over the then-prevailing market
price or which such holders might believe to be otherwise in their best
interest. See Proposal 2 - "Certain Considerations".
Vote Required; Recommendation of the Board of Directors
Approval of the Articles of Amendment requires the affirmative vote of a
majority of the outstanding shares of Common Stock. In addition, the approval
of this Proposal 3 is contingent on the approval of Proposal 2, which requires
approval by holders of a majority
of votes cast on this matter, provided that the number of votes cast represents
over 50% of all outstanding shares of Common Stock. If approved, the Articles
of Amendment will become effective upon the filing thereof with the State
Department of Assessments and Taxation of Maryland. THE BOARD UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" THE ARTICLES OF AMENDMENT. IN THE ABSENCE OF
INSTRUCTIONS TO THE CONTRARY, PROXIES SOLICITED IN
CONNECTION WITH THIS PROXY STATEMENT WILL BE SO VOTED.
<PAGE>
PROPOSAL 4
AMENDMENT OF CHARTER TO DELETE
ARTICLE VIII REGARDING CERTAIN BUSINESS COMBINATIONS
Under the proposed Articles of Amendment, attached hereto as Exhibit B (the
"Business Combination Articles"), Article VIII of the Charter relating to
certain "business combinations" between the Corporation and any "interested
stockholder" (as defined in the Charter) would be deleted in its entirety.
The substance of Article VIII was originally included in the Corporation's
Certificate of Incorporation when it was incorporated as a
Delaware corporation in 1984. At that time, management of the Corporation
viewed Article VIII as a defense against hostile takeovers, since Delaware had
not yet enacted statutory takeover positions. Since that time, a number of
states, including Delaware and Maryland,
have enacted statutes designed to protect corporations from hostile takeovers.
Management of the Corporation believes that the current business combinations
restrictions set forth in Article VIII may be unnecessary in light of the
provisions of the Code prohibiting
ownership by five or fewer individuals of more than 50% of the value of the
outstanding stock of a corporation which has elected to be treated as a real
estate investment trust under the Code. Moreover, management believes that
the investment community views charter provisions such as Article VIII
unfavorably and, thus, management believes that the
continued presence of Article VIII in the Charter may tend to discourage
investment in the Corporation. Significantly, AEW also has expressed the
desire to have the provisions removed from the Charter. In this regard AEW
has required, as a condition to Closing,
that the Board pass certain resolutions excluding AEW, any AEW affiliate and
transferees of AEW from the limitations set forth in Article VIII. See
Proposal 2 - "The Series A Convertible Preferred Stock Purchase Agreement -
Conditions to Closing".
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer
or issuance or a reclassification of equity securities) between a Maryland
corporation and any person who beneficially owns ten percent or more of the
voting power of the corporation's shares or
an affiliate of the corporation who, at any time within the two-year period
prior to the date in question, was the beneficial owner of ten percent or
more of the voting power of the then outstanding voting stock of the
corporation (an "Interested Stockholder") or an
affiliate of such an Interested Stockholder are prohibited for five years
after the most recent date on which the Interested Stockholder becomes an
Interested Stockholder.
Thereafter, any such business combination must be recommended by the board of
directors of such corporation and approved by the affirmative vote of at
least (a) 80% of the votes entitled to be cast by holders of outstanding
shares of voting stock of the corporation
and (b) two-thirds of the votes entitled to be cast by holders of the voting
stock of the corporation other than shares held by the Interested Stockholder
with whom (or with whose affiliate) the business combination is to be
effected, unless, among other conditions, the
corporation's common stockholders receive a minimum price (as defined in the
MGCL) for their shares and the consideration is received in cash or in the
same form as previously paid by the Interested Stockholder for its shares.
These provisions of the MGCL do not
apply, however, to business combinations that are approved by the board of
directors of the corporation prior to the time that the Interested
Stockholder becomes an Interested Stockholder. Pursuant to the statute, the
Corporation has exempted any business
combinations with any person and, consequently, the five-year prohibition and
the super-majority vote requirements will not apply to any such business
combinations at this time. The statute allows the Board of Directors to
repeal the aforementioned exemption.
However, as a condition to AEW's purchase of the AEW Preferred Stock, the
Board of Directors has adopted a resolution which irrevocably exempts any
business combination between the Corporation and AEW, any AEW Affiliate or
any transferee of AEW from the
provisions of the MGCL relating to business combinations described above.
As noted above, if the Stockholders do not approve the proposed amendment to
the Charter, the Board of Directors has adopted resolutions which, pursuant
to the business combination restrictions currently set forth in the Charter,
irrevocably exempt any business combinations which may occur between the
Company and AEW, any AEW Affiliate or
any transferee of AEW. The Board of Directors has also adopted resolutions
which similarly exempt any transaction contemplated by or resulting from the
exercise of any redemption right of the AEW Preferred Stock from limitations
which would otherwise apply.
Pursuant to the terms of the AEW Preferred Stock, the holders of the AEW
Preferred Stock will, in the future, be entitled to vote on any subsequent
proposal to amend the Charter to delete Article VIII therefrom. In addition,
as a condition to Closing, Mr. Bedford will agree to vote his shares in favor
of any such subsequent proposal.
Vote Required; Recommendation of the Board of Directors
Approval of the Business Combination Articles requires the affirmative vote of
80% of the outstanding shares of Common Stock. If approved, the Business
Combination Articles will become effective upon the filing thereof with the
State Department of Assessments and Taxation of Maryland. THE BOARD
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" THE ARTICLES OF AMENDMENT. IN THE
ABSENCE OF INSTRUCTIONS TO THE CONTRARY, PROXIES SOLICITED IN
CONNECTION WITH THIS PROXY STATEMENT WILL BE SO VOTED.
INDEPENDENT AUDITORS
KPMG Peat Marwick, Certified Public Accountants, served as independent
auditors of the Company for the fiscal year ended December 31, 1994.
The Board of Directors, acting upon the recommendation of the Audit
Committee, has selected KPMG Peat Marwick to audit the
financial statements of the Company for the fiscal year ending December 31,
1995. A representative of KPMG Peat Marwick is expected to be present at the
Annual Meeting and will have the opportunity to make a statement if he so
desires and will be available to respond to appropriate questions from
stockholders.
OTHER MATTERS
The Board of Directors knows of no matter to be presented at the Annual
Meeting other than those set forth in the Notice of Meeting and described in
this Proxy Statement. If, however, any other business should properly come
before the meeting, it is the intention of the persons named in the
accompanying proxy to vote in accordance with their best
judgment on such matters.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company hereby incorporates by reference into this Proxy Statement the
following sections of the Company's Annual Report: (i) Management's
Discussion and Analysis set forth at pages 8-11 thereof, and (ii)
the Company's Audited Financial Statements set forth
at pages 16-27 thereof. In addition, the Company hereby incorporates by
reference into this Proxy Statement the unaudited Financial Statements set
forth at pages 1-10 of the Company's Form 10-Q for its first quarter ending
March 31, 1995. A copy of the Company's Annual Report and Form 10-Q is
included with the mailing of this Proxy Statement.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the annual meeting of
Stockholders to be held in 1995 must be received by the Company at its
principal executive offices no later than _______________, 1995 for inclusion
in the Company's proxy statement and form of proxy relating to that meeting.
Such proposals must meet the requirements of the rules of the Securities
and Exchange Commission relating to stockholder proposals.
By order of the Board of Directors,
_______________, 1995 ___________________________________
Jennifer I. Mori
Secretary
<PAGE>
EXHIBIT LIST
EXHIBIT LIST
EXHIBIT A Articles of Amendment Defining the Terms of the Series A
Convertible Preferred Stock and Amending the Limitations
on the Transferability of the Company's Stock
EXHIBIT B Articles of Amendment Deleting Article VIII (relating to
Certain Business Combinations) from the Charter
<PAGE>
EXHIBIT A
ARTICLES OF AMENDMENT DEFINING THE
TERMS OF THE SERIES A CONVERTIBLE PREFERRED STOCK AND
AMENDING THE LIMITATIONS ON THE TRANSFERABILITY OF
THE COMPANY'S STOCK
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 be 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
ny 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
onversion 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 and
such 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 1(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 of 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 Non-Series 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 occuring 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 the
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, wouldresult 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
eneficial 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 7.2.1(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
presents 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 of 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
Transferor 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 stock which the Corporation
has authority to issue, pursuant 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.
By: (Seal)
President
By:_________________________
Secretary
<PAGE>
EXHIBIT B
ARTICLES OF AMENDMENT
DELETING ARTICLE VIII
(RELATING TO CERTAIN BUSINESS COMBINATIONS)
FROM THE CHARTER
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 matter".
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.
By: (seal)
Secretary President
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY MANAGEMENT
The undersigned stockholder of Bedford Property Investors, Inc., a Maryland
corporation (the "Company"), hereby appoints Jennifer I. Mori and Donald A.
Lorenz, and each of them, as proxies for the undersigned, with full power of
substitution, to attend, to vote and otherwise represent all of the shares
that the undersigned holders of record at the Annual Meeting of Stockholders
of the Company to be held on ________________, 1995 at ________.m. at
, and at any adjournment(s) or postponement(s) thereof, with the same
effect as if the undersigned were present, as instructed below on each of the
following matters, as further described in the accompanying Proxy Statement.
The undersigned hereby revokes any proxy previously given with respect to
such shares.
1. Election of Directors: Peter B. Bedford, Anthony Downs, Anthony M.
Frank, Martin I. Zankel, Claude M. Ballard
For all nominees Withhold authority as to all
(Except as marked to the nominees
contrary below)
______________________________________________________________________________
_______________
To withhold authority for any individual nominee(s), print the name(s) of the
nominee(s) above.
2. Approval of the Sale of FOR AGAINST ABSTAIN
Series A Convertible
Preferred Stock
3. Approval of the Amendment FOR AGAINST ABSTAIN
to the Company's Charter
to (i) create the Series A
Convertible Preferred Stock
and to state the terms
thereof, and (ii) include
provisions limiting the
transferability of the
Company's stock
4. Approval of the Amendment FOR AGAINST ABSTAIN
to the Company's Charter
deleting Article VIII relating
to certain business combinations
5. In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment thereof.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Stockholders and the accompanying Proxy Statement.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE
WITH THE SPECIFICATIONS MADE. IF THIS PROXY IS EXECUTED BUT NO
SPECIFICATION IS MADE, THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED FOR EACH OF THE FOREGOING PROPOSALS AND OTHERWISE IN THE DISCRETION
OF THE PROXIES AT THE MEETING OR ANY ADJOURNMENT(S) OR POSTPONEMENT(S)
THEREOF.
MARK HERE IF YOU PLAN TO ATTEND THE
MEETING
Please sign exactly as name appears hereon and
date. If the shares are held jointly, each holder
should sign. When signing as an attorney, executor,
administrator, trustee, guardian or as an officer
signing for a corporation, please give full title
under signature.
Dated ______________________________, 1995
_____________________________________________________
Signature
_____________________________________________________
Signature, if held jointly
Votes must be indicated by filling in X in Black or Blue ink.
Sign, Date and Return the Proxy Card Promptly Using the Enclosed Envelope
