<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 15, 1997
REGISTRATION NO. 333-33643
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BEDFORD PROPERTY INVESTORS, INC.
(Exact name of the Registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 68-0306514
(State of other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
</TABLE>
270 LAFAYETTE CIRCLE
LAFAYETTE, CALIFORNIA 94549
(510) 283-8910
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
------------------------------
PETER B. BEDFORD
BEDFORD PROPERTY INVESTORS, INC.
270 LAFAYETTE CIRCLE
LAFAYETTE, CALIFORNIA 94549
(510) 283-8910
(Name, address, including zip code, and telephone number, including area code of
agent for service)
------------------------------
COPY TO:
WILLIAM H. HINMAN, JR.
SHEARMAN & STERLING
555 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94104
(415) 616-1100
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following box.
/ /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(1) FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.02 per
share, offered by the Company....... 20,000,000 Shares $19.90625 $398,125,000 $120,644(3)
Common Stock, par value $.02 per
share, offered by the Selling
Stockholder......................... 4,166,667 Shares $22.03125 $91,796,882 $27,817
</TABLE>
(1) The amount to be registered and the proposed maximum aggregate offering
price also include the number and offering price of any shares initially
offered or sold outside the United States that are thereafter sold or resold
in the United States. Offers and sales of shares outside the United States
are being made pursuant to the exemption afforded by Rule 901 of Regulation
S and this Registration Statement shall not be deemed effective with respect
to such offers and sales.
(2) Estimated solely for the purpose of computing the amount of the registration
fee, based on the average of the high and low prices for the Company's
Common Stock as reported on the New York Stock Exchange on August 11, 1997
with respect to the 20,000,000 shares previously registered on behalf of the
Company and on October 13, 1997 with respect to the 4,166,667 shares
registered on behalf of the selling stockholder, both in accordance with
Rule 457(c) under the Securities Act of 1933.
(3) Registration fee previously paid by registrant.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 15, 1997
PROSPECTUS
[LOGO]
20,000,000 SHARES
4,166,667 SHARES
BEDFORD PROPERTY INVESTORS, INC.
COMMON STOCK
------------------
Bedford Property Investors, Inc., a Maryland corporation (the "Company"),
may offer from time to time, up to 20,000,000 shares (the "Company Shares") of
the Company's common stock, par value $0.02 per share (the "Common Stock"), in
amounts, at prices and on terms to be determined at the time of sale. In
addition, Bed Preferred No. 1 Limited Partnership ("BPLP" or the "Selling
Stockholder") may offer from time to time up to 4,166,167 shares (the "Selling
Stockholder Shares") (the "Company Shares" and the "Selling Stockholder Shares"
to be generally or collectively referred to as the "Shares") of Common Stock in
amounts, at prices and on terms to be determined at the time of sale. The
Selling Stockholder Shares offered hereby were issued to the Selling Stockholder
on October 14, 1997 upon conversion by the Selling Stockholder of its 8,333,334
shares of the Company's Series A Convertible Preferred Stock, par value $.01 per
share (the "Convertible Preferred Stock"), into shares of Common Stock.
The number of Shares offered pursuant to this Prospectus, the terms of the
offering of such Shares and the initial price and the net proceeds to the
Company or the Selling Stockholder from the sale thereof will be, where
applicable, set forth in an accompanying supplement to this Prospectus (a
"Prospectus Supplement").
The Company's Common Stock is listed on the New York Stock Exchange (the
"NYSE") and the Pacific Exchange (the "PSE") under the symbol "BED." Any Common
Stock offered pursuant to a Prospectus Supplement will be listed on such
exchanges, subject to official notice of issuance.
The Company and the Selling Stockholder may sell Shares directly or through
agents, underwriters or dealers designated from time to time, and the Company
may sell Shares pursuant to a dividend reinvestment plan. If any agents,
underwriters or dealers are involved in the sale of the Shares, the names of
such agents, underwriters or dealers and any applicable commissions or discounts
and the net proceeds to the Company or the Selling Stockholder from such sale
will be set forth in the applicable Prospectus Supplement.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS
RELATING TO AN INVESTMENT IN THE COMMON STOCK.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission"). The Registration
Statement, as well as such reports, proxy statements and other information filed
with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices at Seven World
Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
also can be obtained from the Public Reference Section of the Commission,
Washington, D.C. 20549 at prescribed rates. The Commission maintains a World
Wide Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the site is http://www.sec.gov. Such reports, proxy statements
and other information of or concerning the Company can also be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005 and the offices of the Pacific Exchange at 301 Pine Street, San Francisco,
California 94104.
The Company has filed with the Commission a Registration Statement (of which
this Prospectus is a part) on Form S-3 under the Securities Act with respect to
the Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain portions of which
have been omitted as permitted by the rules and regulations of the Commission,
and in the exhibits thereto. Statements contained in this Prospectus as to the
content of any contract or other document are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference and the exhibits and schedules
thereto. For further information regarding the Company and the Common Stock
offered hereby, reference is hereby made to the Registration Statement and such
exhibits and schedules, which may be examined without charge at, or copies
obtained upon payment of prescribed fees from, the Commission and its regional
offices listed above.
THIS PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (WITHOUT EXHIBITS, UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE) ARE AVAILABLE WITHOUT
CHARGE UPON REQUEST. REQUESTS FOR DOCUMENTS SHOULD BE DIRECTED TO BEDFORD
PROPERTY INVESTORS, INC., 270 LAFAYETTE CIRCLE, LAFAYETTE, CALIFORNIA 94549,
ATTENTION: INVESTOR RELATIONS (TELEPHONE: (510) 283-8910).
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN THE
COMMON STOCK, AND THE IMPOSITION OF A PENALTY BID IN CONNECTION WITH THE
OFFERING. FOR A DISCUSSION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION" IN
THE ACCOMPANYING PROSPECTUS SUPPLEMENT, IF ANY.
2
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents are incorporated by reference in this Prospectus:
1. The Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
2. The Registrant's Current Report on Form 8-K filed on January 9, 1997.
3. The Registrant's Current Report on Form 8-K/A filed on February 4, 1997.
4. The Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1997.
5. The Registrant's Current Report on Form 8-K filed on July 23, 1997.
6. The Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 1997.
7. The Registrant's Current Report on Form 8-K/A filed on September 19, 1997.
8. The description of the Registrant's Common Stock set forth in the
Registrant's registration statement on Form 8-B as filed with the Commission
on July 26, 1993, under the Exchange Act.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of the filing hereof and prior to the
termination of this offering shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the dates of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
3
<PAGE>
THE COMPANY
Bedford Property Investors, Inc., a Maryland corporation, is a
self-administered and self-managed equity REIT engaged in the business of
owning, managing, acquiring and developing industrial and suburban office
properties proximate to selected metropolitan areas primarily in the Western
United States. As of September 30, 1997, the Company owned and operated, either
directly or through one of its wholly-owned subsidiaries, 63 properties
aggregating approximately 5.3 million rentable square feet and comprised of 45
industrial properties (the "Industrial Properties"), 17 suburban office
properties (the "Suburban Office Properties") and one retail property (the
"Retail Property"). The Industrial Properties, the Suburban Office Properties
and the Retail Property are hereinafter referred to individually as a "Property"
and collectively as the "Properties." As of September 30, 1997, the Properties
were approximately 97% occupied by over 400 tenants. The Company's Properties
are located in Northern and Southern California, Oregon, Washington, Arizona,
Nevada, Utah, Colorado, Texas and Kansas.
The Company seeks to grow its asset base through the acquisition of
industrial and suburban office properties and portfolios of such properties, as
well as through the development of new industrial and suburban office
properties. The Company's strategy is to operate in suburban markets that are
experiencing, or are expected by the Company to experience, economic growth. The
Company also seeks markets that are subject to limitations on the development of
similar properties. The Company believes that employment growth is a reliable
indicator of future demand for both industrial and suburban office space. In
addition, the Company believes that certain supply-side constraints, such as
limited availability of undeveloped land in a market, increase a market's
potential for higher average rents over time. The Company is currently targeting
selected markets in which the Company Properties are located as well as selected
markets in which the Company has expertise. The Company believes that due to
recent economic improvements in these markets, and related improvements in the
commercial property markets, an investment in industrial and suburban office
properties in these markets, and in particular in California, provides the
potential for attractive returns through increased occupancy levels, rents and
real estate values.
The Company is led by a professional management team who have on average
over 20 years of experience in the ownership, management, acquisition and
development of industrial and suburban office properties. Peter B. Bedford, the
Company's Chairman and Chief Executive Officer, has been engaged in the
commercial real estate business, primarily in the Western United States, for
over 30 years and has been responsible for the ownership, management,
acquisition and development of an aggregate of approximately 18 million square
feet of industrial, office and retail properties, as well as land in 14 states.
Until October 14, 1997, BPLP, a Delaware limited partnership beneficially
owned by an investment fund managed by AEW Capital Management was the holder of
all of the outstanding shares of the Company's Convertible Preferred Stock. On
October 14, 1997, BPLP elected to convert these shares of Convertible Preferred
Stock into the 4,166,667 shares of Common Stock which may be offered for sale by
BPLP hereunder.
4
<PAGE>
RISK FACTORS
WHEN USED IN THIS PROSPECTUS, THE WORDS "BELIEVES," "ANTICIPATES," "EXPECTS"
AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS.
SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY, INCLUDING, BUT NOT LIMITED TO, THOSE SET
FORTH BELOW. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE
FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY
UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE RESULTS OF ANY REVISIONS TO
THESE FORWARD-LOOKING STATEMENTS WHICH MAY BE MADE TO REFLECT EVENTS OR
CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.
In addition to the other information contained or incorporated by reference
in this Prospectus, prospective investors should carefully consider the
following factors before purchasing the Common Stock offered hereby.
GEOGRAPHIC CONCENTRATION; DEPENDENCE ON CALIFORNIA ECONOMY
As of September 30, 1997, approximately 55% of the Company's total
annualized base rent was generated by its Properties located in the State of
California. As a result of this geographic concentration, the performance of the
commercial real estate markets and the local economies in various areas within
California could affect the value of such Properties and the rental income from
such Properties and, in turn, the Company's results of operations. In addition,
the geographic concentration of the Company's Properties in California in close
proximity to regions known for their seismic activity exposes the Company to the
risk that operating results could be materially affected by a significant
earthquake. See "--Risks Inherent in Real Estate Investments--Effect of
Uninsured Loss."
HISTORICAL LOSSES; POSSIBILITY OF FUTURE LOSSES
As a result of investments made under the Company's prior management team,
the Company had losses of $12.3 million, $5.5 million, $21.9 million and
$286,000 for fiscal years 1990 through 1993, respectively, before taking into
account the gain on the extinguishment of debt in 1992 and gains on sales of
investments and joint venture partnerships in 1993. Although such losses were
due in large part to investments which the Company subsequently divested, there
can be no assurance that the Company will not incur significant losses in the
future. As of September 30, 1997, the Company's consolidated balance sheet
reflected accumulated losses and distributions in excess of net income
aggregating approximately $62.5 million, resulting from the losses referred to
above and the fact that aggregate dividends to stockholders have exceeded net
income.
RISKS INHERENT IN REAL ESTATE INVESTMENTS
GENERAL
Real property investments are subject to numerous risks. The yields
available from an equity investment in real estate depend on the amount of
income generated and costs incurred by the related properties. If properties in
which the Company invests do not generate sufficient income to meet costs,
including debt service, tenant improvements, third-party leasing commissions and
capital expenditures, the Company's results of operations and ability to make
distributions to its stockholders will be adversely affected. Revenues and
values of the Company's properties may be adversely affected by a number of
factors, including the national economic climate, the local economic climate,
local real estate conditions (such as an oversupply of space or a reduction in
demand for real estate in an area), the attractiveness of the properties to
tenants, competition from other available space, the ability of the Company to
provide adequate maintenance and insurance and to cover other operating costs,
government regulations and changes in real estate, zoning or tax laws, interest
rate levels, the availability of financing and potential liabilities under
environmental and other laws. Historically, the Company has had tenants leasing
space in the Properties who occasionally have been delinquent in their payments.
Further, because the Company
5
<PAGE>
generally does not have extensive historical or financial information on the
tenants in its recently acquired Properties, there may be tenants in the
Company's recently acquired Properties who, unknown to the Company, were
delinquent in the payment of their rent in the past. As substantially all of the
Company's income is derived from rental income from real property, the Company's
results of operations and ability to make distributions to stockholders would be
adversely affected if a number of the Company's tenants or one or more of the
Company's significant tenants were unable to meet their obligations to the
Company or failed to renew their leases with the Company, or if the rental rates
upon reletting or renewal of leases were significantly lower than current rates
or if the Company were unable to lease a significant amount of space on
economically favorable terms or at all. In addition, certain significant
expenditures associated with each equity investment (such as debt service, real
estate taxes and maintenance costs) are generally not reduced when circumstances
cause a reduction in rental income from the investment. Should such events
occur, the Company's results of operations and ability to make distributions to
stockholders could be adversely affected.
LEASE EXPIRATIONS; RENEWAL OF LEASES AND RELETTING OF UNLEASED SPACE
As of September 30, 1997, leases representing 3%, 17%, 12% and 15% of the
Company's total annualized base rent were scheduled to expire during 1997, 1998,
1999 and 2000, respectively. The Company will be subject to the risk that, upon
expiration, certain of these or other leases will not be renewed, the space may
not be relet, or the terms of renewal or reletting (including the cost of
required renovations or concessions to tenants) may be less favorable than
current lease terms. In addition, the Company expects to incur costs in making
improvements or repairs to its Properties required by new or renewing tenants
and expenses associated with brokerage commissions payable in connection with
the reletting of space. Similarly, rental income may be reduced due to vacancies
resulting from lease expirations or by construction of tenant improvements
required by renewing or new tenants. If the Company is unable to promptly renew
leases or relet space or to fund expenses relating to tenant turnover, if the
terms of any such renewal or reletting are less favorable than current lease
terms, or if the expenses relating to tenant turnover are greater than expected,
the foregoing could have a material adverse effect on the Company and its
ability to make distributions to stockholders.
DEPENDENCE ON CERTAIN TENANTS
As of September 30, 1997, twenty of the Company's tenants accounted for
approximately 44% of its total annualized base rent. If the Company were to lose
any one or more of such tenants, or if any one or more of such tenants were to
declare bankruptcy or to fail to make rental payments when due, there could be a
material adverse effect on the Company and its ability to make distributions to
stockholders. See "--Bankruptcy of Tenants."
BANKRUPTCY OF TENANTS
At any time, a tenant could seek the protection of the bankruptcy laws,
which might result in the modification or termination of such tenant's lease and
cause a reduction in the cash flow of the Company. In addition, a tenant from
time to time may experience a downturn in its business which may weaken its
financial condition and result in its failure to make rental payments when due.
In the event of default by or bankruptcy of a tenant, the Company may experience
delays in enforcing its rights as lessor and may incur substantial costs in
protecting its investment. The default, bankruptcy or insolvency of a major
tenant may have an adverse effect on the Company and its ability to make
distributions to stockholders. Moreover, a substantial number of the Company's
tenants are professionals or small- or medium-sized businesses, which are
generally more susceptible to the foregoing risks than are large,
well-capitalized enterprises.
6
<PAGE>
RISKS ASSOCIATED WITH REAL ESTATE ACQUISITION AND DEVELOPMENT
The Company intends to actively seek to acquire industrial and suburban
office properties and portfolios of such properties, which may include the
acquisition of other companies and business entities owning such properties.
Although the Company will engage in due diligence with respect to each new
acquisition, there can be no assurance that the Company will be aware of all
potential liabilities and problems associated with such properties, and the
Company may have limited contractual recourse, or no contractual recourse,
against the sellers of such properties. In that regard, the Company only
recently acquired a number of its Properties, and there can be no assurance that
the Company is aware of all potential liabilities and problems associated with
these recently acquired Properties. Moreover, it is likely that in the future,
the majority of the Company's properties and portfolios of properties will be
acquired on an "as is" basis, with limited recourse against the sellers. In
addition, acquisitions of new properties entail risks that the investments will
fail to perform in accordance with expectations, and estimates of the costs of
improvements to bring an acquired property up to the Company's standards, and
standards established for the market position intended for that property, may
prove inaccurate. To the extent that the Company acquires properties with
substantial vacancies (as it has in the past), there is a risk that the Company
will be unable to lease vacant space in a timely manner or at all, and that the
costs of obtaining tenants (such as tenant improvements, lease concessions and
brokerage commissions) could prove more costly than anticipated.
The Company will be subject to a number of risks relating to the development
of any industrial and suburban office property projects it decides to develop,
including the risks that financing for such development may not be available on
favorable terms, that a project may not be completed or may not be completed on
schedule or for the amount planned (resulting in increased debt service expense
and construction costs) and that newly constructed properties may not be leased
on profitable terms or at all. Timely construction may be adversely affected by
the failure to obtain governmental permits, by environmental matters, by local
or national strikes and by local or national shortages in building materials or
supplies or fuel for equipment. Any of the foregoing could adversely affect the
Company and its ability to make distributions to stockholders.
EFFECT OF UNINSURED LOSS
The Company currently carries general liability coverage with primary limits
of $1 million per occurrence and $2 million in the aggregate, as well as a $20
million umbrella liability policy. The Company carries property insurance on a
replacement value basis covering both the cost of direct physical damage and the
loss of rental income. Separate flood and earthquake insurance is provided with
an annual aggregate limit of $10 million, subject to varying deductibles of 5%
to 10% of total insurable value per building with respect to earthquake
coverage. Certain types of losses, however (such as losses due to acts of war,
nuclear accidents or pollution), may be either uninsurable or not economically
insurable. Likewise, certain losses could exceed the limits of the Company's
insurance policies or could cause the Company to bear a substantial portion of
those losses due to deductibles under those policies. Should an uninsured loss
occur, the Company could lose both its invested capital in and anticipated cash
flow from the property and would continue to be obligated to repay any
outstanding indebtedness incurred to acquire such property. In addition, a
majority of the Properties are located in areas that are subject to earthquake
activity. Although the Company has obtained earthquake insurance policies for
all of its Properties, should one or more Properties sustain damage as a result
of an earthquake, the Company may incur substantial losses up to the amount of
the deductible under its earthquake policy and, additionally, to the extent that
the damage exceeds the policy's maximum coverage. Although the Company has
obtained owner's title insurance policies for each of the Properties, the title
insurance may be in an amount less than the current market value of certain of
the Properties. If a title defect results in a loss that exceeds insured limits,
the Company could lose all or part of its investment in, and anticipated gains
(if any) from, such Property.
7
<PAGE>
SUBSTANTIAL INCREASE IN DIVIDEND REQUIREMENTS; POSSIBLE INABILITY TO SUSTAIN
DIVIDENDS
Any new shares of Common Stock issued hereunder could substantially increase
the cash required to continue to pay cash dividends at current levels. Any
Common Stock or preferred stock that may in the future be issued to finance
acquisitions, upon exercise of stock options or otherwise, would have a similar
effect. See "--Shares Available for Future Sale." The Company's ability to pay
dividends will depend in large part on the performance of its Properties and
other properties that it may acquire in the future. In addition, the Company's
existing credit facility (the "Credit Facility") places certain limitations on
the Company's ability to pay quarterly dividends to stockholders. The Company is
currently renegotiating these and other provisions in its Credit Facility,
although there can be no assurance that such renegotiation will result in the
Company acquiring additional flexibility in its ability to pay dividends.
In addition, the Company's ability to pay dividends is based upon a number
of uncertainties. In particular, the Company only recently acquired a number of
its Properties and, therefore, has a limited operating history with respect to
those Properties. The Company's ability to pay dividends depends in large part
upon whether these recently acquired Properties, as well as the Company's other
Properties and future acquisitions, perform in accordance with expectations.
Likewise, the Company's ability to pay dividends will depend upon, among other
things, occupancy levels at its Properties, its ability to enter into new leases
upon expiration of current leases and costs associated with the renewal or
reletting of space, expenditures with respect to existing and newly acquired
Properties, the amount of its debt and the interest rate thereon, default or
bankruptcy by tenants, and other costs relating to its Properties, as well as
the continued absence of significant expenditures relating to environmental or
other regulatory matters. Most of these matters are beyond the control of the
Company and it is unlikely that the Company's expectations with respect to these
matters will prove accurate in all respects. A significant difference between
such expectations and actual results could have a material adverse effect on the
Company and its ability to pay dividends.
The Company's ability to pay dividends on the Common Stock is further
limited by the laws of Maryland, its state of incorporation. Under the Maryland
General Corporate Law, as amended (the "MGCL"), a Maryland corporation may not
make a distribution if, after giving effect to such distribution, either (i) the
corporation would not be able to pay indebtedness of the corporation as such
indebtedness becomes due in the usual course of business or (ii) the
corporation's total assets would be less than the sum of the corporation's total
liabilities plus (unless the corporation's charter provides otherwise, which the
Company's charter (the "Charter") does with respect to dividends but does not
with respect to distributions by redemption or other acquisition of shares or
otherwise) the amount that would be needed, if the corporation were to be
dissolved at the time of distribution, to satisfy the preferential rights upon
dissolution of stockholders whose preferential rights are superior to those
receiving the distribution. Thus, the Company cannot make a distribution, except
by dividend, on the Common Stock if, after giving effect to the distribution,
the Company's total assets would be less than the sum of the Company's
liabilities plus the amount that would be needed to satisfy the preferential
rights upon dissolution of the holders of any shares of preferred stock then
outstanding if the Company were to be dissolved at the time of the distribution.
TAX RISKS; RISKS ASSOCIATED WITH REIT STATUS
ADVERSE CONSEQUENCES OF THE FAILURE TO MAINTAIN QUALIFICATION AS A REIT
The Company believes that it has operated so as to qualify as a REIT under
the Internal Revenue Code of 1986, as amended (the "Code"), commencing with the
taxable year 1985. However, no assurance can be given that the Company will be
able to continue to operate in a manner enabling it to remain so qualified or
that it will not be found to have failed to qualify as a REIT for a prior tax
year. In that regard (as discussed below), it is uncertain whether the Company
properly requested written statements from certain stockholders for tax year
1993 as required by the regulations issued by the United States Treasury
8
<PAGE>
Department (the "Treasury Regulations") under the Code. Qualification as a REIT
involves the application of highly technical and complex Code provisions which
have only a limited number of judicial and administrative interpretations, and
the determination of various factual matters and circumstances not entirely
within the Company's control may have an impact on its ability to maintain its
qualification as a REIT. For example, in order to qualify as a REIT, at least
95% of the Company's gross income in any year must be derived from qualifying
sources and the Company must make distributions to stockholders aggregating
annually at least 95% of its REIT taxable income (excluding net capital gains).
In addition, no assurance can be given that new legislation, Treasury
Regulations, administrative interpretations or court decisions will not
significantly change the tax laws with respect to the Company's qualification as
a REIT or the federal income tax consequences of such qualification. The
Company, however, is not aware of any proposal to amend the tax laws that would
significantly and adversely affect the Company's ability to continue to operate
as a REIT.
As a condition to maintaining its status as a REIT, the Code, and the
Treasury Regulations promulgated thereunder, contain a requirement (the "Five or
Fewer Requirement") that, during the last half of each taxable year, not more
than 50% in value of the REIT's outstanding stock be owned, directly or
indirectly, by five or fewer individuals (defined in the Code to include certain
entities). For purposes of the Five or Fewer Requirement, the Code generally
permits a look-thru rule that treats shares of stock in a REIT held by certain
tax-exempt entities as held directly by their beneficiaries. In order to
determine if a REIT satisfies the Five or Fewer Requirement, the Treasury
Regulations require a REIT to request written statements concerning the
ownership of its capital stock from certain stockholders of record (the
"Stockholder Polling Requirements"). For tax year 1993 (and possibly for certain
prior years which tax counsel referred to below believes are outside the normal
period for federal tax audit), it is uncertain whether the Company properly
requested the written statements required by the Stockholder Polling
Requirements from certain clearing organizations holding Common Stock as
nominees for the beneficial owners of such shares. However, the Company did
employ stockholder polling procedures for tax year 1993 which it believes went
beyond what is required by the Treasury Regulations under the Code in providing
stockholder ownership information for purposes of determining whether the
Company had satisfied the Five or Fewer Requirement. In that regard, the Company
has received an opinion of Shearman & Sterling, counsel to the Company, to the
effect that, based on various assumptions and factual representations made by
the Company, the Company has not, by virtue of the Stockholder Polling
Requirements, failed to qualify as a REIT with respect to tax year 1993.
However, such opinion is not binding on the Internal Revenue Service (the
"IRS"). If the IRS were to successfully challenge such compliance, the Company
would lose its status as a REIT as of the first taxable year in which it was
considered not to have complied with such requirements.
If the Company fails to maintain its qualification as a REIT, or is found
not to have qualified as a REIT for any prior year, the Company would not be
entitled to deduct dividends paid to its stockholders and would be subject to
federal income tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates. In addition, unless entitled to
relief under certain statutory provisions, the Company would also be
disqualified from treatment as a REIT for the four taxable years following the
year during which qualification was lost. This treatment would reduce amounts
available for investment or distribution to stockholders because of the
additional tax liability to the Company for the year or years involved. In
addition, the Company would no longer be required by the Code to make any
distributions. As a result, disqualification of the Company as a REIT could have
a material adverse effect on the Company and its ability to make distributions
to stockholders. To the extent that distributions to stockholders have been made
in anticipation of the Company's qualifying as a REIT, the Company might be
required to borrow funds or to liquidate certain of its investments to pay the
applicable tax.
9
<PAGE>
EFFECT OF DISTRIBUTION REQUIREMENTS
To maintain its status as a REIT, the Company is required each year to
distribute to its stockholders at least 95% of its taxable income (excluding net
capital gains). In addition, the Company is subject to a 4% nondeductible excise
tax on the amount, if any, by which certain distributions paid by it with
respect to any calendar year are less than the sum of 85% of its ordinary income
and 95% of its capital gain net income for the calendar year plus any amount of
such income not distributed in prior years. Although the Company anticipates
that cash flow from operations will be sufficient to enable it to pay its
operating expenses and meet the distribution requirements discussed above, there
can be no assurance that this will be the case and it may be necessary for the
Company to incur borrowings or otherwise obtain funds to satisfy the
distribution requirements associated with maintaining its qualification as a
REIT. In addition, differences in timing between the receipt of income and the
payment of expenses in arriving at taxable income of the Company could require
the Company to incur borrowings or otherwise obtain funds to meet the
distribution requirements that are necessary to maintain its qualification as a
REIT. There can be no assurance that the Company will be able to borrow funds or
otherwise obtain funds if and when necessary to satisfy such requirements.
TRANSFER AND OWNERSHIP LIMITATIONS
For the purpose of preserving the Company's REIT qualification, the
Company's Charter provides that no holder is permitted to own, either actually
or constructively under the applicable attribution rules of the Code, more than
5% (in value) of the aggregate outstanding shares of all classes of stock of the
Company or more than 5% (in number or value, whichever is more restrictive) of
the outstanding shares of Common Stock, with certain exceptions. In addition, no
holder is 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 would cause more than 50% in value of the
Company's outstanding stock to be owned by five or fewer individuals, would
result in the Company's stock being beneficially owned by less than 100 persons
(determined without reference to any rule of attribution) or would otherwise
result in the Company's failure to qualify as a REIT. Acquisition or ownership
(actual or constructive) of the Company's stock in violation of these
restrictions results in automatic transfer of such stock to a trust for the
benefit of a charitable beneficiary or, under certain specified circumstances,
the violative transfer may be deemed void ab initio or the Company may choose to
redeem the violative shares. Mr. Bedford and BPLP are subject to higher
ownership limitations than the other stockholders. Specifically, Mr. Bedford is
not permitted to own more than 15% of the lesser of the number or value of the
outstanding shares of Common Stock and BPLP is not permitted to own more than
58% of the lesser of the number or value of the outstanding shares of Common
Stock.
The constructive ownership rules are complex and may cause Common 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 5% of the number or value of outstanding Common
Stock (or the acquisition of an interest in an entity which owns Common Stock)
by an individual or entity could cause that individual or entity (or another
individual or entity) to constructively own Common Stock in excess of the limits
described above, and thus subject such stock to the ownership restrictions in
the Charter.
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent on the efforts of its senior officers, and
in particular Peter B. Bedford, its Chairman and Chief Executive Officer. While
the Company believes that it could find replacements for these key personnel,
the loss of their services could have a material adverse effect on the Company.
In addition, the Credit Facility provides that it is an event of default
thereunder if Mr. Bedford ceases for any reason to be the Chairman or Chief
Executive Officer of the Company and a replacement reasonably satisfactory to
the lenders thereunder has not been appointed by the Board of Directors within
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<PAGE>
six months thereafter. Mr. Bedford and the Company have entered into an amended
employment agreement pursuant to which Mr. Bedford has agreed to serve as
Chairman of the Board and Chief Executive Officer on a substantially full-time
basis until the agreement's expiration on September 18, 2000. This agreement
will be automatically renewed for additional consecutive one-year terms unless
either party gives the other notice of non-renewal.
COMPETITION
Numerous industrial and suburban office properties compete with the
Company's Properties in attracting tenants. Some of these competing properties
are newer, better located or better capitalized than the Company's Properties.
Many of the Company's investments, particularly the Suburban Office Properties,
are located in markets which have a significant supply of available space,
resulting in intense competition for tenants and lower rents. The number of
competitive properties in a particular area could have a material adverse effect
on the Company's ability to lease space in the Properties or at newly acquired
or developed properties. In addition, numerous real estate companies (including
other REITs) compete with the Company in making bids to acquire new properties.
Many of these companies are larger and have substantially greater financial
resources than the Company. The activities of these competitors could cause the
Company to pay a higher purchase price for a new property than it otherwise
would have paid, or may prevent the Company from purchasing a desired property
at all.
REGULATORY COMPLIANCE
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real estate is liable for the costs of removal or
remediation of certain hazardous or toxic substances released on, above, under
or in such property. Such laws often impose such liability without regard to
whether the owner knew of, or was responsible for, the presence of such
hazardous or toxic substances. The costs of such removal or remediation could be
substantial. Additionally, the presence of such substances, or the failure to
properly remediate such substances, may adversely affect the owner's ability to
borrow using such real estate as collateral. All of the Properties have had
Phase I environmental site assessments (which involve inspection without soil
sampling or groundwater analysis) by independent environmental consultants and
have been inspected for hazardous materials as part of the Company's acquisition
inspections. None of the Phase I assessments has revealed any environmental
conditions requiring material expenditures for remediation. The Phase I
assessment for Milpitas Town Center indicates that the groundwater under that
Property either has been, or may in the future be, impacted by the migration of
contaminants originating off-site. According to information available to the
Company, the responsible party for this off-site source has been identified and
has begun remediation pursuant to a cleanup program mandated by a California
environmental authority and the cleanup program is backed by an insurance policy
from CIGNA up to $10 million. The Company does not believe that this
environmental matter will impair the future value of Milpitas Town Center in any
significant respect, or that the Company will be required to fund any portion of
the cost of remediation, although there can be no assurance in this regard. No
assurance can be given that these Phase I assessments or the Company's
inspections have revealed all environmental liabilities and problems relating to
its Properties.
Certain environmental laws impose liability on a previous owner of property
to the extent that hazardous or toxic substances were present during the prior
ownership period. A transfer of the property does not relieve an owner of such
liability. Thus, the Company may be liable in respect of properties and joint
venture interests previously sold or otherwise divested.
The Company believes that it is in compliance in all material respects with
all federal, state and local laws regarding hazardous or toxic substances. To
date, compliance with federal, state and local environmental protection
regulations has not had a material effect upon the Company. However, there can
be no
11
<PAGE>
assurance that costs of investigating and remediating environmental matters with
respect to properties currently or previously owned by the Company or properties
which the Company may acquire in the future, or other expenditures or
liabilities (including claims by private parties) resulting from hazardous
substances present in, on, under or above such properties or resulting from
circumstances or other actions or claims relating to environmental matters, will
not have a material adverse effect on the Company and its ability to make
distributions to stockholders.
AMERICANS WITH DISABILITIES ACT COMPLIANCE; GOVERNMENT REGULATION; RISK OF
INCREASED REGULATORY COMPLIANCE COSTS
Under the Americans with Disabilities Act (the "ADA"), effective in 1992,
all public accommodations and commercial facilities are required to meet certain
federal requirements related to access and use by disabled persons. Compliance
with the ADA requires removal of access barriers, and noncompliance may result
in imposition of fines by the U.S. government or an award of damages to private
litigants. Although the Company believes that the Properties are substantially
in compliance with these requirements, the Company may in the future incur costs
to comply with the ADA with respect to both existing Properties and properties
which may be acquired in the future, which could have an adverse effect on the
Company and its ability to make distributions to stockholders.
The Properties are, and properties which the Company may acquire in the
future will be, subject to various other federal, state and local regulatory
requirements such as local building codes and other similar regulations. Failure
to comply with these requirements could result in the imposition of fines by
governmental authorities or awards of damages to private litigants. The Company
believes that the Properties are currently in substantial compliance with all
applicable regulatory requirements, although expenditures at properties owned by
the Company may be required to comply with changes in these laws. No material
expenditures are contemplated at this time in order to comply with any such laws
or regulations; however, there can be no assurance that these requirements will
not be changed or that new requirements will not be imposed that would require
significant unanticipated expenditures by the Company, which could have an
adverse effect on the Company and its ability to make distributions to
stockholders. Similarly, changes in laws increasing the potential liability for
environmental conditions existing on the Properties may result in significant
unanticipated expenditures, which could adversely affect the Company and its
ability to make distributions to stockholders.
RISKS OF DEBT FINANCING
DEPENDENCE ON CREDIT FACILITY AND MORTGAGE FINANCING
The Credit Facility, which as of September 30, 1997 had an outstanding
balance of $97.6 million, permits the Company to borrow and issue letters of
credit thereunder. Borrowings under the Credit Facility bear interest at a
floating rate and the Company may from time to time incur or assume other
indebtedness which bears interest at a floating rate. In the event of interest
rate increases, the Company's results of operations may be adversely affected.
In that regard, the Company's results of operations for the last several years
have benefitted from historically low levels of interest rates and could be
adversely affected by a rise in interest rates. As of September 30, 1997, the
Credit Facility was secured by mortgages on 32 Properties (which Properties
collectively accounted for approximately 50% of the Company's annualized base
rent as of September 30, 1997), along with the rental proceeds from such
Properties. As of September 30, 1997, these 32 properties comprised
approximately 44% of the Company's total assets. In addition, during 1997, the
Company obtained mortgage loans which, as of September 30, 1997 were in the
aggregate principal amount of $60.5 million. As of September 30, 1997, these
mortgage loans were collateralized by 17 Properties (which Properties
collectively accounted for approximately 28% of the Company's annualized base
rent as of September 30, 1997). As of September 30, 1997, these 17 Properties
comprised approximately 22% of the Company's total assets. The Company is
currently under negotiations to restructure its Credit Facility as an unsecured
line, although there can be no assurance that such
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<PAGE>
renegotiations will prove successful. If the Company fails to meet its
obligations under the Credit Facility or the aforementioned mortgage loans, or
any other debt instruments it may enter into from time to time, including
failure to comply with financial covenants, the holders of such indebtedness
generally would be entitled to demand immediate repayment of the principal
thereof and to foreclose upon any collateral securing such indebtedness.
The Credit Facility currently expires on June 1, 2000, when the principal
amount of all outstanding borrowings must be paid. Since the term of the Credit
Facility is limited, the Company's ability to continue to fund acquisitions and
provide funds for working capital and other cash needs following the expiration
or utilization of the Credit Facility will depend primarily on its ability to
obtain additional private or public equity or debt financing.
The Company is subject to the risks normally associated with debt financing,
including the risk that the Company's cash flow from operations will be
insufficient to meet required payments of principal and interest, the risk that
the Company will not be able to refinance existing indebtedness or that the
terms of any such refinancing will not be as favorable as the terms of such
indebtedness, and the risk that the Company may be unable to finance future
acquisitions or capital expenditures on favorable terms, or at all. In addition,
the Company is subject to the risk that its failure to maintain its REIT status
may constitute an event of default under the Credit Facility. In addition, the
Credit Facility provides that it is an event of default thereunder if Mr.
Bedford ceases for any reason to be Chairman or Chief Executive Officer of the
Company and a replacement reasonably satisfactory to the lender under the Credit
Facility has not been appointed by the Board of Directors within six months
thereafter. See "--Dependence on Key Personnel." In addition, default under or
acceleration of any debt instrument could, pursuant to cross-default clauses,
cause or permit the acceleration of other indebtedness. Any such default or
acceleration could have a material adverse effect on the Company and its ability
to make distributions to stockholders and to maintain its qualification as a
REIT under the Code and could threaten the continued viability of the Company.
POLICIES ON INDEBTEDNESS SUBJECT TO CHANGE
The Company currently has a policy of limiting its total consolidated
indebtedness to 50% of the aggregate market value of the outstanding shares of
Common Stock plus the total consolidated indebtedness of the Company. The
organizational documents of the Company, however, do not contain any limitation
on the amount or percentage of indebtedness the Company may incur. Accordingly,
the Board of Directors could alter its policy of limiting the extent of its
borrowing. If this policy were changed, the Company could become more highly
leveraged, resulting in an increase in debt service that could adversely affect
the Company and its ability to make distributions to stockholders and in an
increased risk of default on its obligations. Moreover, although the Company
will consider factors other than market capitalization in making decisions
regarding the incurrence of debt (such as the purchase price of properties to be
acquired with debt financing, the estimated market value of properties upon
refinancing, and the ability of particular properties and the Company as a whole
to generate cash flow to cover expected debt service), there can be no assurance
that the aforementioned ratio will be such that the Company, after meeting debt
service obligations thereon, would be able to continue to make stockholder
distributions at current levels.
REGISTRATION RIGHTS
Pursuant to a registration rights agreement, Mr. Bedford has the right to
require the Company to register up to 250,000 shares under the Securities Act
for offer and sale to the public (including by way of an underwritten public
offering) and to cause such shares to be included in any registration statement
filed by the Company. The right of Mr. Bedford to register shares of Common
Stock 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 "--Shares Available for Future
Sale."
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<PAGE>
RISK OF SUBSTANTIAL DILUTION; MARKET REACTION TO SALES UNDER THIS REGISTRATION
STATEMENT
Under the registration statement of which this Prospectus forms a part, the
Company has the ability to issue up to 20,000,000 additional shares of Common
Stock. In addition, this registration statement registers for sale the 4,166,667
shares of Common Stock the Selling Stockholder received upon its conversion of
the Convertible Preferred Stock. As of October 14, 1997, the Company had
approximately 15.3 million shares of Common Stock outstanding (including the
4,166,667 shares of Common Stock issued upon the conversion of the Convertible
Preferred Stock). Holders of Common Stock could experience substantial dilution
in the event that the Company issues a substantial number of these additional
shares. This issuance could also adversely affect the market price of the Common
Stock. The market price of the Common Stock may be particularly susceptible to
price fluctuations in the near to intermediate future given the relatively large
number of shares that may be sold under this registration statement as compared
to the number of shares currently outstanding.
EFFECT OF MARKET INTEREST RATES ON PRICE OF COMMON STOCK
One of the factors that will influence the market price of the shares of
Common Stock in public markets will be the annual yield on the price paid for
shares of Common Stock from distributions by the Company. An increase in market
interest rates may lead prospective purchasers of the Common Stock to seek a
higher annual yield from their investments. Such circumstances may adversely
affect the market price of the Common Stock.
CONCENTRATION OF VOTING POWER
As of October 14, 1997, BPLP was the beneficial owner of 4,166,667 shares of
Common Stock of the Company, representing approximately 27% of the outstanding
shares of Common Stock at that date. In addition, As of October 14, 1997, Mr.
Bedford may be deemed to have been the beneficial owner of 1,011,663 shares of
Common Stock of the Company (including then-exercisable options to purchase
101,250 shares and 50,000 shares owned by the Grindstone Trust, as to which Mr.
Bedford disclaims beneficial ownership), representing approximately 6% of the
outstanding shares of Common Stock at that date. While BPLP and Mr. Bedford do
not individually or in the aggregate have majority control of the Company, they
both currently have, and likely will continue to have, significant influence
with respect to the election of directors and approval or disapproval of
significant corporate actions.
EXEMPTION FROM THE MARYLAND BUSINESS COMBINATION LAW
Under the MGCL, certain "business combinations" (including certain issuances
of equity securities)
between a Maryland corporation and any person who beneficially owns 10% 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 10% or more of the voting power of the
then-outstanding voting stock of the corporation (an "Interested Stockholder")
or an affiliate thereof are prohibited for five years after the most recent date
on which the Interested Stockholder becomes an Interested Stockholder.
Thereafter, all such business combinations must be approved by two super-
majority votes of the stockholders 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 common shares. Mr.
Bedford and BPLP currently beneficially own more than 10% of the Company's
voting shares and would, therefore, be subject to the business combination
provisions of the MGCL. However, as permitted by the MGCL, the Board of
Directors has elected to exempt any business combination with any person from
these provisions of the MGCL. Consequently, unless such exemption is amended or
repealed by the Board of Directors, the five-year prohibition and the
super-majority vote requirements described above will not apply to any business
combination between any Interested Stockholder and the Company. As a result, the
Company may in the future enter into business combinations with Mr. Bedford,
BPLP or other
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<PAGE>
Interested Stockholders, without compliance by the Company with the
super-majority vote requirements and other provisions of the statute. The
exemption from these provisions may be amended or repealed by the Board of
Directors at any time.
ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF THE CHARTER, THE BYLAWS AND
MARYLAND LAW
The Company's Charter authorizes the Board of Directors to cause the Company
to issue additional shares of Common Stock, Preferred Stock, Convertible
Preferred Stock and to set the preferences, rights and other terms of such
preferred stock without the approval of the holders of the Common Stock.
Although the Board of Directors has no intention to issue any shares of
Preferred Stock at the present time, it may establish one or more series of
Preferred Stock that could, depending on the terms of such series, delay, defer
or prevent a change in control of the Company or other transaction that may be
in the best interests of the stockholders.
The Charter contains other provisions that may delay, defer or prevent a
transaction or a change in control of the Company that might involve a premium
price for the holders of the Common Stock or otherwise be in the best interests
of the stockholders or that could otherwise adversely affect the interests of
the holders of the Common Stock, and the Bylaws may be amended by the Board of
Directors to include provisions that would have a similar effect, although the
Board presently has no such intention. The Charter contains provisions limiting
the transferability and ownership of shares of the stock of the Company, which
may have the effect of delaying, deferring or preventing a transaction or a
change in control of the Company that might involve a premium price for the
holders of the Common Stock or otherwise be in their best interests or that
could have dividend, voting or other rights that could adversely affect the
interests of holders of Common Stock.
Although, as described above in "--Exemption from the Maryland Business
Combination Law," the Board of Directors has elected to exempt the Company from
the "business combination" provisions of the MGCL, such exemption may be amended
or repealed by the Board of Directors at any time. Such action by the Board of
Directors would impose the "business combination" restrictions of the MGCL on
Interested Stockholders, which could delay, defer or prevent a transaction or
change in control of the Company that might involve a premium price for the
Company's stock or otherwise be in the best interests of the stockholders or
that could otherwise adversely affect the interests of the stockholders.
In addition, the MGCL restricts the voting rights of shares deemed to be
"control shares." Under the MGCL, "control shares" are those which, when
aggregated with any other shares held by the acquiror, entitle the acquiror to
exercise voting power within specified ranges. Although the Bylaws provide that
the control share provisions of the MGCL shall not apply to any acquisition by
any person of shares of stock of the Company, such provision of the Bylaws may
be amended or eliminated by the Board of Directors at any time in the future.
Moreover, any such amendment or elimination of such provision of the Bylaws may
result in the application of the control share provisions of the MGCL not only
to control shares which may be acquired in the future, but also to control
shares previously acquired. The control share provisions of the MGCL could
delay, defer or prevent a transaction or change in control of the Company that
might involve a premium price for the Company's stock or otherwise be in the
best interests of the stockholders or that could otherwise adversely affect the
interests of the stockholders.
SHARES AVAILABLE FOR FUTURE SALE
No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock, or the availability of such shares for future sales,
will have on the market price of the Common Stock prevailing from time to time.
Sales of substantial amounts of Common Stock, or the perception that such sales
could occur, may adversely affect the prevailing market price for the Common
Stock.
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<PAGE>
CHANGES IN POLICIES
The major policies of the Company, including its policies with respect to
maintaining its qualification as a REIT and with respect to dividends,
acquisitions, debt and investments, are established by the Board of Directors.
Although it has no present intention to do so, the Board of Directors may amend
or revise these and other policies from time to time without a vote of or notice
to the stockholders of the Company. Accordingly, holders of the shares of Common
Stock will have no control over changes in policies of the Company, including
any policies relating to the payment of dividends or to maintaining
qualification as a REIT.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement, the
Company will use the net cash proceeds from the sale of the Shares to acquire
new properties as suitable opportunities arise, to expand and improve certain
properties in the Company's portfolio, to develop new industrial and suburban
office properties, to repay certain indebtedness and for general corporate
purposes. Pending application of any net proceeds, the Company will invest such
proceeds in interest-bearing accounts and short-term, interest-bearing
securities, which are consistent with the Company's intention to continue to
qualify for taxation as a REIT. Such investments may include, for example,
government and governmental agency securities, certificates of deposit and
interest-bearing bank deposits.
The Company will not receive any of the proceeds from the sale, if any, of
the Selling Stockholder Shares. See "Selling Stockholder".
SELLING STOCKHOLDER
The Selling Stockholder and any of its transferees who acquire the Selling
Stockholder Shares in such a manner that they continue to constitute
"restricted" securities within the meaning of Rule 144 under the Securities Act
(together, the "Selling Stockholders") may from time to time offer up to
4,166,667 shares of Common Stock of the Company. Each Prospectus Supplement, if
any, will name each Selling Stockholder, if any, offering shares thereby,
indicate the nature of any position, office, or other material relationship
which the Selling Stockholders have had within the past three years with the
Company or any of its predecessors of affiliates, and state the number of shares
owned by the Selling Stockholders prior to the offering, the number of shares of
Common Stock offered by the Selling Stockholders pursuant to the Prospectus
Supplement and the number of shares of Common Stock and the percentage (if one
percent or more) of the outstanding Common Stock owned by the Selling
Stockholders after the offering.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT OF
TITLE OF CLASS NAME AND ADDRESS OWNED CLASS
- ----------------------- --------------------------- ----------------- ---------------
<S> <C> <C> <C>
Common Stock Bed Preferred No. 1 4,166,667 27%
Limited Partnership (1)
225 Franklin Street
Boston, MA 02110-2803
</TABLE>
- ------------------------
(1) A Delaware limited partnership beneficially owned by an investment fund
managed by AEW Capital Management.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
The following summary of certain terms of the capital stock of the Company
and Maryland law does not purport to be complete and is subject to and qualified
in its entirety by reference to the Company's Charter and Bylaws and Maryland
law.
GENERAL
The Company's Charter provides that the Company may issue up to 50,000,000
shares of Common Stock, 10,000,000 shares of Convertible Preferred Stock, and
10,000,000 shares of Preferred Stock. As of September 30, 1997, there were
11,164,700 shares of Common Stock issued and outstanding. Under Maryland law,
stockholders generally are not liable for a corporation's debts or obligations
solely as a result of their status as stockholders.
COMMON STOCK
All shares of Common Stock offered hereby will be duly authorized, fully
paid and nonassessable. Subject to the preferential rights of any shares or
series of stock that may be issued in the future, holders of shares of Common
Stock are entitled to receive dividends on such stock if, as and when authorized
and declared by the Board of Directors out of assets legally available therefor
and to share ratably in the assets of the Company legally available for
distribution to its stockholders in the event of its liquidation, dissolution or
winding up after payment of or making adequate provision for all debts and
liabilities of the Company.
Each outstanding share of Common Stock entitles the holder to one vote on
all matters submitted to a vote of stockholders and, except as may be provided
with respect to any class or series of stock that may be issued in the future,
the holders of such shares possess the exclusive voting power.There is no
cumulative voting in the election of Directors, which means that the holders of
a majority of the outstanding voting shares of Common Stock can elect all of the
directors standing for election and the holders of the remaining shares of
Common Stock will not be able to elect any directors.
Holders of shares of Common Stock have no preference, conversion, exchange,
sinking fund, redemption rights or preemptive rights to subscribe for any
securities of the Company.
Under the MGCL a Maryland corporation cannot dissolve, amend its charter,
merge, consolidate, sell all or substantially all of its assets, engage in a
share exchange or engage in similar transactions outside the ordinary course of
business unless such dissolution, amendment, merger, consolidation, sale or
share exchange is approved by the affirmative vote of stockholders holding at
least two-thirds of the outstanding shares entitled to vote on the matter unless
a lesser percentage (but not less than a majority of all the votes entitled to
be cast on the matter) is set forth in the corporation charter. The Company's
Charter specifies that the affirmative vote of the stockholders holding a
majority of the outstanding shares is necessary to approve such transactions.
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PREFERRED STOCK
Shares of Preferred Stock (including any unissued shares of any series of
Preferred Stock, to the extent permitted by the terms of such series) may be
issued from time to time, in one or more series as authorized by the Board of
Directors. Prior to issuance of shares of each series, the Board of Directors is
required by the MGCL and the Charter to specify the number of shares of
Preferred Stock to be included in such series and set the terms, preferences,
conversion and other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications and terms or conditions of
redemption for each such series. Accordingly, the Board of Directors, without
approval of the holders of Common Stock, could cause the issuance of one or more
series of Preferred Stock that could, depending on the terms of such series,
delay, defer or prevent a transaction or change in control of the Company that
might involve a premium price for the Common Stock or otherwise be in the best
interests of the holders of Common Stock, or that could have dividend, voting or
other rights that could adversely affect the interests of holders of Common
Stock. See "Risk Factors--Anti-takeover Effect of Certain Provisions of the
Charter, the Bylaws and Maryland Law." As of the date hereof, the Company has no
present plans to issue any additional series of Preferred Stock.
RESTRICTIONS ON TRANSFER AND OWNERSHIP OF CAPITAL STOCK
GENERAL
The Charter provides that the Board of Directors shall use its reasonable
best efforts to cause the Company and its stockholders to qualify for federal
income tax treatment in accordance with provisions of the Code applicable to a
REIT. In furtherance of the foregoing, the Charter further provides that the
Board of Directors shall use its reasonable best efforts to take such actions as
are necessary and may take such actions, as in its sole judgment and discretion
are desirable, to preserve the status of the Company as a REIT; provided,
however, that if the Board of Directors determines that it is no longer in the
best interests of the Company for the Company to continue to qualify as a REIT,
the Board of Directors may revoke or otherwise terminate the Company's election
to be taxed as a REIT.
LIMITATION ON TRANSFER OF CAPITAL STOCK
For the Company to qualify as a REIT under the Code, the Company must, among
other things, satisfy the Five or Fewer Requirement and 100 Stockholder
Requirement. See "Certain Federal Income Tax Considerations." To reduce the risk
that the Company would fail to meet these requirements, the Charter places
limitations on the transferability of the Company's stock.
Subject to certain exceptions, no holder is 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") or more than five
percent (in number or value, whichever is more restrictive) of the outstanding
shares of Common Stock (the "Common Stock Ownership Limit"). In addition to
either of the foregoing ownership limits, no holder is 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 results in automatic transfer of such
stock to a trust for the benefit of a charitable beneficiary or, under certain
specified circumstances, the violative transfer may be deemed void AB INITIO or
the Company may choose to redeem the violative shares.
As noted above, if any transfer of stock occurs which, if effective, will
result in any person (a "Prohibited Owner") beneficially or constructively
owning (under the applicable attribution rules of the
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Code) shares of stock in excess of an applicable ownership restriction, such
shares will 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 will have all voting rights
with respect to such shares, and all dividends or distributions paid on such
shares will 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 will, 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
will 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 will be distributed to the Prohibited Owner to
the extent of the lesser of (i) the price paid by the Prohibited Owner for the
share 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 Charter) on the date of the event which caused the shares to be held in
trust and (ii) the price received by the Trustee from the sale or other
disposition of shares. Any net sales proceeds in excess of this amount will be
paid immediately to the charitable beneficiary.
The Charter exempts Mr. Bedford and BPLP from the Aggregate Stock Ownership
Limit and the Common Stock Ownership Limit and creates separate ownership
limitations for each of these two parties. Mr. Bedford is limited to the
ownership, either actual or constructive under the applicable attribution rules
of the Code, of no more than 15% of the lesser of the number or value of the
outstanding shares of Common Stock. BPLP is limited to the ownership, either
actual or constructive under the applicable attribution rules of the Code, of
58% of the lesser of the number or value of the outstanding shares of Common
Stock.
In addition, the Charter permits the Board of Directors to waive, under
certain conditions, 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 pursuant to which it sold the Convertible Preferred
Stock to BPLP that it will not unreasonably withhold its consent to any transfer
by BPLP, 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 is
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, refuse 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
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 the acquisition of an interest in an entity which owns Common
Stock) by an individual or entity could cause that individual or entity (or
another individual or entity) to constructively own Common 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 Charter.
The Charter also requires 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
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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 is 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.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Chase Mellon
Shareholder Services.
CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE
COMPANY'S CHARTER AND BYLAWS
The following summary of certain provisions of Maryland law and of the
Charter and Bylaws of the Company does not purport to be complete and is subject
to and qualified in its entirety by reference to Maryland law and the Charter
and Bylaws of the Company. Copies of the Charter and Bylaws may be obtained as
described under "Available Information."
MARYLAND BUSINESS COMBINATION LAW
Under the MGCL, certain "business combinations" (including certain issuances
of equity securities) between a Maryland corporation and any Interested
Stockholder or an affiliate thereof are prohibited for five years after the most
recent date on which the Interested Stockholder becomes an Interested
Stockholder. Thereafter, all such business combinations must be approved by two
super-majority votes of the stockholders unless, among other conditions, the
corporation's common stock holders 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 common shares. Mr.
Bedford and BPLP currently beneficially own more than 10% of the Company's
voting shares and would, therefore, be subject to the business combination
provisions of the MGCL. However, as permitted by the MGCL, the Board of
Directors has elected to exempt any business combination with any person from
these provisions of the MGCL. Consequently, unless such exemption is amended or
repealed by the Board of Directors, the five-year prohibition and the super
majority vote requirements described above will not apply to any business
combination between any Interested Stockholder and the Company. As a result, the
Company may in the future enter into business combinations with Mr. Bedford,
BPLP or other Interested Stockholders, without compliance by the Company with
the super majority vote requirements and other provisions of the statute. The
exemption from these provisions may be amended or repealed by the Board of
Directors at any time. Such action by the Board of Directors would impose the
restrictions of the business combination provisions of the MGCL on the Company,
which could delay, defer or prevent a transaction or 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 or that could otherwise adversely
affect the interests of the stockholders.
CONTROL SHARE ACQUISITIONS
The MGCL also provides that "control shares" (defined below) of a Maryland
corporation acquired in a "control share acquisition" have no voting rights
except to the extent approved by a vote of two-thirds of the votes entitled to
be cast on the matter, excluding shares of stock owned by the acquiror, by
officers or by directors who are employees of the corporation. The control share
provisions of the MGCL do not apply (a) to shares acquired in a merger,
consolidation or share exchange if the corporation is a party to the transaction
or (b) to acquisitions approved or exempted by the corporation's charter or
bylaws. The Bylaws of the Company currently contain a provision exempting from
the control share provisions of the MGCL any and all acquisitions by any person
of the Company's shares of stock and, as a result, the control
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share provisions currently do not apply to the Company. There can be no
assurance, however, that such provision will not be amended or eliminated by the
Board of Directors at any time in the future.
"Control shares" are voting shares of stock which, if aggregated with all
other such shares of stock previously acquired by the acquiror, or in respect of
which the acquiror is able to exercise or direct the exercise of voting power
(except solely by virtue of a revocable proxy), would entitle the acquiror to
exercise voting power in electing directors within one of the following ranges
of voting power: (i) one-fifth or more but less than one-third, (ii) one-third
or more but less than a majority, or (iii) a majority or more of all voting
power. Thus, if an acquisition of control shares within one range is approved by
stockholders and is followed by an acquisition of additional control shares by
the same person that results in the total number of control shares owned by that
person being in a higher range, then voting rights for the additional shares in
excess of the previously approved range would also have to be approved by the
stockholders. Control shares do not include shares the acquiring person is then
entitled to vote as a result of having previously obtained stockholder approval.
A "control share acquisition" means the acquisition of control shares, subject
to certain exceptions.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of directors of the corporation to call a special meeting
of stockholders to be held within 50 days of demand to consider the voting
rights of the shares. If no request for a meeting is made, the corporation may
itself present the question at any stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then,
subject to certain limitations, the corporation may redeem any or all of the
control shares (except those for which voting rights have previously been
approved) for fair value determined, without regard to the absence of voting
rights for the control shares, as of the date of the last control share
acquisition by the acquiror or of the stockholders meeting at which the voting
rights of such shares were considered and not approved. If voting rights for
control shares are approved at the stockholders meeting and the acquiror becomes
entitled to vote a majority of the shares entitled to vote, all other
stockholders may exercise appraisal rights. The fair value of the shares as
determined for purposes of such appraisal rights may not be less than the
highest price per share paid by the acquiror in the control share acquisition.
As stated above, the control share provisions of the MGCL do not currently
apply to the Company because the Bylaws of the Company contain a provision
exempting from the control share provisions of the MGCL any and all acquisitions
by any person of the Company's shares of stock. There can be no assurance,
however, that such provision will not be amended or eliminated by the Board of
Directors at any time in the future. Moreover, any amendment or elimination of
such provision of the Bylaws may result in the application of the control share
provisions of the MGCL not only to shares which may be acquired in any future
control share acquisitions, but also to shares acquired in prior control share
acquisitions. The potential for such application of the control share provisions
of the MGCL could delay, defer or prevent a transaction or 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.
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INTERESTED DIRECTOR TRANSACTIONS
The MGCL provides that a contract or other transaction between a corporation
and any of its directors or between a corporation and any other entity in which
any of its directors is a director or has a material financial interest is not
void or voidable by reason of (i) such common directorship or interest; (ii) the
presence of the director at the meeting of the board which authorizes, approves,
or ratifies the contract or transaction; or (iii) the counting of the vote of
the director for the authorization, approval, or ratification of the contract or
transaction if: (a) the fact of the common directorship or interest is disclosed
or known to the board of directors and the board of directors ratifies or
approves the contract or transaction by the affirmative vote of a majority of
its disinterested directors; (b) the fact of the common directorship or interest
is disclosed or known to the stockholders entitled to vote, and the contract or
transaction is authorized, approved or ratified by a majority of the votes cast
by the stockholders entitled to vote other than the votes of shares owned of
record or beneficially by the interested director or corporation; or (c) the
contract or transaction is fair and reasonable to the corporation. In addition,
the Company's Charter contains a provision for approval by the disinterested
directors that is substantially similar to the provision of the MGCL referred to
in clause (a) of the preceding sentence.
AMENDMENTS TO THE CHARTER AND BYLAWS
The Charter provides generally that its provisions may be amended only by
the affirmative vote of a majority of all the votes entitled to be cast on the
matter. The Bylaws provide that the Board of Directors has the exclusive power
to adopt, alter or repeal any provision of the Bylaws and to make new Bylaws.
THE BOARD OF DIRECTORS
The Bylaws provide that the number of Directors of the Company may be
established by a majority of the entire Board of Directors but may not be fewer
than the minimum required by the MGCL nor more than 15, and at least one-half of
the Board of Directors shall consist of Independent Directors. The Bylaws define
"Independent Director" as a director who is not an employee or consultant of the
Company. Any vacancy on the Company's Board of Directors for any cause other
than an increase in the number of Directors shall be filled by a majority of the
remaining Directors (although such majority is less than a quorum). However, any
vacancy that arises because an Independent Director ceases to be a Director of
the Company will be filled by the selection of a successor Director by a
majority vote of the remaining Independent Directors (although less than a
quorum). Any vacancy on the Board created by an increase in the number of
Directors may be filled by a majority vote of the entire Board of Directors,
except that a vacancy which is required to be filled by an Independent Director
pursuant to the Company's Bylaws will be filled by a majority vote of the Board
of Directors' remaining Independent Directors (although less than a quorum). The
Bylaws provide that an individual so elected as a Director will hold office for
the unexpired term of the Director he is replacing.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS
The Bylaws of the Company provide that (a) with respect to an annual meeting
of stockholders, nominations of persons for election to the Board of Directors
and the proposal of business to be considered by stockholders may be made only
(i) pursuant to the Company's notice of meeting, (ii) by or at the discretion of
the Board of Directors or (iii) by a stockholder who is entitled to vote at the
meeting and has complied with the advance notice procedures set forth in the
Bylaws and (b) with respect to special meetings of stockholders, only the
business specified in the Company's notice of meeting may be brought before the
meeting of stockholders, and nominations of persons for election to the Board of
Directors may be made only (i) pursuant to the Company's notice of meeting, (ii)
by or at the discretion of the Board of Directors or (iii) provided that the
Board of Directors has determined that Directors shall be elected at such
meeting, by a stockholder who is entitled to vote at the meeting and has
complied with the advance notice provisions set forth in the Bylaws. The
foregoing provisions of the Company's Bylaws could delay, defer or prevent a
transaction or a change in control of the Company that might involve a premium
price for the Common Stock.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
THE FOLLOWING IS A GENERAL SUMMARY OF THE MATERIAL FEDERAL INCOME TAX
CONSIDERATIONS ASSOCIATED WITH AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY.
SHEARMAN & STERLING, COUNSEL TO THE COMPANY, HAS REVIEWED THE FOLLOWING
DISCUSSION AND IS OF THE OPINION THAT IT FAIRLY SUMMARIZES THE FEDERAL INCOME
TAX CONSIDERATIONS THAT ARE LIKELY TO BE MATERIAL TO A HOLDER OF COMMON STOCK.
THE FOLLOWING DISCUSSION IS NOT EXHAUSTIVE OF ALL POSSIBLE TAX CONSIDERATIONS
AND IS NOT TAX ADVICE. MOREOVER, THIS SUMMARY DOES NOT DEAL WITH ALL TAX ASPECTS
THAT MIGHT BE RELEVANT TO A PARTICULAR PROSPECTIVE STOCKHOLDER IN LIGHT OF HIS
OR HER PERSONAL CIRCUMSTANCES; NOR DOES IT DEAL WITH PARTICULAR TYPES OF
STOCKHOLDERS THAT ARE SUBJECT TO SPECIAL TREATMENT UNDER THE CODE, SUCH AS
INSURANCE COMPANIES, FINANCIAL INSTITUTIONS AND BROKER-DEALERS. THE CODE
PROVISIONS GOVERNING THE FEDERAL INCOME TAX TREATMENT OF REITS ARE HIGHLY
TECHNICAL AND COMPLEX, AND THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE
APPLICABLE CODE PROVISIONS, RULES AND TREASURY REGULATIONS PROMULGATED
THEREUNDER, AND ADMINISTRATIVE AND JUDICIAL INTERPRETATIONS THEREOF. THE
FOLLOWING DISCUSSION AND THE OPINIONS OF SHEARMAN & STERLING ARE BASED ON
CURRENT LAW.
EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR
WITH RESPECT TO SUCH PURCHASER'S SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX CONSEQUENCES OF THE PURCHASE, HOLDING AND SALE OF COMMON STOCK OF THE
COMPANY.
FEDERAL INCOME TAXATION OF THE COMPANY
The Company believes that, commencing with its taxable year ending December
31, 1985, it was organized and has operated in such a manner as to qualify for
taxation as a REIT under the Code, and the Company intends to continue to
operate in such a manner, but no assurance can be given that it will operate in
a manner so as to qualify or remain qualified. The Company has not and does not
intend to request a ruling from the IRS as to its status as a REIT. Based on
various assumptions and factual representations made by the Company, in the
opinion of Shearman & Sterling, counsel to the Company, the Company was
organized in conformity with the requirements for qualification as a REIT, the
Company has operated so as to qualify as a REIT since its taxable year ended
December 31, 1993 (which such counsel believes is the Company's earliest taxable
year which is within the normal period for federal tax audit), and the Company's
proposed method of operation will enable it to meet the requirements for
qualification and taxation as a REIT under the Code. Such qualification depends
upon the Company's ability to meet the various requirements imposed under the
Code through actual operations, as discussed below, and no assurance can be
given that actual operations will meet these requirements. The opinion of
Shearman & Sterling is not binding on the IRS. The opinion of Shearman &
Sterling also is based upon existing law, the Treasury Regulations, currently
published administrative positions of the IRS and judicial decisions, which are
subject to change either prospectively or retroactively. In addition, as
discussed under "Risk Factors--Tax Risks; Risks Associated with REIT Status,"
for tax year 1993 (and possibly for certain prior years which such counsel
believes are outside the normal period for federal tax audit) it is uncertain
whether the Company properly requested the written statements required by the
Treasury Regulations concerning the ownership of its stock by certain
stockholders of record (the "Stockholder Polling Requirements") from certain
clearing organizations holding Common Stock as nominees for the beneficial
owners of such shares. However, the Company did employ stockholder polling
procedures for tax year 1993 which it believes went beyond what is required by
the Treasury Regulations in providing stockholder ownership information for
purposes of determining whether the Company satisfied the Five or Fewer
Requirement (defined below under the caption "--Requirements for
Qualification"). In that regard, the Company has received an opinion of Shearman
& Sterling to the effect that, based on various assumptions and factual
representations made by the Company, the Company has not, by virtue of the
Stockholder Polling Requirements, failed to qualify as a REIT with respect to
tax year 1993.
If the Company qualifies for taxation as a REIT, it generally will not be
subject to federal corporate income taxes on that portion of its ordinary income
or capital gain that is currently distributed to
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stockholders. The REIT provisions of the Code generally allow a REIT to deduct
dividends paid to its stockholders. This deduction for dividends paid to
stockholders substantially eliminates the federal "double taxation" on earnings
(once at the corporate level and once again at the stockholder level) that
usually results from investments in a corporation.
The Company, however, will be subject to federal income tax, as follows:
first, the Company will be taxed at regular corporate rates on its undistributed
REIT taxable income, including undistributed net capital gains. Second, under
certain circumstances, the Company may be subject to the "alternative minimum
tax." Third, if the Company has net income from the sale or other disposition of
"foreclosure property" that is held primarily for sale to customers in the
ordinary course of business or other non-qualifying income from foreclosure
property, it will be subject to tax at the highest corporate rate on such
income. Fourth, if the Company has net income from prohibited transactions
(which are, in general, certain sales or other dispositions of property other
than foreclosure property held primarily for sale to customers in the ordinary
course of business), such income will be subject to a 100% tax. Fifth, if the
Company should fail to satisfy either the 75% or 95% gross income test
(discussed below) but has nonetheless maintained its qualification as a REIT
because certain other requirements have been met, it will be subject to a 100%
tax on the net income attributable to the greater of the amount by which the
Company fails the 75% or 95% test, multiplied by a fraction intended to reflect
the Company's profitability. Sixth, if the Company fails to distribute during
each year at least the sum of (i) 85% of its REIT ordinary income for such year,
(ii) 95% of its REIT capital gain net income for such year and (iii) any
undistributed taxable income from prior periods, the Company will be subject to
a 4% excise tax on the excess of such required distribution over the amounts
actually distributed. Seventh, if the Company should acquire any asset from a C
corporation (i.e., a corporation generally subject to full corporate-level tax)
in a carryover-basis transaction and the Company subsequently recognizes gain on
the disposition of such asset during the ten-year period (the "Recognition
Period") beginning on the date on which the asset was acquired by the Company,
then, to the extent of the excess of (a) the fair market value of the asset as
of the beginning of the applicable Recognition Period over (b) the Company's
adjusted basis in such asset as of the beginning of such Recognition Period (the
"Built-In Gain"), such gain will be subject to tax at the highest regular
corporate rate, pursuant to guidelines issued by the IRS (the "Built-In Gain
Rules").
REQUIREMENTS FOR QUALIFICATION
To qualify as a REIT, the Company must elect to be so treated and must meet
the requirements, discussed below, relating to the Company's organization,
sources of income, nature of assets and distributions of income to stockholders.
ORGANIZATIONAL REQUIREMENTS
The Code defines a REIT as a corporation, trust or association: (i) that is
managed by one or more directors or trustees, (ii) the beneficial ownership of
which is evidenced by transferable shares or by transferable certificates of
beneficial interest, (iii) that would be taxable as a domestic corporation but
for the REIT requirements, (iv) that is neither a financial institution nor an
insurance company subject to certain provisions of the Code, (v) the beneficial
ownership of which is held by 100 or more persons (the "100 Stockholder
Requirement"), and (vi) during the last half of each taxable year not more than
50% in value of the outstanding stock of which is owned, directly or indirectly,
through the application of certain attribution rules, by five or fewer
individuals (as defined in the Code to include certain entities) (the "Five or
Fewer Requirement"). In addition, certain other tests, described below,
regarding the nature of its income and assets also must be satisfied. The Code
provides that conditions (i) through (iv), inclusive, must be met during the
entire taxable year and that condition (v) must be met during at least 335 days
of a taxable year of 12 months or during a proportionate part of a taxable year
of less than 12 months. For purposes of conditions (v) and (vi), pension funds
and certain other tax-exempt entities are treated as individuals, subject to a
"look-through" exception in the case of condition (vi).
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In order to protect the Company from a concentration of ownership of its
stock that would cause the Company to fail the Five or Fewer Requirement or the
100 Stockholder Requirement, the Charter of the Company provides that no holder
is permitted to own, either actually or constructively under the applicable
attribution rules of the Code, more than 5% (in value) of the aggregate
outstanding shares of all classes of stock of the Company or more than 5% (in
number or value, whichever is more restrictive) of the outstanding shares of
Common Stock, with certain exceptions. In addition, no holder is 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 would
cause more than 50% in value of the Company's outstanding stock to be owned by
five or fewer individuals or would result in the Company's stock being
beneficially owned by less than 100 persons (determined without reference to any
rule of attribution). See "Description of Capital Stock of the
Company--Restrictions on Transfer and Ownership of Capital Stock." In addition,
certain investors will be prohibited from purchasing or holding the shares of
Common Stock issued on conversion of the Convertible Preferred Stock (but only
so long as such Common Stock is a "restricted security" as defined in Rule 144).
See "Description of Capital Stock of the Company-- Restrictions on Transfer and
Ownership of Capital Stock." In rendering its opinion that the Company has
operated so as to qualify, and its proposed method of operation will enable it
to qualify, as a REIT, Shearman & Sterling is relying on the representation of
the Company that the ownership of its stock has satisfied and will satisfy the
Five or Fewer Requirement and the 100 Stockholder Requirement; and Shearman &
Sterling expresses no opinion as to whether, as a matter of law, the provisions
contained in the Charter will preclude the Company from failing the Five or
Fewer Requirement or the 100 Stockholder Requirement.
In addition, a corporation may not elect to become a REIT unless its taxable
year is the calendar year. The Company has a calendar year taxable year.
The Company owns and operates a number of properties through subsidiaries.
Under the Code, a corporation which is a "qualified REIT subsidiary" is not
treated as a separate corporation; rather, all assets, liabilities and items of
income, deduction, and credit of a "qualified REIT subsidiary" are treated as
assets, liabilities and such items (as the case may be) of the REIT. The
Company's subsidiaries are "qualified REIT subsidiaries." Thus, in applying the
requirements described herein, the Company's "qualified REIT subsidiaries" will
be ignored, and all assets, liabilities and items of income, deduction and
credit of such subsidiaries will be treated as assets, liabilities and items of
the Company. While this summary generally does not address state tax
consequences, some states may not recognize a "qualified REIT subsidiary", which
could cause a subsidiary to be taxed or could cause the Company to fail to
qualify as a REIT under such state law.
The Company owns investments through Bedford Realty Partners, L.P. (the
"Partnership"), and may in the future own additional investments through the
Partnership or other partnerhips. In general, partnerships are "pass-through"
entities which are not subject to federal income tax. Rather, partners are
allocated their proportionate share of the items of income, gain, loss,
deduction and credit of a partnership, and are potentially subject to tax
thereon, without regard to whether the partners receive a distribution from the
partnership. As a result, the Company will include its proportionate share of
(i) the Partnership's income, gains, losses, deductions and credits for purposes
of the various REIT gross income tests and in its computation of its REIT
taxable income and (ii) the Partnership's assets for purposes of the REIT asset
tests.
INCOME TESTS
To maintain qualification as a REIT, three gross income requirements must be
satisfied annually. First, at least 75% of the Company's gross income, excluding
gross income from certain dispositions of property held primarily for sale to
customers in the ordinary course of a trade or business ("prohibited
transactions") for each taxable year, must be derived directly or indirectly
from investments relating to real
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property or mortgages on real property (including "rents from real property"
and, in certain circumstances, interest) or from certain types of temporary
investments. Second, at least 95% of the Company's gross income (excluding gross
income from "prohibited transactions") for each taxable year must be derived
from such real property investments and from dividends, interest and gain from
the sale or disposition of stock or securities or from any combination of the
foregoing. Third, short-term gain from the sale or other disposition of stock or
securities, gain from "prohibited transactions" and gain from the sale or other
disposition of real property held for less than four years (apart from
involuntary conversions and sales of foreclosure property) must represent less
than 30% of the Company's gross income (including gross income from prohibited
transactions) for each taxable year.
Rents received or deemed to be received by the Company will qualify as
"rents from real property" in satisfying the gross income requirements for a
REIT described above only if several conditions are met. First, the amount of
rent generally must not be based in whole or in part on the income or profits of
any person. An amount received or accrued generally will not be excluded from
the term "rents from real property," however, solely by reason of being based on
a fixed percentage or percentages of receipts of sales. Second, the Code
provides that rents received from a tenant will not qualify as "rents from real
property" in satisfying the gross income tests if the REIT, or a direct or
constructive owner of 10% or more of the REIT, directly or constructively owns
10% or more of such tenant. Third, if rent attributable to personal property,
leased in connection with a lease of real property, is greater than 15% of the
total rent received under the lease, then the portion of rent attributable to
the personal property will not qualify as "rents from real property." Fourth,
for rents to qualify as "rents from real property" the REIT must not operate or
manage the property or furnish or render services to tenants, other than through
an "independent contractor" who is adequately compensated and from whom the REIT
does not derive any income; provided, however, that a REIT may provide services
with respect to its properties and the income will qualify as "rents from real
property" if the services are "usually or customarily rendered" in connection
with the rental of room or other space for occupancy only and are not otherwise
considered "rendered to the occupant."
The Company has not and does not anticipate that it will in the future
charge rent that is based in whole or in part on the income or profits of any
person (except by reason of being based on a fixed percentage or percentages of
receipts of sales consistent with the rule described above). The Company has not
and does not anticipate that it will in the future derive rent attributable to
personal property leased in connection with real property that exceeds 15% of
the total rents.
The term "interest" generally does not include any amount received or
accrued (directly or indirectly) if the determination of such amount depends in
whole or in part on the income or profits of any person. An amount received or
accrued generally will not be excluded from the term "interest," however, solely
by reason of being based on a fixed percentage or percentages of receipts or
sales.
If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for that year
if it is eligible for relief under certain provisions of the Code. These relief
provisions will be generally available if (i) the Company's failure to meet
these tests was due to reasonable cause and not due to willful neglect, (ii) the
Company attaches a schedule of the sources of its income to its federal income
tax return and (iii) any incorrect information on the schedule is not due to
fraud with intent to evade tax. It is not possible, however, to state whether,
in all circumstances, the Company would be entitled to the benefit of these
relief provisions. For example, if the Company fails to satisfy the gross income
tests because nonqualifying income that the Company intentionally incurs exceeds
the limits on such income, the IRS could conclude that the Company's failure to
satisfy the tests was not due to reasonable cause. As discussed above in
"--Federal Income Taxation of the Company," even if these relief provisions
apply, a tax would be imposed with respect to the excess net income. No similar
mitigation provision provides relief if the Company fails the 30% income test;
and in such case, the Company will cease to qualify as a REIT. See "Risk
Factors--Tax Risks; Risks Associated with REIT Status--Adverse Consequences of
the Failure to Maintain Qualification as a REIT."
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ASSET TESTS
At the close of each quarter of its taxable year, the Company also must
satisfy three tests relating to the nature and diversification of its assets.
First, at least 75% of the value of the Company's total assets must be
represented by real estate assets, cash, cash items and government securities.
Second, no more than 25% of the Company's total assets may be represented by
securities other than those in the 75% asset class. Third, of the investments
included in the 25% asset class (which does not include any securities issued by
a "qualified REIT subsidiary"), the value of any one issuer's securities owned
by the Company may not exceed 5% of the value of the Company's total assets, and
the Company may not own more than 10% of any one issuer's outstanding voting
securities.
After initially meeting the asset tests at the close of any quarter, the
Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset values.
If the failure to satisfy the asset tests results from an acquisition of
securities or other property during a quarter, the failure can be cured by
disposition of sufficient nonqualifying assets within 30 days after the close of
that quarter. The Company has maintained and intends in the future to maintain
adequate records of the value of its assets to ensure compliance with the asset
tests and to take such other actions within 30 days after the close of any
quarter as may be required to cure any noncompliance.
ANNUAL DISTRIBUTION REQUIREMENTS
In order to be taxed as a REIT, the Company is required to distribute
dividends (other than capital gain dividends) to its stockholders in an amount
at least equal to (a) the sum of (i) 95% of the Company's "REIT taxable income"
(computed without regard to the dividends-paid deduction and the Company's net
capital gain) and (ii) 95% of the net income, if any, from foreclosure property
in excess of the special tax on income from foreclosure property, minus (b) the
sum of certain items of non-cash income. Such distributions must be paid in the
taxable year to which they relate or in the following taxable year if declared
before the Company timely files its federal income tax return for such year and
if paid on or before the first regular dividend payment after such declaration.
Even if the Company satisfies the foregoing distribution requirements, to the
extent that the Company does not distribute all of its net capital gain or "REIT
taxable income," as adjusted, it will be subject to tax thereon at regular
capital gains or ordinary corporate tax rates. Furthermore, if the Company
should fail to distribute during each calendar year at least the sum of (a) 85%
of its ordinary income for that year, (b) 95% of its capital gain net income for
that year and (c) any undistributed taxable income from prior periods, the
Company would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. In addition, during its
Recognition Period, if the Company disposes of any asset subject to the Built-In
Gain Rules, the Company will be required, pursuant to guidance issued by the
IRS, to distribute at least 95% of the Built-In Gain (after tax), if any,
recognized on the disposition of the asset.
It is expected that the Company's REIT taxable income will continue to be
less than its cash flow due to the allowance of depreciation and other non-cash
charges in computing REIT taxable income. Accordingly, the Company anticipates
that it will generally have sufficient cash or liquid assets to enable it to
satisfy the 95% distribution requirement. It is possible, however, that the
Company, from time to time, may not have sufficient cash or other liquid assets
to meet the 95% distribution requirement or to distribute such greater amount as
may be necessary to avoid income and excise taxation, as a result of timing
differences between (i) the actual receipt of income and actual payment of
deductible expenses and (ii) the inclusion of such income and deduction of such
expenses in arriving at taxable income of the Company, or as a result of
nondeductible expenses such as principal amortization or repayments, or capital
expenditures in excess of non-cash deductions. In the event that such timing
differences occur, the Company may find it necessary to seek funds through
borrowings or the issuance of equity securities (there being no assurance that
it will be able to do so) or, if possible to pay taxable stock dividends in
order to meet the dividend requirement.
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Under certain circumstances, the Company may be able to rectify a failure to
meet the distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which may be included in the Company's deduction
for dividends paid for the earlier year. Thus, the Company may be able to avoid
being taxed on amounts distributed as deficiency dividends. The Company will,
however, be required to pay interest based upon the amount of any deduction
taken for deficiency dividends.
FAILURE TO QUALIFY
If the Company fails to qualify for taxation as a REIT in any taxable year
and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to stockholders in any year in which the
Company fails to qualify will not be deductible by the Company nor will they be
required to be made. In such event, to the extent of current or accumulated
earnings and profits, all distributions to stockholders will be dividends,
taxable as ordinary income; and subject to certain limitations of the Code,
corporate distributees may be eligible for the dividends-received deduction.
Unless the Company is entitled to relief under specific statutory provisions,
the Company also will be disqualified from taxation as a REIT for the four
taxable years following the year during which qualification was lost. It is not
possible to state whether in all circumstances the Company would be entitled to
such statutory relief. For example, if the Company fails to satisfy the gross
income tests because nonqualifying income that the Company intentionally incurs
exceeds the limit on such income, the IRS could conclude that the Company's
failure to satisfy the tests was not due to reasonable cause and disallow relief
on that basis. See "Risk Factors--Tax Risks; Risks Associated with REIT
Status--Adverse Consequences of the Failure to Maintain Qualification as a
REIT."
TAXATION OF U.S. STOCKHOLDERS
As used herein, the term "U.S. Stockholder" means a holder of Common Stock
that for United States federal income tax purposes (a) is a citizen or resident
of the United States, (b) is a corporation, partnership or other entity created
or organized in or under the laws of the United States or of any political
subdivision thereof, (c) is an estate, the income of which is subject to United
States federal income taxation regardless of its source, or (d) is a trust whose
administration is under the primary supervision of a court within the United
States and over which one or more United States trustees have authority to
control all substantial decisions. For any taxable year for which the Company
qualifies for taxation as a REIT, amounts distributed to taxable U.S.
Stockholders will be taxed as follows.
DISTRIBUTIONS GENERALLY
Distributions to U.S. Stockholders, other than capital gain dividends
discussed below, will constitute dividends up to the amount of the Company's
current or accumulated earnings and profits and will be taxable to the
stockholders as ordinary income. For purposes of determining whether
distributions are out of current or accumulated earnings and profits, the
earnings and profits of the Company will be allocated first to the Company's
Preferred Stock, if any, and then allocated to the Common Stock. These
distributions are not eligible for the dividends-received deduction for
corporations. To the extent that the Company makes a distribution in excess of
its current or accumulated earnings and profits, the distribution will be
treated first as a tax-free return of capital, reducing the tax basis in the
U.S. Stockholder's Common Stock, and the distribution in excess of a U.S.
Stockholder's tax basis in its Common Stock will be taxable as gain realized
from the sale of its Common Stock. Dividends declared by the Company in October,
November or December of any year payable to a stockholder of record on a
specified date in any such month shall be treated as both paid by the Company
and received by the stockholder on December 31 of the year, provided that the
dividend is actually paid by the Company during January of the following
calendar year. Stockholders may not include on their own federal income tax
returns any losses of the Company.
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The Company will be treated as having sufficient earnings and profits to
treat as a dividend any distribution by the Company up to the amount required to
be distributed in order to avoid imposition of the 4% excise tax discussed in
"--Federal Income Taxation of the Company" above. Moreover, any "deficiency
dividend" will be treated as an ordinary or capital gain dividend, as the case
may be, regardless of the Company's earnings and profits. As a result,
stockholders may be required to treat certain distributions that would otherwise
result in a tax-free return of capital as taxable dividends.
CAPITAL GAIN DIVIDENDS
Dividends to U.S. Stockholders that are properly designated by the Company
as capital gain dividends will be treated as long-term capital gains (to the
extent they do not exceed the Company's actual net capital gain) for the taxable
year without regard to the period for which the stockholder has held his stock.
However, corporate stockholders may be required to treat up to 20% of certain
capital gain dividends as ordinary income. Capital gain dividends are not
eligible for the dividends-received deduction for corporations.
PASSIVE ACTIVITY LOSS AND INVESTMENT INTEREST LIMITATIONS
Distributions from the Company and gain from the disposition of Common Stock
will not be treated as passive activity income, and therefore stockholders will
not be able to apply any "passive activity losses" against such income.
Dividends from the Company (to the extent they do not constitute a return of
capital) will generally be treated as investment income for purposes of the
investment income limitation on the deduction of investment interest. Under
recently enacted legislation, net capital gain from the disposition of Common
Stock and capital gain dividends generally will be excluded from investment
income.
CERTAIN DISPOSITIONS OF SHARES
In general, a U.S. Stockholder will realize capital gain or loss on the
disposition of shares of Common Stock equal to the difference between the sales
price for such shares and the adjusted tax basis for such shares. Gain or loss
realized upon a sale or exchange of Common Stock by a U.S. Stockholder who has
held such Common Stock for more than one year will be treated as long-term
capital gain or loss, respectively, and otherwise will be treated as short-term
capital gain or loss. However, losses incurred on the sale or exchange of Common
Stock held for less than six months (after applying certain holding period
rules) will be deemed long-term capital loss to the extent of any capital gain
dividends received by the selling stockholder from those shares.
TREATMENT OF TAX-EXEMPT STOCKHOLDERS
Generally, a tax-exempt investor that is exempt from tax on its investment
income, such as an individual retirement account ("IRA") or a 401(k) plan, that
holds the Common Stock as an investment will not be subject to tax on dividends
paid by the Company. However, if such tax-exempt investor is treated as having
purchased its Common Stock with borrowed funds, some or all of its dividends
will be subject to tax. In addition, a portion of the dividends paid to certain
pension plans (including 401(k) plans but not including IRAs and government
pension plans) that own more than 10% (by value) of the Company's outstanding
Common Stock will be taxed as unrelated business taxable income if the Company
is treated as predominantly owned within the meaning of the Code by such pension
plans.
RECENT LEGISLATION
On August 5, 1997, legislation was enacted which will be beneficial to the
Company and its shareholders because the relevant provisions would liberalize
several of the rules concerning the qualifications and taxation of the Company
as a REIT. These rules applicable to the Company will be effective for the
Company's taxable year beginning January 1, 1998. In addition, the legislation
reduces the rate of tax,
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in the case of individuals, on long-term capital gain on property held for more
than 18 months. Prospective holders are urged to consult their own tax advisors
regarding the new legislation.
SPECIAL TAX CONSIDERATIONS FOR FOREIGN STOCKHOLDERS
The rules governing United States federal income taxation of non-resident
alien individuals, foreign corporations, foreign partnerships and foreign trusts
and estates (collectively, "Non-U.S. Stockholders") are complex, and the
following discussion is intended only as a summary of these rules. Prospective
Non-U.S. Stockholders should consult with their own tax advisors to determine
the impact of federal, state and local income tax laws on an investment in the
Company, including any reporting requirements.
In general, Non-U.S Stockholders will be subject to regular United States
federal income tax with respect to their investment in the Company if the
investment is "effectively connected" with the Non-U.S. Stockholder's conduct of
a trade or business in the United States. A corporate Non-U.S. Stockholder that
receives income that is (or is treated as) effectively connected with a U.S.
trade or business also may be subject to the branch profits tax under Section
884 of the Code, which is imposed in addition to regular United States federal
corporate income tax generally at the rate of 30%, subject to reduction under a
tax treaty, if applicable. The following discussion will apply to Non-U.S.
Stockholders whose investment in the Company is not so effectively connected.
A distribution by the Company that is not attributable to gain from the sale
or exchange by the Company of a United States real property interest and that is
not designated by the Company as a capital gain dividend will be treated as an
ordinary income dividend to the extent that it is made out of current or
accumulated earnings and profits. Generally, any ordinary income dividend will
be subject to a United States federal income tax equal to 30% of the gross
amount of the dividend unless this tax is reduced by an applicable tax treaty.
To the extent that the Company makes a distribution in excess of its current or
accumulated earnings and profits, the distribution will be treated first as a
tax-free return of capital, reducing a Non-U.S. Stockholder's basis in its
Common Stock (but not below zero), and the distribution in excess of a Non-U.S.
Stockholder's tax basis in its Common Stock will be treated as gain realized
from the sale of its Common Stock.
Distributions by the Company that are attributable to gain from the sale or
exchange of a United States real property interest will be taxed to a Non-U.S.
Stockholder under the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, such distributions are taxed to a Non-U.S. Stockholder
as if the distributions were gains "effectively connected" with a United States
trade or business. Accordingly, a Non-U.S. Stockholder will be taxed at the
normal capital gain rates applicable to a U.S. Stockholder (subject to any
applicable alternative minimum tax and a special alternative minimum tax in the
case of non-resident alien individuals). Distributions subject to FIRPTA also
may be subject to the branch profits tax generally at the rate of 30%, subject
to reduction under a tax treaty, if applicable.
Although tax treaties may reduce the Company's withholding obligations, the
Company generally will be required to withhold from distributions to Non-U.S.
Stockholders, and remit to the IRS, (i) 35% of designated capital gain dividends
(or, if greater, 35% of the amount of any distributions that could be designated
as capital gain dividends) and (ii) 30% of all other distributions, unless
reduced by an applicable tax treaty. In addition, if the Company designates
prior distributions as capital gain dividends, subsequent distributions, up to
the amount of such prior distributions, will be treated as capital gain
dividends for purposes of withholding. Because the Company will withhold 30% of
all other distributions, a Non-U.S. Stockholder will be entitled to a refund
from the IRS to the extent the distribution is not a distribution out of
earnings and profits.
Unless the Common Stock constitutes a "United States real property interest"
within the meaning of FIRPTA, a sale of Common Stock by a Non-U.S. Stockholder
generally will not be subject to United States federal income taxation. The
Common Stock will not constitute a United States real property interest if the
Company is a "domestically controlled REIT." A domestically controlled REIT is a
REIT in which at all
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times during a specified testing period less than 50% in value of its shares is
held directly or indirectly by Non-U.S. Stockholders. It is currently
anticipated that the Company will be a domestically controlled REIT and
therefore that the sale of Common Stock will not be subject to taxation under
FIRPTA. However, because the Common Stock is publicly traded, no assurance can
be given that the Company will continue to be a domestically controlled REIT. If
the Company were not a domestically controlled REIT, a sale of Common Stock by a
Non-U.S. Stockholder would not be subject to taxation under FIRPTA provided that
the Non-U.S. Stockholder does not beneficially own more than 5% of the stock of
the Company and the Common Stock of the Company continues to be traded on an
established securities market (e.g. the NYSE and the PSE). In addition, a sale
of Common Stock by a Non-U.S. Stockholder, regardless of whether the 5%
beneficial ownership level is exceeded, would not be subject to the 10%
withholding tax so long as the Common Stock continues to be traded on an
established securities market. Notwithstanding the foregoing, capital gains not
subject to FIRPTA will be taxable to a Non-U.S. Stockholder if the Non-U.S.
Stockholder is a non-resident alien individual who is present in the United
States for 183 days or more during the taxable year and certain other conditions
apply, in which case the non-resident alien individual will be subject to a 30%
tax on his or her U.S. source capital gains. If the Company were not a
domestically controlled REIT, gain on the sale of Common Stock would be subject
to taxation under FIRPTA, and a Non-U.S. Stockholder would be subject to the
same treatment as a U.S. Stockholder with respect to the gain (subject to
applicable alternative minimum tax and a special alternative minimum tax in the
case of non-resident alien individuals). In such case, under FIRPTA the
purchaser of Common Stock may be required to withhold 10% of the purchase price
and remit this amount to the IRS.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
Under certain circumstances, U.S. Stockholders may be subject to backup
withholding at a rate of 31% on payments made with respect to, or cash proceeds
of a sale or exchange of, Common Stock. Backup withholding will apply only if
the holder (i) fails to furnish his or her taxpayer identification number
("TIN") (which, for an individual, would be his or her Social Security number),
(ii) furnishes an incorrect TIN, (iii) is notified by the IRS that he or she has
failed properly to report payments of interest and dividends or is otherwise
subject to backup withholding or (iv) under certain circumstances, fails to
certify, under penalties of perjury, that he or she has furnished a correct TIN
and (a) that he or she has not been notified by the IRS that he or she is
subject to backup withholding for failure to report interest and dividend
payments or (b) that he or she has been notified by the IRS that he or she is no
longer subject to backup withholding. Backup withholding will not apply with
respect to payments made to certain exempt recipients, such as corporations and
tax-exempt organizations.
U.S. Stockholders should consult their own tax advisors regarding their
qualifications for exemption from backup withholding and the procedure for
obtaining such an exemption. Backup withholding is not an additional tax.
Rather, the amount of any backup withholding with respect to a payment to a U.S.
Stockholder will be allowed as a credit against the U.S. Stockholder's United
States federal income tax liability and may entitle the U.S. Stockholder to a
refund, provided that the required information is furnished to the IRS.
Additional issues may arise pertaining to information reporting and backup
withholding for Non-U.S. Stockholders. Non-U.S. Stockholders should consult
their tax advisors with regard to U.S. information reporting and backup
withholding.
STATE AND LOCAL TAX
The Company and its stockholders may be subject to state and local tax in
states and localities in which it does business or owns property. The tax
treatment of the Company and the stockholders in such jurisdictions may differ
from the federal income tax treatment described above. Consequently, prospective
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stockholders should consult their own tax advisors regarding the effect of state
and local tax laws on an investment in the Company.
ERISA CONSIDERATIONS
The following is intended to be a summary only and is not a substitute for
careful planning with a professional. Employee benefit plans subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
various sections of the Code considering purchasing the shares of Common Stock
should consult with their own tax and other appropriate counsel regarding the
application of ERISA and the Code to their purchase of the Common Stock. Benefit
Plans (as defined below) should also consider the entire discussion under the
heading "Certain Federal Income Tax Considerations" as material contained
therein is relevant to any decision by a Plan to purchase the Common Stock.
FIDUCIARY CONSIDERATIONS
Certain employee benefit plans and individual retirement accounts and
individual retirement annuities ("IRAs") (collectively "Benefit Plans") are
subject to various provisions of ERISA and the Code. Before investing in the
Common Stock of the Company, a Benefit Plan fiduciary should ensure that such
investment is in accordance with ERISA's general fiduciary standards. In making
such a determination, a Benefit Plan fiduciary should ensure that the investment
is in accordance with the governing instruments and the overall policies of the
Benefit Plan, and that the investment will comply with the diversification and
composition requirements of ERISA. In addition, provisions of ERISA and the Code
prohibit transactions involving the assets of a Benefit Plan by persons who have
specified relationships with such Benefit Plan ("Parties in Interest" under
ERISA and "Disqualified Persons" under the Code, collectively referred to herein
as "Parties in Interest"), unless an exemption is available for such
transaction. The consequences of such prohibited transactions include the
imposition of excise taxes, possible disqualification of IRAs and other
liabilities. A Benefit Plan fiduciary should ensure that any investment in
shares of the Common Stock will not constitute or give rise to a direct or
indirect non-exempt prohibited transaction. A Benefit Plan fiduciary should also
consider prohibitions in ERISA relating to improper delegation of control over
or responsibility for "plan assets."
PLAN ASSETS ISSUE
In certain circumstances where a Benefit Plan holds an interest in an
entity, the assets of the entity are deemed to be "plan assets" (the
"Look-Through Rule") of such Benefit Plan for purposes of the prohibited
transactions provisions of the ERISA Code. In addition, under such
circumstances, any person that exercises authority or control with respect to
the management or disposition of such assets is a Benefit Plan fiduciary. "Plan
assets" are not defined in ERISA or the Code, but the United States Department
of Labor has issued a regulation, effective March 13, 1987 (the "Regulation"),
that outlines the circumstances under which a Plan's interest in an entity will
be subject to the Look-Through Rule.
The Regulation applies to the purchase by a Benefit Plan of an "equity
interest" in an entity, such as common stock of a REIT. However, the Regulation
provides an exception to the Look-Through Rule for equity interests that are
"publicly-offered securities."
Under the Regulation, a "publicly-offered security" is a security that is
(1) freely transferable, (ii) part of a class of securities that is widely-held
and (iii) either (a) part of a class of securities that is registered under
section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") or (b) sold to a Benefit Plan as part of an offering of
securities, and the class of securities of which such security is a part is
registered under the Exchange Act within 120 days (or such longer period allowed
by the Commission) after the end of the fiscal year of the issuer during which
the offering of such securities to the public occurred. Whether a security is
considered "freely transferable" depends on the facts and circumstances of each
case. Generally, if the security is part of an offering in which the minimum
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investment is $10,000 or less, any restriction on or prohibition against
transfer or assignment of such security for the purposes of preventing a
termination or reclassification of the entity for federal or state tax purposes
will not itself prevent the security from being considered freely transferable.
A class of securities is considered "widely-held" if immediately after the
initial offering it is owned by 100 or more investors independent of the issuer
and of one another.
It is anticipated by the Company that the Common Stock will meet the
criteria of the publicly-offered securities exceptions to the Look-Through Rule.
Accordingly, the Company believes that, if a Benefit Plan purchases shares of
the Common Stock, the Company's assets should not be deemed to be "plan assets."
PLAN OF DISTRIBUTION
The Shares may be sold in or outside the United States by the Company and/or
the Selling Stockholders through agents, underwriters or dealers, directly to
one or more purchasers or directly by the Company through a dividend
reinvestment plan. The Prospectus Supplement with respect to the Shares offered
thereby will set forth the terms of the offering of such Shares, including the
name or names of any agents, underwriters, or dealers, the purchase price of
such Shares and the proceeds to the Company and/or the Selling Stockholders from
such sale, any delayed delivery arrangements, any underwriting discounts and
other items constituting underwriters' compensation, the public offering price,
and any discounts or concessions allowed or reallowed or paid to dealers.
If underwriters are used in the sale of the Shares, the Shares may be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The Shares may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter(s) with respect to a particular
underwritten offering of Shares will be named in the Prospectus Supplement
relating to such offering, and if an underwriting syndicate is used, the
managing underwriter(s) will be set forth on the cover of such Prospectus
Supplement. Unless otherwise set forth in the Prospectus Supplement relating
thereto, the obligations of the underwriters or agents to purchase the Shares
will be subject to conditions precedent, and the underwriters will be obligated
to purchase all the Shares if any are purchased. The public offering price and
any discounts or concessions allowed or reallowed or paid to dealers may be
changed from time to time.
If dealers are utilized in the sale of Shares with respect to which this
Prospectus is delivered, such Shares will be sold to the dealers as principals.
The dealers may then resell such Shares to the public at varying prices to be
determined by such dealers at the time of resale. The names of the dealers and
the terms of the transactions will be set forth in the Prospectus Supplement
relating thereto.
Shares may be sold directly by the Company and/or the Selling Stockholders
or through agents designated by the Company and/or the Selling Stockholders from
time to time at fixed prices, which may be changed, or at varying prices
determined at the time of sale. Shares may also be sold directly by the Company
pursuant to a dividend reinvestment plan. Any agent involved in the offer or
sale of the Shares with respect to which this Prospectus is delivered will be
named, and any commissions payable by the Company, with respect to the Company
Shares, or the Selling Stockholder, with respect to the Selling Stockholder
Shares, to such agent will be set forth, in the Prospectus Supplement relating
thereto. Unless otherwise indicated in the Prospectus Supplement, any such agent
will be acting on a best efforts basis for the period of its appointment.
In connection with the sale of the Shares, underwriters or agents may
receive compensation from the Company, with respect to the Company Shares, or
the Selling Stockholder, with respect to the Selling Stockholder Shares, or from
purchasers of Shares for whom they may act as agents in the form of discounts,
concessions or commissions. Underwriters, agents and dealers participating in
the distribution of the Shares may be deemed to be underwriters and any
discounts or commissions received by them from the
33
<PAGE>
Company and/or the Selling Stockholders and any profit on the resale of the
Shares by them may be deemed to be underwriting discounts or commissions under
the Securities Act.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland. Certain legal
matters related to the sale of the Shares will be passed upon for the Company by
Shearman & Sterling, San Francisco, California. In addition, the description of
federal income tax consequences contained in the section of the Prospectus
entitled "Certain Federal Income Tax Considerations" is based upon the opinion
of Shearman & Sterling. Certain legal matters related to the Offering will be
passed upon for the Underwriters, if any, by Brown & Wood LLP, San Francisco,
California.
EXPERTS
The consolidated financial statements and financial statement schedule of
Bedford Property Investors, Inc. as of December 31, 1996 and 1995 and for each
of the years in the three-year period ended December 31, 1996; the Combined
Historical Summary of Gross Income and Direct Operating Expenses of O'Toole
Business Center, Signal Systems Building and 6500 Kaiser Drive for the year
ended December 31, 1995, the Historical Summary of Gross Income and Direct
Operating Expenses of Orillia Office Park and the Combined Historical Summary of
Gross Income and Direct Operating Expenses of Executive Center at South Bank,
Bedford Fremont Business Center, U.S. Bank Centre, Scripps Wateridge Corporate
Center and Phoenix Airport Center have been incorporated by reference herein and
in the Registration Statements in reliance upon the reports of KPMG Peat Marwick
LLP, independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing. The
reports on the Summary of Gross Income and Direct Operating Expenses for O'Toole
Business Center, Signal Systems Building, 6500 Kaiser Drive, Orillia Office
Park, Executive Center at South Bank, Bedford Fremont Business Center, U.S. Bank
Centre, Scripps Wateridge Corporate Center and Phoenix Airport Center
(collectively referred to as the "Summaries") contain a paragraph that states
that the Summaries were prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission, as described in note A
thereto. The Summaries are not intended to be a complete presentation of income
and expenses of O'Toole Business Center, Signal Systems Building, 6500 Kaiser
Drive, Orillia Office Park, Executive Center at South Bank, Bedford Fremont
Business Center, U.S. Bank Centre, Scripps Wateridge Corporate Center and
Phoenix Airport Center.
34
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN
ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 2
Incorporation of Certain Information by Reference......................... 3
The Company............................................................... 4
Risk Factors.............................................................. 5
Use of Proceeds........................................................... 16
Selling Stockholder....................................................... 16
Description of Capital Stock of the Company............................... 17
Certain Provisions of Maryland Law and of the Company's Charter and
Bylaws.................................................................. 20
Certain Federal Income Tax Considerations................................. 23
ERISA Considerations...................................................... 32
Plan of Distribution...................................................... 33
Legal Matters............................................................. 34
Experts................................................................... 34
</TABLE>
20,000,000 SHARES
4,166,667 SHARES
BEDFORD PROPERTY
INVESTORS, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Bedford Property Investors,
Inc. (the "Registrant") in connection with the sale of Common Stock being
registered. All amounts are estimates except the SEC registration fee, the NASD
filing fee and the listing fees for the New York Stock Exchange and the Pacific
Stock Exchange.
<TABLE>
<S> <C>
SEC Registration Fee.................................................. $148,461
Legal Fees and Expenses............................................... $200,000
Printing and Engraving Costs.......................................... $475,000
Accounting Fees and Expenses.......................................... $100,000
Blue Sky Fees and Expenses............................................ $ 3,000
New York Stock Exchange Listing Fee................................... $ 34,800
Pacific Exchange Listing Fee.......................................... $ 7,500
Miscellaneous......................................................... $ 6,239
--------
Total............................................................. $975,000
--------
--------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper personal benefit or profit in
money, property or services or (b) active and deliberate dishonesty established
by a final judgment as being material to the cause of action. The Charter of the
Registrant contains such a provision which eliminates such liability to the
maximum extent permitted by the MGCL.
The Charter of the Registrant authorizes it, to the maximum extent permitted
by Maryland law, to obligate itself to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (a) any
present or former director or officer or (b) any individual who, while the
director of the Registrant and at the request of the Registrant, serves or has
served another corporation, partnership, joint venture, trust, employee benefit
plan or any other enterprise as a director, officer, partner or trustee of such
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise. The Bylaws of the Registrant obligate it, to the maximum extent
permitted by Maryland law, without requiring a preliminary determination of the
ultimate entitlement to indemnification, to indemnify and to pay or reimburse
reasonable expense in advance of final disposition of a proceeding to (a) any
individual who is a present or former director or officer of the Registrant and
who is made a party to the proceeding by reason of his service in that capacity
or (b) any individual who, while a director of the Registrant and at the request
of the Registrant, serves or has served another corporation, partnership, joint
venture, trust, employee benefit plan, or other enterprise and who is made a
party to the proceeding by reason of his service in that capacity. The
Registrant's Charter and Bylaws also permit the Registrant to indemnify and
advance expenses to any person who served a predecessor of the Registrant in any
of the capacities described above and to any employee or agent of the Registrant
or a predecessor of the Registrant.
The MGCL requires a corporation (unless its charter provides otherwise,
which the Registrant's Charter does not) to indemnify a director or officer who
has been successful, on the merits or otherwise, in the defense of any
proceeding to which he is made a party by reason of his service in that
capacity. The MGCL permits a corporation to indemnify its present and former
directors and officers, and certain other parties, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them
II-1
<PAGE>
in connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities unless it is established that (a) the
act or business of the indemnified party was material to the matter giving rise
to the proceeding and (i) was committed in bad faith or (ii) was the result of
active and deliberate dishonesty, (b) the indemnified party actually received an
improper personal benefit in money, property or services or (c) in the case of
any criminal proceeding, the indemnified party had reasonable cause to believe
that the act or omission was unlawful. However, a Maryland corporation may not
indemnify for an adverse judgment in a suit by or in the right of the
corporation or for a judgment of liability on the basis that a personal benefit
was improperly received, unless in either case a court orders indemnification,
and then only for expenses. In addition, the MGCL permits a corporation to
advance reasonable expenses to a director or officer upon the corporation's
receipt of (a) a written affirmation by the director or officer of his good
faith belief that he has met the standard of conduct necessary for
indemnification by the corporation and (b) a written statement by or on his
behalf to repay the amount paid or reimbursed by the corporation if it shall
ultimately be determined that the standard of conduct was not met.
Peter B. Bedford's employment agreement provides that the Registrant shall
indemnify Mr. Bedford to the fullest extent permitted by law, provided that the
indemnification applies to Mr. Bedford only so long as he acts in good faith and
is not found to be guilty of recklessness or willful or wanton misconduct.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Registrant
pursuant to the foregoing provisions, the Registrant has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
ITEM 16. EXHIBITS.
(a) Exhibits
The following exhibits are filed herewith or incorporated herein by
reference.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ------------------------------------------------------------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement.
4.1 -- Specimen Stock Certificate (incorporated herein by reference
to Exhibit 4.1 to the Registrant's Registration Statement on
Form S-2, Commission File No. 333-921).
4.2 -- Charter of the Registrant, as amended (incorporated herein
by reference to Exhibit 3.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997).
4.3 -- Amended and Restated Bylaws of the Registrant (incorporated
herein by reference to Exhibit 3.2 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995).
5.1 -- Opinion of Ballard Spahr Andrews & Ingersoll as to the
legality of the Registrant's Common Stock.
8.1* -- Opinion of Shearman & Sterling as to certain tax matters.
23.1 -- Consent of KPMG Peat Marwick LLP, independent certified
public accountants.
23.2 -- Consent of Ballard Spahr Andrews & Ingersoll (included in
the opinion filed as Exhibit 5.1).
23.3* -- Consent of Shearman & Sterling (included in the opinion
filed as Exhibit 8.1).
24.1* -- Powers of Attorney.
</TABLE>
- ------------------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes as follows:
II-2
<PAGE>
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after the
effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) may be
reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the change in volume represents no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in this Registration Statement;
provided, however, that paragraphs (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") that are incorporated by reference in this Registration
Statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the Company's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(5) That, for purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as a part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(6) That, for the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions referred to in Item 15 or otherwise the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the
II-3
<PAGE>
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Lafayette, State of California, on the 14th day of
October, 1997.
BEDFORD PROPERTY INVESTORS, INC.
By: /S/ HANH KIHARA
-----------------------------------------
Hanh Kihara
CONTROLLER (PRINCIPAL ACCOUNTING OFFICER)
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed below by the following
person in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------ ------------------------------------------ -------------------
<C> <S> <C>
*
-------------------------------------- Chairman of the Board and Chief Executive October 14, 1997
Peter B. Bedford Officer (Principal Executive Officer)
/s/ SCOTT R. WHITNEY
-------------------------------------- Senior Vice President and Chief Financial October 14, 1997
Scott R. Whitney Officer (Principal Financial Officer)
/S/ HANH KIHARA
-------------------------------------- Controller (Principal Accounting Officer) October 14, 1997
Hanh Kihara
*
-------------------------------------- Director October 14, 1997
Claude M. Ballard
*
-------------------------------------- Director October 14, 1997
Anthony Downs
*
-------------------------------------- Director October 14, 1997
Thomas G. Eastman
*
-------------------------------------- Director October 14, 1997
Anthony M. Frank
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------ ------------------------------------------ -------------------
<C> <S> <C>
*
-------------------------------------- Director October 14, 1997
Thomas H. Nolan, Jr.
*
-------------------------------------- Director October 14, 1997
Martin M. Zankel
*By /s/ HANH KIHARA
----------------------------------
Hanh Kihara
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement.
4.1 -- Specimen Stock Certificate (incorporated herein by reference to Exhibit 4.1 to the Registrant's
Registration Statement on Form S-2, Commission File No. 333-921).
4.2 -- Charter of the Registrant, as amended (incorporated herein by reference to Exhibit 3.1 to the
Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997).
4.3 -- Amended and Restated Bylaws of the Registrant (incorporated herein by reference to Exhibit 3.2 to
the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995).
5.1 -- Opinion of Ballard Spahr Andrews & Ingersoll as to the legality of the Registrant's Common Stock.
8.1* -- Opinion of Shearman & Sterling as to certain tax matters.
23.1 -- Consent of KPMG Peat Marwick LLP, independent certified public accountants.
23.2 -- Consent of Ballard Spahr Andrews & Ingersoll (included in the opinion filed as Exhibit 5.1).
23.3* -- Consent of Shearman & Sterling (included in the opinion filed as Exhibit 8.1).
24.1* -- Powers of Attorney.
</TABLE>
* Previously filed.
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
(a Maryland corporation)
____________ Shares of Common Stock
PURCHASE AGREEMENT
Dated: ___________, 199_
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
(a Maryland corporation)
____________ Shares of Common Stock
(Par Value $.02 Per Share)
PURCHASE AGREEMENT
____________, 199_
[Name and address
of underwriters]
Dear Sirs:
Bedford Property Investors, Inc., a Maryland corporation (the
"Company"), confirms its agreement with __________________________________ and
each of the other Underwriters named in Schedule A hereto (collectively, the
"Underwriters," which term shall also include any underwriter substituted as
hereinafter provided in Section 10 hereof), for whom __________________________
are acting as representatives (in such capacity, the "Representatives"), with
respect to the sale by the Company and the purchase by the Underwriters, acting
severally and not jointly, of the respective numbers of shares of Common Stock,
par value $.02 per share, of the Company ("Common Stock") set forth in said
Schedule A, and with respect to the grant by the Company to the Underwriters,
acting severally and not jointly, of the option described in Section 2(b) hereof
to purchase all or any part of __________ additional shares of Common Stock to
cover over-allotments, if any. The aforesaid _____________ shares of Common
Stock (the "Initial Securities") to be purchased by the Underwriters and all or
any part of the ___________ shares of Common Stock subject to the option
described in Section 2(b) hereof (the "Option Securities") are hereinafter
called, collectively, the "Securities."
The Company understands that the Underwriters propose to make a public
offering of the Securities as soon as the Representatives deem advisable after
this Agreement has been executed and delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 dated January 8, 1996
(Registration No. 333-15233, the "Registration Statement"), including the
related prospectus dated ____________, for the registration of its Common Stock
(including the Securities) under the
2
<PAGE>
Securities Act of 1933, as amended (the "1933 Act"), and the offering thereof
from time to time in accordance with Rule 415 of the rules and regulations of
the Commission under the 1933 Act (the "1933 Act Regulations"). Such
registration statements and any Rule 462(b) Registration Statement (as defined
below) have each been declared effective by the Commission. As provided in
Section 3(a), a prospectus supplement relating to the Securities, the terms of
the offering thereof and the other matters set forth therein has been prepared
and will be filed pursuant to Rule 424 of the 1933 Act Regulations. Such
prospectus supplement, in the form first filed after the date hereof pursuant
to Rule 424, is herein referred to as the "Prospectus Supplement." The
prospectus included in the Registration Statement relating to all offerings of
Securities under the Registration Statement, as supplemented by the Prospectus
Supplement, is herein called the "Prospectus;" provided, however, that, if the
Prospectus is amended or supplemented on or after the date hereof but prior to
the date on which the Prospectus Supplement is first filed pursuant to Rule
424, the term "Prospectus" shall refer to the Prospectus as so amended or
supplemented and as supplemented by the Prospectus Supplement; and provided,
further, that all references to the "Registration Statement" and the
"Prospectus" shall be deemed to include all documents incorporated therein by
reference pursuant to the Securities Exchange Act of 1934, as amended (the
"1934 Act"); and provided, further, that if the Company files a registration
statement with the Commission pursuant to Rule 462(b) of the 1933 Act
Regulations (the "Rule 462(b) Registration Statement"), then, after such
filing, all references to the "Registration Statement" shall also be deemed to
include the Rule 462(b) Registration Statement. For purposes of this
Agreement, all references to the Registration Statement, Prospectus, Prospectus
Supplement or preliminary prospectus or to any amendment or supplement to any
of the foregoing shall be deemed to include the copy filed with the Commission
pursuant to its Electronic Data Gathering, Analysis and Retrieval system
("EDGAR").
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" in the
Registration Statement, preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, preliminary prospectus
or the Prospectus shall be deemed to mean and include the filing of any
document under the 1934 Act which is incorporated by reference in the
Registration Statement, preliminary prospectus or the Prospectus, as the case
may be.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company
represents and warrants to each Underwriter as of the date hereof and as of the
Closing Time referred to in Section 2(c) hereof, and agrees with each
Underwriter, as follows:
3
<PAGE>
(i) Compliance with Registration Requirements. The Company
meets the requirements for use of Form S-3 under the 1933 Act. Each
of the Registration Statement and any Rule 462(b) Registration
Statement have become effective under the 1933 Act and no stop order
suspending the effectiveness of the Registration Statement or any Rule
462(b) Registration Statement has been issued under the 1933 Act and
no proceedings for that purpose have been instituted or are pending
or, to the knowledge of the Company, are contemplated by the
Commission, and any request on the part of the Commission for
additional information has been complied with.
At the respective times the Registration Statement, the Rule
462(b) Registration Statement and any post-effective amendments
thereto (including the filing of the Company's most recent Annual
Report on Form 10-K with the Commission) became effective and at the
Closing Time (and, if any Option Securities are purchased, at the Date
of Delivery referred to below), the Registration Statement, the Rule
462(b) Registration Statement and any amendments and supplements
thereto complied and will comply in all material respects with the
requirements of the 1933 Act and the 1933 Act Regulations and will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. On the date hereof and at the
Closing Time (and, if any Option Securities are purchased, at such
date of delivery) neither the Prospectus nor any amendments or
supplements thereto contained or will contain an untrue statement of a
material fact or omitted or will omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the representations and warranties in this subsection
shall not apply to statements in or omissions from the Registration
Statement or Prospectus made in reliance upon and in conformity with
information furnished to the Company in writing by any Underwriter
through _____________ expressly for use in the Registration Statement
or Prospectus.
Each preliminary prospectus and the Prospectus filed as part
of the Registration Statement as originally filed or as part of any
amendment thereto, or filed pursuant to Rule 424 under the 1933 Act,
complied when so filed in all material respects with the 1933 Act
Regulations and each preliminary prospectus and the Prospectus
delivered to the Underwriters for use in connection with this offering
was substantially identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
(ii) Incorporated Documents. The documents incorporated or
deemed to be incorporated by reference in the Registration Statement
and the Prospectus, at the time they were or hereafter are filed with
the Commission, complied and will comply in all material respects with
the requirements of the 1934 Act and the rules and regulations of the
Commission thereunder (the "1934 Act Regulations"), and, when read
together with the other information in the Prospectus, at the date of
the Prospectus and at the Closing Time, will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make
4
<PAGE>
the statements therein, in the light of the circumstances under
which they were made, not misleading.
(iii) Independent Accountants. The accountants who certified
the financial statements and supporting schedules included in the
Registration Statement are independent public accountants as required
by the 1933 Act and the 1933 Act Regulations.
(iv) Financial Statements. The financial statements included
in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 and incorporated by reference in the Registration
Statement, and any more recent financial statements included or
incorporated by reference in the Registration Statement, present
fairly the financial position of the Company and its consolidated
subsidiaries at the dates indicated and the statements of operations,
changes in stockholders' equity and cash flows of the Company and its
consolidated subsidiaries for the periods specified; said financial
statements have been prepared in conformity with generally accepted
accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved. The supporting schedules, if any,
included in the Registration Statement present fairly in accordance
with GAAP the information required to be stated therein. The selected
consolidated financial and operating data and the summary consolidated
financial and operating data included in the Prospectus present fairly
the information shown therein and have been compiled on a basis
consistent with that of the last audited financial statements included
or incorporated by reference in the Registration Statement. The
Historical Summaries of Gross Income and Direct Operating Expenses of
Landsing Pacific Portfolio, 3002 Dow Business Center, 6600 College
Boulevard and 350 East Plumeria Drive (the "Properties") incorporated
by reference into the Registration Statement and the Prospectus,
together with the related notes, present fairly the results of
operations of the Properties for the periods specified and have been
prepared in conformity with GAAP applied on a consistent basis
throughout the periods involved. The pro forma financial statements
of the Company and its subsidiaries and the related notes thereto
incorporated by reference into the Registration Statement and the
Prospectus present fairly the information shown therein, have been
prepared in accordance with the Commission's rules and guidelines with
respect to pro forma financial statements and have been properly
compiled on the bases described therein, and the assumptions used in
the preparation thereof are reasonable and the adjustments used
therein are appropriate to give effect to the transactions and
circumstances referred to therein.
(v) No Material Adverse Change in Business. Since the
respective dates as of which information is given or incorporated by
reference into the Registration Statement and the Prospectus, except
as otherwise stated therein, (A) there has been no material adverse
change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise (a "Material Adverse
Effect"), whether or not arising in the ordinary course of business,
(B) there have been no transactions entered into by
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the Company or any of its subsidiaries, other than those in the
ordinary course of business, which are material with respect to the
Company and its subsidiaries considered as one enterprise, and (C)
except for regular quarterly dividends on the Series A Convertible
Preferred Stock, par value $.02 per share (the "Convertible Preferred
Stock") and the Common Stock in amounts per share that are consistent
with past practice, there has been no dividend or distribution of any
kind declared, paid or made by the Company on any class of its capital
stock.
(vi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Maryland and has corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and to enter into and perform
its obligations under this Agreement; and the Company is duly
qualified as a foreign corporation to transact business and is in good
standing in each other jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure so to qualify or to
be in good standing would not result in a Material Adverse Effect.
(vii) Good Standing of Subsidiaries. Each subsidiary of the
Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a
Material Adverse Effect; except as otherwise disclosed in the
Registration Statement, all of the issued and outstanding capital
stock of each "significant subsidiary" as defined in Rule 405 of
Regulation C of the 1933 Act (each a "Subsidiary" and, collectively,
the "Subsidiaries") of the Company has been duly authorized and
validly issued, is fully paid and non-assessable and is owned by the
Company, directly or through subsidiaries, free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or
equity; none of the outstanding shares of capital stock of the
Subsidiaries was issued in violation of the preemptive or similar
rights arising by operation of law, under the charter or by-laws of
any Subsidiary or under any agreement to which the Company or any
subsidiary is a party. Each of the Subsidiaries is a "qualified REIT
subsidiary" within the meaning of Section 856(i)(2) of the Internal
Revenue Code of 1986, as amended (the "Code").
(viii) Capitalization. The authorized, issued and
outstanding capital stock of the Company is as set forth in the
Prospectus in the column entitled "Actual" under the caption
"Capitalization" (except for subsequent issuances, if any, pursuant to
this Agreement, pursuant to employee benefit plans referred to in the
Prospectus or pursuant to the exercise of convertible securities or
options referred to in the Prospectus).
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(ix) Authorization of Agreement. This Agreement has been
duly authorized, executed and delivered by the Company.
(x) Authorization and Description of Securities. The shares
of issued and outstanding Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable; none of the
outstanding shares of Common Stock of the Company was issued in
violation of preemptive or other similar rights arising by operation
of law, under the charter or by-laws of the Company, under any
agreement to which the Company or any of its subsidiaries is a party
or otherwise. The Securities have been duly authorized for issuance
and sale to the Underwriters pursuant to this Agreement and, when
issued and delivered by the Company pursuant to this Agreement against
payment of the consideration set forth herein, will be validly issued
and fully paid and non-assessable; the Common Stock conforms to all
statements relating thereto contained or incorporated by reference in
the Prospectus and such description conforms to the rights set forth
in the instruments defining the same; no holder of the Securities will
be subject to personal liability by reason of being such a holder; and
the issuance of the Securities is not subject to preemptive or other
similar rights arising by operation of law, under the charter and
by-laws of the Company, or under any agreement to which the Company or
any of its subsidiaries is a party.
(xi) Absence of Defaults and Conflicts. Neither the Company
nor any of its subsidiaries is in violation of its charter or by-laws
or in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Company or any of its subsidiaries
is a party or by which any of them may be bound, or to which any of the
property or assets of the Company or any of its subsidiaries is subject
(collectively, "Agreements and Instruments") except for such violations
or defaults that would not have a Material Adverse Effect; and the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein and in the
Registration Statement (including the use of the proceeds from the sale
of the Securities as described in the Prospectus under the caption "Use
of Proceeds") and compliance by the Company with its obligations
hereunder have been duly authorized by all necessary corporate action
and do not and will not, whether with or without the giving of notice
or passage of time or both, conflict with or constitute a breach of, or
default or Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries pursuant
to, any Agreement or Instrument except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not have a
Material Adverse Effect, nor will such action result in any violation
of the provisions of the charter or by-laws of the Company or any
applicable law, statute, rule, regulation, judgment, order, writ or
decree of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Company or any of its
subsidiaries or any of their assets or properties. As used herein, a
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"Repayment Event" means any event or condition which gives the holder
of any note, debenture or other evidence of indebtedness (or any person
acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any of its subsidiaries.
(xii) Absence of Labor Dispute. No labor dispute with the
employees of the Company or any of its subsidiaries exists or, to the
knowledge of the Company, is imminent, and the Company is not aware of
any existing or imminent labor disturbance by the employees of any of
its or any of its subsidiaries' principal suppliers, manufacturers,
customers or contractors, which, in either case, may reasonably be
expected to result in a Material Adverse Effect.
(xiii) Absence of Proceedings. There is no action, suit,
proceeding, inquiry or investigation before or by any court or
governmental agency or body, domestic or foreign, now pending, or, to
the knowledge of the Company, threatened, against or affecting the
Company or any subsidiary, which is required to be disclosed in the
Registration Statement (other than as disclosed therein), or which
might reasonably be expected to result in a Material Adverse Effect,
or which might reasonably be expected to materially and adversely
affect the properties or assets thereof or the consummation of this
Agreement or the performance by the Company of its obligations
hereunder; the aggregate of all pending legal or governmental
proceedings to which the Company or any subsidiary is a party or of
which any of their respective property or assets is the subject which
are not described in the Registration Statement, including ordinary
routine litigation incidental to the business could not reasonably be
expected to result in a Material Adverse Effect.
(xiv) Accuracy of Exhibits. There are no contracts or
documents which are required to be described in the Registration
Statement, the Prospectus or the documents incorporated by reference
therein or to be filed as exhibits thereto which have not been so
described and filed as required.
(xv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or
agency is necessary or required for the performance by the Company of
its obligations hereunder, in connection with the offering, issuance
or sale of the Securities hereunder or the consummation of the
transactions contemplated by this Agreement, except such as have been
already obtained or as may be required under the 1933 Act or the 1933
Act Regulations, state securities laws or the rules and regulations of
the National Association of Securities Dealers, Inc. (the "NASD").
(xvi) Possession of Licenses and Permits. The Company and
the subsidiaries possess such permits, licenses, approvals, consents
and other authorizations (collectively, "Governmental Licenses") issued
by the appropriate federal, state, local or foreign regulatory agencies
or bodies necessary to conduct the business now operated by them; the
Company and its subsidiaries are in compliance with the terms
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and conditions of all such Governmental Licenses, except where the
failure so to comply would not, singly or in the aggregate, have a
Material Adverse Effect; all of the Governmental Licenses are valid and
in full force and effect, except when the invalidity of such
Governmental Licenses or the failure of such Governmental Licenses to
be in full force and effect would not have a Material Adverse Effect;
and neither the Company nor any of its subsidiaries has received any
notice of proceedings relating to the revocation or modification of any
such Governmental Licenses which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would result in
a Material Adverse Effect.
(xvii) Title to Property. The Company and the Subsidiaries
have good and marketable title to all real property owned by the
Company and the Subsidiaries and good title to all other properties
owned by them, in each case, free and clear of all mortgages, pledges,
liens, security interests, claims, restrictions or encumbrances of any
kind except such as (a) are described in the Prospectus or (b) are not
materially significant in relation to the business of the Company and
the Subsidiaries, considered as one enterprise; and all of the leases
and subleases material to the business of the Company and the
Subsidiaries, considered as one enterprise, and under which the
Company or any of the Subsidiaries holds properties described in the
Prospectus, are in full force and effect, and neither the Company nor
any of the Subsidiaries has any notice of any material claim of any
sort that has been asserted by anyone adverse to the rights of the
Company or any of the Subsidiaries under any of the leases or
subleases mentioned above, or affecting or questioning the rights of
the Company or such Subsidiary of the continued possession of the
leased or subleased premises under any such lease or sublease.
(xviii) Investment Company Act. The Company is not, and upon
the issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the
Prospectus will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in
the Investment Company Act of 1940, as amended (the "1940 Act").
(xix) Environmental Laws. Except as described in the
Registration Statement and except such violations as would not, singly
or in the aggregate, result in a Material Adverse Effect, to the
Company's knowledge, after due inquiry (A) neither the Company nor any
of its subsidiaries is in violation of any federal, state, local or
foreign statute, law, rule, regulation, ordinance, code, policy or
rule of common law and any judicial or administrative interpretation
thereof including any judicial or administrative order, consent,
decree or judgment, relating to pollution or protection of human
health, the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or
wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, "Hazardous Materials")
or to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or
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handling of Hazardous Materials (collectively, "Environmental Laws"),
(B) the Company and its subsidiaries have all permits, authorizations
and approvals required under any applicable Environmental Laws and are
each in compliance with their requirements, (C) there are no pending or
threatened administrative, regulatory or judicial actions, suits,
demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental
Law against the Company or any of its subsidiaries and (D) there are no
events or circumstances that might reasonably be expected to form the
basis of an order for clean-up or remediation, or an action, suit or
proceeding by any private party or governmental body or agency, against
or affecting the Company or any of its subsidiaries relating to any
Hazardous Materials or the violation of any Environmental Laws.
(xx) Qualification as a Real Estate Investment Trust. At all
times since the date of formation of the Company's predecessor, the
Company has operated and qualified as a real estate investment trust
under Section 856 through 860 of the Code and the related regulations,
and has met all applicable organizational and operational requirements
for qualification as a real estate investment trust, including the
requirements relating to stock ownership and annual stockholder
reporting, sources of income, nature of assets and annual
distributions. Based on the Company's current and anticipated status
and operations, the Company will qualify as a real estate investment
trust for the Company's current taxable year and the Company has no
reason to believe that it will be unable to maintain that status in
subsequent taxable years.
(b) Officer's Certificates. Any certificate signed by any officer
of the Company and delivered to the Representatives or to counsel for the
Underwriters shall be deemed a representation and warranty by the Company to
each Underwriter as to the matters covered thereby.
SECTION 2. Sale and Delivery to Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company agrees to sell to each Underwriter, severally and not
jointly, and each Underwriter, severally and not jointly, agrees to purchase
from the Company, at the price per share set forth in Schedule B, the number of
Initial Securities set forth in Schedule A opposite the name of such
Underwriter, plus any additional number of Initial Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(b) Option Securities. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option to the
Underwriters, severally and not jointly, to purchase up to an additional
___________ shares of Common Stock at the price per share set forth in Schedule
B, less an amount per share equal to any dividends or distributions declared by
the Company
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and payable on the Initial Securities but not payable on the Option Securities.
The option hereby granted will expire 30 days after the date hereof and may be
exercised in whole or in part from time to time only for the purpose of
covering over-allotments which may be made in connection with the offering and
distribution of the Initial Securities upon notice by the Representatives to
the Company setting forth the number of Option Securities as to which the
several Underwriters are then exercising the option and the time and date of
payment and delivery for such Option Securities. Any such time and date of
delivery (a "Date of Delivery") shall be determined by the Representatives, but
shall not be later than seven full business days after the exercise of said
option, nor in any event prior to the Closing Time, as hereinafter defined. If
the option is exercised as to all or any portion of the Option Securities, each
of the Underwriters, acting severally and not jointly, will purchase that
proportion of the total number of Option Securities then being purchased which
the number of Initial Securities set forth in Schedule A opposite the name of
such Underwriter bears to the total number of Initial Securities, subject in
each case to such adjustments as the Representatives in their discretion shall
make to eliminate any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the office of
Shearman & Sterling, 555 California Street, San Francisco, California, or at
such other place as shall be agreed upon by the Representatives and the
Company, at 7:00 A.M. (California time) on the third (fourth, if the pricing
occurs after 4:30 P.M. (Washington D.C. time) on any given day) business day
after the date hereof (unless postponed in accordance with the provisions of
Section 10 hereof), or such other time not later than ten business days after
such date as shall be agreed upon by the Representatives and the Company (such
time and date of payment and delivery being herein called "Closing Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be agreed upon by the
Representatives and the Company, on each Date of Delivery as specified in the
notice from the Representatives to the Company. Payment shall be made to the
Company by certified or official bank check or checks drawn in, or wire
transfer of, immediately available funds payable to the order of the Company,
against delivery to the Representatives for the respective accounts of the
Underwriters of certificates for the Securities to be purchased by them. It is
understood that each Underwriter has authorized the Representatives, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Initial Securities and the Option Securities, if any, which it
has agreed to purchase. _____________, individually and not as representative
of the Underwriters, may (but shall not be obligated to) make payment of the
purchase price for the Initial Securities or the Option Securities, if any, to
be purchased by any Underwriter whose check has not been received by the
Closing Time or the relevant Date of Delivery, as the case may be, but such
payment shall not relieve such Underwriter from its obligations
hereunder.
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(d) Denominations; Registration. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations
and registered in such names as the Representatives may request in writing at
least two full business days before the Closing Time or the relevant Date of
Delivery, as the case may be. The certificates for the Initial Securities and
the Option Securities, if any, will be made available for examination and
packaging by the Representatives in The City of New York not later than 10:00
A.M. on the business day prior to the Closing Time or the relevant Date of
Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with
each Underwriter as follows:
(a) Preparation of Prospectus Supplement. If reasonably
requested by you in connection with the offering of the Securities,
the Company will prepare a preliminary prospectus supplement
containing such information as you and the Company deem appropriate,
and, prior to or immediately following the execution of this
Agreement, the Company will have prepared or will prepare a Prospectus
Supplement that complies with the 1933 Act and the 1933 Act
Regulations and that sets forth the number of Securities and their
terms not otherwise specified in the Prospectus, the name of each
Underwriter participating in the offering and number of Securities
that each severally has agreed to purchase, the name of each
Underwriter, if any, acting as representative of the Underwriters in
connection with the offering, the price at which the Securities are to
be purchased by the Underwriters from the Company, any initial public
offering price, any selling concession and reallowance, and such other
information as you and the Company deem appropriate in connection with
the offering of the Securities. The Company will promptly transmit
copies of the Prospectus Supplement to the Commission for filing
pursuant to Rule 424 of the 1933 Act Regulations and will furnish to
the Underwriters as many copies of any preliminary prospectus
supplement and the Prospectus as you shall reasonably request.
(b) Compliance with Securities Regulations and Commission
Requests. During the period when the Prospectus is required by the
1933 Act to be delivered in connection with sales of the Securities,
the Company will notify you immediately, and confirm the notice in
writing, (i) of the effectiveness of any amendment to the Registration
Statement, (ii) of the transmission to the Commission for filing of any
supplement to the Prospectus or any document that would as a result
thereof be incorporated by reference in the Prospectus, (iii) of the
receipt of any comments from the Commission with respect to the
Registration Statement, the Prospectus or the Prospectus Supplement,
(iv) of any request by the Commission for any amendment to the
Registration Statement or any supplement to the Prospectus or for
additional information relating thereto or to any document incorporated
by reference in the Prospectus and (v) of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement, of the suspension of the qualification of the
Securities for offering or sale in any jurisdiction, or of the
institution or threatening of any proceeding for any of such purposes.
The Company will use every reasonable effort to prevent the issuance of
any such stop order or of any order
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suspending such qualification and, if any such order is issued, to
obtain the lifting thereof at the earliest possible moment.
(c) Filing of Amendments. During the period when the
Prospectus is required by the 1933 Act to be delivered in connection
with sales of the Securities, the Company will inform you of its
intention to file any amendment to the Registration Statement
(including any filing under Rule 462(b) of the 1933 Act Regulations),
any supplement to the Prospectus or any document that would as a
result thereof be incorporated by reference in the Prospectus; will
furnish you with copies of any such amendment, supplement or other
document a reasonable time in advance of filing; and will not file any
such amendment, supplement or other document in a form to which you or
your counsel shall reasonably object; except that the Company shall
inform you of its intention to file documents pursuant to Section
14(d) of the 1934 Act and shall furnish you with copies of such
documents immediately upon the filing thereof, and you or your counsel
shall not be entitled to object thereto other than pursuant to Section
3(f). The Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T.
(d) Delivery of Registration Statement. The Company has
furnished or will furnish to you as many signed copies of the
Registration Statement (as originally filed) and of all amendments
thereto, whether filed before or after the Registration Statement
became effective, copies of all exhibits and documents filed therewith
or incorporated by reference therein (through the end of the period
when the Prospectus is required by the 1933 Act to be delivered in
connection with sales of the Securities) and signed copies of all
consents and certificates of experts, as you may reasonably request,
and has furnished or will furnish to you, for each of the
Underwriters, one conformed copy of the Registration Statement (as
originally filed) and of each amendment thereto (including documents
incorporated by reference into the Prospectus but without exhibits,
but excluding any such documents filed by the Company under the 1934
Act prior to the end of the most recent fiscal year for which the
Company has filed an Annual Report on Form 10-K). The copies of the
Registration Statement and each amendment thereto furnished to the
Underwriters will be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to
the extent permitted by Regulation S-T.
(e) Delivery of Prospectuses. The Company will furnish to
each Underwriter, without charge, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934
Act, such number of copies of the Prospectus (including the Prospectus
Supplement) (as amended or supplemented) as such Underwriter may
reasonably request. The Prospectus and any amendments or supplements
thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
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(f) Continued Compliance with Securities Laws. If, at
any time when the Prospectus is required by the 1933 Act to be
delivered in connection with sales of the Securities, any event shall
occur or condition exist as a result of which it is necessary, in the
opinion of counsel for the Underwriters or counsel for the Company, to
amend the Registration Statement or amend or supplement the Prospectus
in order that the Prospectus will not include an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser, or
if it shall be necessary, in the opinion of either such counsel, at
any such time to amend the Registration Statement or amend or
supplement the Prospectus in order to comply with the requirements of
the 1933 Act or the 1933 Act Regulations, the Company will promptly
prepare and file with the Commission, subject to Section 3(c), such
amendment or supplement as may be necessary to correct such untrue
statement or omission or to make the Registration Statement or the
Prospectus comply with such requirements.
(g) Blue Sky Qualifications. The Company will use its
best efforts, in cooperation with the Underwriters, to qualify the
Securities for offering and sale under the applicable securities laws
of such states and other jurisdictions as you may designate and to
maintain such qualifications in effect for a period of not less than
one year from the date hereof; provided, however, that the Company
shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which it is not so qualified or to
subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject. The Company
will file such statements and reports as may be required by the laws
of each jurisdiction in which the Securities have been qualified as
above provided. The Company will also supply you with such
information as is necessary for the determination of the legality of
the Securities for investment under the laws of such jurisdictions as
you may request.
(h) Rule 158. The Company will make generally available
to its security holders as soon as practicable, but not later than 45
days after the close of the period covered thereby, an earnings
statement of the Company (in form complying with the provisions of
Rule 158 of the 1933 Act Regulations), covering (i) a period of 12
months beginning after the effective date of the Registration
Statement but not later than the first day of the Company's fiscal
quarter next following such effective date and (ii) a period of 12
months beginning after the date of this Agreement but not later than
the first day of the Company's fiscal quarter next following the date
of this Agreement.
(i) Use of Proceeds. The Company will apply the proceeds
from the sale of the Securities for the purposes set forth under the
caption "Use of Proceeds" in the Prospectus.
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(j) Listing. The Company will comply with all rules and
regulations of the New York Stock Exchange and the Pacific Stock
Exchange in respect of the listing of the Common Stock and will use
its best efforts to cause the Securities to be eligible for trading
thereon.
(k) Restriction on Sale of Securities. During a period of
90 days from the date hereof, the Company will not, without the
prior written consent of ___________, (i) directly or indirectly,
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of any
share of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or file any registration
statement under the 1933 Act with respect to any of the foregoing or
(ii) enter into any swap or any other agreement or any transaction
that transfers, in whole or in part, directly or indirectly, the
economic consequence of ownership of the Common Stock, whether any
such swap or transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Stock or such other securities, in
cash or otherwise. The foregoing sentence shall not apply to (A) the
Securities to be sold hereunder, (B) any shares of Common Stock issued
by the Company upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof and referred
to in the Prospectus, (C) any shares of Common Stock issued or
options to purchase Common Stock granted pursuant to existing employee
benefit plans of the Company referred to in the Prospectus, any
non-employee director stock option plan or dividend reinvestment plan
or (D) the issuance of partnership units exchangeable for shares of
Common Stock in connection with property acquisitions.
(l) Reporting Requirements. During the period when the
Prospectus is required by the 1933 Act to be delivered in connection
with sales of the Securities, the Company will, subject to Section
3(c), file promptly all documents required to be filed with the
Commission pursuant to Section 13, 14 or 15(d) of the 1934 Act.
SECTION 4. Payment of Expenses. (a) Expenses. The Company
will pay all expenses incident to the performance of its obligations under this
Agreement, including (i) the preparation, printing and filing of the
Registration Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the preparation, printing
and delivery to the Underwriters of this Agreement, any Agreement among
Underwriters and such other documents as may be required in connection with the
offering, purchase, sale and delivery of the Securities, (iii) the preparation,
issuance and delivery of the certificates for the Securities to the
Underwriters, including any stock or other transfer taxes or duties payable upon
the sale of the Securities to the Underwriters, (iv) the fees and disbursements
of the Company's counsel, accountants and other advisors, (v) the qualification
of the Securities under securities laws in accordance with the provisions of
Section 3(g) hereof, including filing fees and the reasonable fees and
disbursements of counsel for the Underwriters in connection therewith and in
connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of any
preliminary prospectus supplements, and the Prospectus and any amendments or
supplements thereto, (vii) the preparation, printing and delivery to the
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Underwriters of copies of the Blue Sky Survey and any supplement thereto,
(viii) the fees and expenses of any transfer agent or registrar for the
Securities, (ix) the filing fees incident to, and the reasonable fees and
disbursements of counsel to the Underwriters in connection with, the review by
the NASD of the terms of the sale of the Securities and (x) the fees and
expenses incurred in connection with the listing of the Securities on the NYSE
and the PSE.
(b) Termination of Agreement. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or Section
9(a)(i) hereof, the Company shall reimburse the Underwriters for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations. The
obligations of the several Underwriters hereunder are subject to the accuracy
of the representations and warranties of the Company contained in Section 1
hereof or in certificates of any officer of the Company or any of its
subsidiaries delivered pursuant to the provisions hereof, to the performance by
the Company of its covenants and other obligations hereunder, and to the
following further conditions:
(a) Effectiveness of Registration Statement and 462(b)
Registration Statement. The Registration Statement has become
effective not later than 5:30 P.M., Washington D.C. time, on the date
hereof, any Rule 462(b) Registration Statement has become effective
not later than 10:00 P.M., Washington D.C. time, on the date hereof,
and at Closing Time no stop order suspending the effectiveness of the
Registration Statement or 462(b) Registration Statement shall have
been issued under the 1933 Act or proceedings therefor initiated or
threatened by the Commission, and any request on the part of the
Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the Underwriters.
(b) Opinions of Counsel for Company. At Closing Time the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Shearman & Sterling, counsel for the Company,
together with the favorable opinion of Ballard Spahr Andrews &
Ingersoll, special Maryland counsel for the Company, each in form and
substance satisfactory to counsel for the Underwriters, together with
signed or reproduced copies of each such letter for each of the other
Underwriters to the effect set forth in Exhibit A-1 and Exhibit A-2
hereto and to such further effect as counsel to the Underwriters may
reasonably request.
(c) Opinion of Counsel for Underwriters. At Closing Time
the Representatives shall have received the favorable opinion, dated
as of Closing Time, of _______________________, counsel for the
Underwriters, together with signed or reproduced copies of such letter
for each of the other Underwriters with respect to the matters set
forth in __________________. In giving such opinion such counsel may
rely, as to all matters governed by the laws of jurisdictions other
than the law of the States of New York and California and the federal
law of the United States, upon the opinions of counsel satisfactory to
you. Such counsel may also state that, insofar as
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<PAGE>
such opinion involves factual matters, they have relied, to the extent
they deem proper, upon certificates of officers of the Company and its
subsidiaries and certificates of public officials.
(d) Officers' Certificate. At Closing Time there shall
not have been, since the date hereof or since the respective dates as
of which information is given in the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or not arising in
the ordinary course of business, and the Representatives shall have
received a certificate of the Chief Executive Officer or a Vice
President of the Company and of the chief financial or chief
accounting officer of the Company, dated as of Closing Time, to the
effect that (i) there has been no such material adverse change, (ii)
the representations and warranties in Section 1 hereof are true and
correct with the same force and effect as though expressly made at and
as of Closing Time, (iii) the Company has complied with all agreements
and satisfied all conditions on its part to be performed or satisfied
at or prior to Closing Time, and (iv) no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been initiated or threatened by the
Commission.
(e) Accountant's Comfort Letter. At the time of the
execution of this Agreement, the Representatives shall have received
from KPMG Peat Marwick LLP a letter dated such date, in form and
substance satisfactory to the Representatives, together with signed or
reproduced copies of such letter for each of the other Underwriters
containing statements and information of the type ordinarily included
in accountants' "comfort letter" to underwriters with respect to the
financial statements and certain financial information contained in
the Registration Statement and the Prospectus.
(f) Bring-down Comfort Letter. At Closing Time the
Representatives shall have received from KPMG Peat Marwick LLP a
letter, dated as of Closing Time, to the effect that they reaffirm the
statements made in the letter furnished pursuant to subsection (e) of
this Section, except that the specified date referred to shall be a
date not more than three business days prior to Closing Time.
(g) Approval of Listing. At the Closing Time the
Securities shall have been approved for listing on the NYSE and the
PSE, subject only to official notice of issuance.
[(h) Lock-up Agreements. At the date of this Agreement,
the Representatives shall have received an agreement substantially in
the form of Exhibit B hereto signed by the persons listed on Schedule
C hereto.]
(i) Additional Documents. At Closing Time and at each
Date of Delivery counsel for the Underwriters shall have been
furnished with such documents and
17
<PAGE>
opinions as they may require for the purpose of enabling them
to pass upon the issuance and sale of the Securities as herein
contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all proceedings taken by the
Company in connection with the issuance and sale of the Securities
as herein contemplated shall be satisfactory in form and substance
to the Representatives and counsel for the Underwriters.
(j) Conditions to Purchase of Option Securities. In the
event that the Underwriters exercise their option provided in Section
2(b) hereof to purchase all or any portion of the Option Securities,
the representations and warranties of the Company contained herein and
the statements in any certificates furnished by the Company hereunder
shall be true and correct as of each Date of Delivery and, at the
relevant Date of Delivery, the Representatives shall have received:
(i) Officer's Certificate. A certificate, dated such Date of
Delivery, of the President or a Vice President of the Company
and of the chief financial or chief accounting officer of the
Company confirming that the certificate delivered at the
Closing Time pursuant to Section 5(d) hereof remains true and
correct as of such Date of Delivery.
(ii) Opinions of Counsel for Company. The favorable opinion
of Shearman & Sterling, counsel for the Company, together with
the favorable opinion of Ballard Spahr Andrews & Ingersoll,
special Maryland counsel for the Company, each in form and
substance satisfactory to counsel for the Underwriters, dated
such Date of Delivery, relating to the Option Securities to be
purchased on such Date of Delivery and otherwise to the same
effect as the opinions required by Section 5(b) hereof.
(iii) Opinion of Counsel for Underwriters. The favorable
opinion of _______________, counsel for the Underwriters,
dated such Date of Delivery, relating to the Option Securities
to be purchased on such Date of Delivery and otherwise to the
same effect as the opinion required by Section 5(c) hereof.
(iv) Bring-down Comfort Letter. A letter from KPMG Peat
Marwick LLP, in form and substance satisfactory to the
Representatives and dated such Date of Delivery, substantially
in the same form and substance as the letter furnished to the
Representatives pursuant to Section 5(f) hereof, except that
the "specified date" on the letter furnished pursuant to this
paragraph shall be a date not more than five days prior to
such Date of Delivery.
(k) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement may be terminated by the Representatives by notice to the
Company at any time at or prior to Closing Time, and such termination shall be
without liability of any party to any other party except as
18
<PAGE>
provided in Section 4 and except that Sections 1, 6 and 7 shall survive any
such termination and remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of Underwriters. The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement (or any amendment thereto), including the
Rule 430A Information and the Rule 434 Information, if applicable, or
the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus
supplement or the Prospectus (or any amendment or supplement thereto),
or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 6(d) hereof) any such
settlement is effected with the written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by
______________), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding
by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, to the extent that any
such expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through ______________ expressly for use in the Registration
Statement (or any amendment thereto) or any preliminary prospectus supplement or
the Prospectus (or any amendment or supplement thereto); and provided, further,
that this indemnity agreement with respect to any preliminary prospectus
supplement shall not inure to the benefit of any Underwriter from whom the
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<PAGE>
person asserting any such losses, liabilities, claims, damages or expenses
purchased Securities, or any person controlling such Underwriter, if a copy of
the Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by or on
behalf of any Underwriter to such person, if such is required by law, at or
prior to the written confirmation of the sale of such Securities to such person
and if the Prospectus (as so amended or supplemented) would have cured the
defect giving rise to such loss, liability, claim, damage or expense.
(b) Indemnification of Company, Directors and Officers. Each
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection
(a) of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus
supplement or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter through _____________ expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary
prospectus supplement or the Prospectus (or any amendment or supplement
thereto).
(c) Actions against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section
6(a) above, counsel to the indemnified parties shall be selected by
_____________, and, in the case of parties indemnified pursuant to Section 6(b)
above, counsel to the indemnified parties shall be selected by the Company. An
indemnifying party may participate at its own expense in the defense of any such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying parties be liable for
fees and expenses of more than one counsel (in addition to any local counsel)
separate from their own counsel for all indemnified parties in connection with
any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances. No
indemnifying party shall, without the prior written consent of the indemnified
parties, settle or compromise or consent to the entry of any judgment with
respect to any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever in
respect of which indemnification or contribution could be sought under this
Section 6 or Section 7 hereof (whether or not the indemnified parties are actual
or potential parties thereto), unless such settlement, compromise or consent
20
<PAGE>
(i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim
and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 6(a)(ii) hereof effected without its written
consent if (i) such settlement is entered into more than 45 days after receipt
by such indemnifying party of the aforesaid request, (ii) such indemnifying
party shall have received notice of the terms of such settlement at least 30
days prior to such settlement being entered into and (iii) such indemnifying
party shall not have reimbursed such indemnified party in accordance with such
request prior to the date of such settlement.
SECTION 7. Contribution. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the
offering of the Securities pursuant to this Agreement or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one hand and
of the Underwriters on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the
Underwriters on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Underwriters,
in each case as set forth on the cover of the Prospectus Supplement, or, if
Rule 434 is used, the corresponding location on the Term Sheet, bear to the
aggregate initial public offering price of the Securities as set forth on such
cover.
The relative fault of the Company on the one hand and the Underwriters
on the other hand shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
21
<PAGE>
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 7. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 7 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged
untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter,
and each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
shall have the same rights to contribution as the Company. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Initial Securities set forth opposite their
respective names in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company submitted pursuant
hereto, shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Underwriter or controlling person, or
by or on behalf of the Company, and shall survive delivery of the Securities to
the Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The Representatives may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Registration
Statement, any material adverse change in the condition, financial
22
<PAGE>
or otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there has occurred any
material adverse change in the financial markets in the United States, any
outbreak of hostilities or escalation thereof or other calamity or crisis or
any change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Representatives,
impracticable to market the Securities or to enforce contracts for the sale of
the Securities, or (iii) if trading in any securities of the Company has been
suspended or limited by the Commission or the NYSE or the PSE, or if trading
generally on the American Stock Exchange or the NYSE or in the over-the-counter
market has been suspended or limited, or minimum or maximum prices for trading
have been fixed, or maximum ranges for prices have been required, by any of
said exchanges or by such system or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental authority, or
(iv) if a banking moratorium has been declared by Federal, California or New
York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that
Sections 6 and 7 hereof shall survive such termination and remain in full force
and effect.
SECTION 10. Default by One or More of the Underwriters. If one
or more of the Underwriters shall fail at Closing Time or a Date of Delivery to
purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the Representatives shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but
not less than all, of the Defaulted Securities in such amounts as may be agreed
upon and upon the terms herein set forth; if, however, the Representatives
shall not have completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed
10% of the number of Securities to be purchased on such date, each of
the non-defaulting Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions that
their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of
the number of Securities to be purchased on such date, this Agreement
shall terminate without liability on the part of any non-defaulting
Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the Representatives or the Company shall
have the right to postpone
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<PAGE>
Closing Time or a Date of Delivery for a period not exceeding seven days in
order to effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements. As used herein, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 10.
SECTION 11. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to
the Underwriters shall be directed to the Representatives at
_____________________, attention of ________________; notices to the Company
shall be directed to it at 270 Lafayette Circle, Lafayette, California 94549,
attention of Peter B. Bedford.
SECTION 12. Parties. This Agreement shall each inure to the
benefit of and be binding upon the Underwriters and the Company and their
respective successors. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any person, firm or corporation, other
than the Underwriters and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the Underwriters and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities
from any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
SECTION 13. Governing Law and Time. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE. EXCEPT AS
OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
24
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Underwriters and the Company in accordance with its
terms.
Very truly yours,
BEDFORD PROPERTY INVESTORS, INC.
By
-----------------------------
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
[Names of underwriters]
- -----------------------------------
By:
-------------------------------
By
----------------------------------------------------
Authorized Signatory
For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.
25
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
(a Maryland corporation)
____________ Shares of Common Stock
PURCHASE AGREEMENT
Dated: ___________, 199_
<PAGE>
BEDFORD PROPERTY INVESTORS, INC.
(a Maryland corporation)
____________ Shares of Common Stock
(Par Value $.02 Per Share)
PURCHASE AGREEMENT
____________, 199_
[Name and address
of underwriters]
Dear Sirs:
Bedford Property Investors, Inc., a Maryland corporation (the "Company")
proposes to issue and sell to the underwriters named in Schedule A hereto
(collectively, the "Underwriters," which term shall also include any underwriter
substituted as hereinafter provided in Section 10 hereof), for whom you are
acting as representatives (the "Representatives"), _____________________
authorized but unissued shares of the Company's Common Stock, par value $.02 per
share (shares of which class of stock of the Company are hereinafter referred to
as "Common Stock"), and the stockholders named in Schedule B (the "Selling
Stockholders") propose to sell severally an aggregate of __________ outstanding
shares of Common Stock, as set forth opposite their name on Schedule B, to the
Underwriters. Such shares of Common Stock, aggregating __________ shares, are
to be sold to each Underwriter, acting severally and not jointly, in such
amounts as are set forth in Schedule A opposite the name of such Underwriter.
The Company and each of the Selling Stockholders also grant to the Underwriters,
severally and not jointly, the option described in Section 2 to purchase all or
any part of __________ additional shares of Common Stock to cover
over-allotments. The aforesaid __________ shares of Common Stock (the "Initial
Securities"), together with all or any part of the __________ additional shares
of Common Stock subject to the option described in Section 2 (the "Option
Securities"), are collectively herein called the "Securities". The Securities
are more fully described in the Prospectus referred to below.
The Company and the Selling Stockholders understand that the Underwriters
propose to make a public offering of the Securities as soon as the
Representatives deem advisable after this Agreement has been executed and
delivered.
The Company has filed with the Securities and Exchange Commission (the
2
<PAGE>
"Commission") a registration statement on Form S-3 dated August 14, 1997
(Registration No. 333-33643, the "Registration Statement"), including the
related prospectus dated ____________, for the registration of its Common Stock
(including the Securities) under the Securities Act of 1933, as amended (the
"1933 Act"), and the offering thereof from time to time in accordance with
Rule 415 of the rules and regulations of the Commission under the 1933 Act (the
"1933 Act Regulations"). Such registration statements and any Rule 462(b)
Registration Statement (as defined below) have each been declared effective by
the Commission. As provided in Section 3(a), a prospectus supplement relating
to the Securities, the terms of the offering thereof and the other matters set
forth therein has been prepared and will be filed pursuant to Rule 424 of the
1933 Act Regulations. Such prospectus supplement, in the form first filed after
the date hereof pursuant to Rule 424, is herein referred to as the "Prospectus
Supplement." The prospectus included in the Registration Statement relating to
all offerings of Securities under the Registration Statement, as supplemented by
the Prospectus Supplement, is herein called the "Prospectus;" PROVIDED, HOWEVER,
that, if the Prospectus is amended or supplemented on or after the date hereof
but prior to the date on which the Prospectus Supplement is first filed pursuant
to Rule 424, the term "Prospectus" shall refer to the Prospectus as so amended
or supplemented and as supplemented by the Prospectus Supplement; and PROVIDED,
FURTHER, that all references to the "Registration Statement" and the
"Prospectus" shall be deemed to include all documents incorporated therein by
reference pursuant to the Securities Exchange Act of 1934, as amended (the "1934
Act"); and PROVIDED, FURTHER, that if the Company files a registration statement
with the Commission pursuant to Rule 462(b) of the 1933 Act Regulations (the
"Rule 462(b) Registration Statement"), then, after such filing, all references
to the "Registration Statement" shall also be deemed to include the Rule 462(b)
Registration Statement. For purposes of this Agreement, all references to the
Registration Statement, Prospectus, Prospectus Supplement or preliminary
prospectus or to any amendment or supplement to any of the foregoing shall be
deemed to include the copy filed with the Commission pursuant to its Electronic
Data Gathering, Analysis and Retrieval system ("EDGAR").
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the
Registration Statement, preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, preliminary prospectus
or the Prospectus shall be deemed to mean and include the filing of any document
under the 1934 Act which is incorporated by reference in the Registration
Statement, preliminary prospectus or the Prospectus, as the case may be.
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company represents
and warrants to each Underwriter as of the date hereof and as of the Closing
Time referred to in Section 2(c) hereof, and agrees with each Underwriter, as
follows:
3
<PAGE>
(i) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The Company meets the
requirements for use of Form S-3 under the 1933 Act. Each of the
Registration Statement and any Rule 462(b) Registration Statement have
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
At the respective times the Registration Statement, the Rule 462(b)
Registration Statement and any post-effective amendments thereto (including
the filing of the Company's most recent Annual Report on Form 10-K with the
Commission) became effective and at the Closing Time (and, if any Option
Securities are purchased, at the Date of Delivery referred to below) the
Registration Statement, the Rule 462(b) Registration Statement and any
amendments and supplements thereto complied and will comply in all material
respects with the requirements of the 1933 Act and the 1933 Act Regulations
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading. On the date hereof and at the
Closing Time (and, if any Option Securities are purchased, at such date of
delivery), neither the Prospectus nor any amendments or supplements thereto
contained or will contain an untrue statement of a material fact or omitted
or will omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the representations and
warranties in this subsection shall not apply to statements in or omissions
from the Registration Statement or Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by any
Underwriter through _____________ expressly for use in the Registration
Statement or Prospectus.
Each preliminary prospectus and the Prospectus filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act Regulations and each
preliminary prospectus and the Prospectus delivered to the Underwriters for
use in connection with this offering was substantially identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) INCORPORATED DOCUMENTS. The documents incorporated or deemed to
be incorporated by reference in the Registration Statement and the
Prospectus, at the time they were or hereafter are filed with the
Commission, complied and will comply in all material respects with the
requirements of the 1934 Act and the rules and regulations of the
Commission thereunder (the "1934 Act Regulations"), and, when read together
with the other information in the Prospectus, at the date of the Prospectus
and at the Closing Time, will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein,
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in the light of the circumstances under which they were made, not misleading.
(iii) INDEPENDENT ACCOUNTANTS. The accountants who certified the
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
(iv) FINANCIAL STATEMENTS. The financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995
and incorporated by reference in the Registration Statement, and any more
recent financial statements included or incorporated by reference in the
Registration Statement, present fairly the financial position of the
Company and its consolidated subsidiaries at the dates indicated and the
statements of operations, changes in stockholders' equity and cash flows of
the Company and its consolidated subsidiaries for the periods specified;
said financial statements have been prepared in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved. The supporting schedules, if any,
included in the Registration Statement present fairly in accordance with
GAAP the information required to be stated therein. The selected
consolidated financial and operating data and the summary consolidated
financial and operating data included in the Prospectus present fairly the
information shown therein and have been compiled on a basis consistent with
that of the last audited financial statements included or incorporated by
reference in the Registration Statement. The Historical Summaries of Gross
Income and Direct Operating Expenses of Landsing Pacific Portfolio, 3002
Dow Business Center, 6600 College Boulevard and 350 East Plumeria Drive
(the "Properties") incorporated by reference into the Registration
Statement and the Prospectus, together with the related notes, present
fairly the results of operations of the Properties for the periods
specified and have been prepared in conformity with GAAP applied on a
consistent basis throughout the periods involved. The pro forma financial
statements of the Company and its subsidiaries and the related notes
thereto incorporated by reference into the Registration Statement and the
Prospectus present fairly the information shown therein, have been prepared
in accordance with the Commission's rules and guidelines with respect to
pro forma financial statements and have been properly compiled on the bases
described therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions and circumstances referred to therein.
(v) NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the respective
dates as of which information is given or incorporated by reference into
the Registration Statement and the Prospectus, except as otherwise stated
therein, (A) there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise
(a "Material Adverse Effect"), whether or not arising in the ordinary
course of business, (B) there have been no transactions entered into by the
Company or any of its subsidiaries, other than those in the ordinary course
of business, which are material with respect to the Company and its
subsidiaries considered as one enterprise, and
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(C) except for regular quarterly dividends on the Series A Convertible Preferred
Stock, par value $.02 per share (the "Convertible Preferred Stock") and the
Common Stock in amounts per share that are consistent with past practice, there
has been no dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.
(vi) GOOD STANDING OF THE COMPANY. The Company has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Maryland and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its obligations
under this Agreement; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not result
in a Material Adverse Effect.
(vii) GOOD STANDING OF SUBSIDIARIES. Each subsidiary of the Company
has been duly organized and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation, has
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectus and is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing
would not result in a Material Adverse Effect; except as otherwise
disclosed in the Registration Statement, all of the issued and outstanding
capital stock of each "significant subsidiary" as defined in Rule 405 of
Regulation C of the 1933 Act (each a "Subsidiary" and, collectively, the
"Subsidiaries") of the Company has been duly authorized and validly issued,
is fully paid and non-assessable and is owned by the Company, directly or
through subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity; none of the outstanding shares
of capital stock of the Subsidiaries was issued in violation of the
preemptive or similar rights arising by operation of law, under the charter
or by-laws of any Subsidiary or under any agreement to which the Company or
any subsidiary is a party. Each of the Subsidiaries is a "qualified REIT
subsidiary" within the meaning of Section 856(i)(2) of the Internal Revenue
Code of 1986, as amended (the "Code").
(viii) CAPITALIZATION. The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectus in the column
entitled "Actual" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to this Agreement, pursuant to employee benefit
plans referred to in the Prospectus or pursuant to the exercise of
convertible securities or options referred to in the Prospectus).
(ix) AUTHORIZATION OF AGREEMENT. This Agreement has been duly
authorized, executed and delivered by the Company.
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(x) AUTHORIZATION AND DESCRIPTION OF SECURITIES. The shares of issued
and outstanding Common Stock have been duly authorized and validly issued
and are fully paid and non-assessable; none of the outstanding shares of
Common Stock of the Company was issued in violation of preemptive or other
similar rights arising by operation of law, under the charter or by-laws of
the Company, under any agreement to which the Company or any of its
subsidiaries is a party or otherwise. The shares of Common Stock to be
sold by the Company have been duly authorized for issuance and sale to the
Underwriters pursuant to this Agreement and, when issued and delivered by
the Company pursuant to this Agreement against payment of the consideration
set forth herein, will be validly issued and fully paid and non-assessable;
such shares of Common Stock conforms to all statements relating thereto
contained or incorporated by reference in the Prospectus and such
description conform to the rights set forth in the instruments defining the
same; no holder of such Shares of Common Stock will be subject to personal
liability by reason of being such a holder; and the issuance of the
Securities is not subject to preemptive or other similar rights arising by
operation of law, under the charter and by-laws of the Company, or under
any agreement to which the Company or any of its subsidiaries is a party.
(xi) VALIDITY OF SELLING STOCKHOLDER'S SECURITIES. The shares of
Common Stock to be sold by the Selling Stockholders have been duly
authorized and validly issued and are fully paid and non-assessable; and no
holder thereof, relating to debts due and owing to a corporation's
laborers, servants or employees is or will be subject to personal liability
by reason of being such a holder.
(xii) ABSENCE OF DEFAULTS AND CONFLICTS. Neither the Company nor any
of its subsidiaries is in violation of its charter or by-laws or in default
in the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which any of
them may be bound, or to which any of the property or assets of the Company
or any of its subsidiaries is subject (collectively, "Agreements and
Instruments") except for such violations or defaults that would not have a
Material Adverse Effect; and the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated herein
and in the Registration Statement (including the use of the proceeds from
the sale of the Securities as described in the Prospectus under the caption
"Use of Proceeds") and compliance by the Company with its obligations
hereunder have been duly authorized by all necessary corporate action and
do not and will not, whether with or without the giving of notice or
passage of time or both, conflict with or constitute a breach of, or
default or Repayment Event (as defined below) under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any of its subsidiaries pursuant to, any
Agreement or Instrument except for such conflicts, breaches or defaults or
liens, charges or encumbrances that would not have a Material Adverse
Effect, nor will such action result in any violation of the provisions of
the charter or by-laws of the Company or any applicable law, statute, rule,
regulation, judgment,
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order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company or any of
its subsidiaries or any of their assets or properties. As used herein, a
"Repayment Event" means any event or condition which gives the holder of
any note, debenture or other evidence of indebtedness (or any person acting
on such holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Company or any of
its subsidiaries.
(xiii) ABSENCE OF LABOR DISPUTE. No labor dispute with the employees
of the Company or any of its subsidiaries exists or, to the knowledge of
the Company, is imminent, and the Company is not aware of any existing or
imminent labor disturbance by the employees of any of its or any of its
subsidiaries' principal suppliers, manufacturers, customers or contractors,
which, in either case, may reasonably be expected to result in a Material
Adverse Effect.
(xiv) ABSENCE OF PROCEEDINGS. There is no action, suit, proceeding,
inquiry or investigation before or by any court or governmental agency or
body, domestic or foreign, now pending, or, to the knowledge of the
Company, threatened, against or affecting the Company or any subsidiary,
which is required to be disclosed in the Registration Statement (other than
as disclosed therein), or which might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to
materially and adversely affect the properties or assets thereof or the
consummation of this Agreement or the performance by the Company of its
obligations hereunder; the aggregate of all pending legal or governmental
proceedings to which the Company or any subsidiary is a party or of which
any of their respective property or assets is the subject which are not
described in the Registration Statement, including ordinary routine
litigation incidental to the business could not reasonably be expected to
result in a Material Adverse Effect.
(xv) ACCURACY OF EXHIBITS. There are no contracts or documents which
are required to be described in the Registration Statement, the Prospectus
or the documents incorporated by reference therein or to be filed as
exhibits thereto which have not been so described and filed as required.
(xvi) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Securities hereunder or the consummation of the transactions
contemplated by this Agreement, except such as have been already obtained
or as may be required under the 1933 Act or the 1933 Act Regulations, state
securities laws or the rules and regulations of the National Association of
Securities Dealers, Inc. (the "NASD").
(xvii) POSSESSION OF LICENSES AND PERMITS. The Company and the
subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the
appropriate federal, state, local
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or foreign regulatory agencies or bodies necessary to conduct the business
now operated by them; the Company and its subsidiaries are in compliance
with the terms and conditions of all such Governmental Licenses, except
where the failure so to comply would not, singly or in the aggregate, have
a Material Adverse Effect; all of the Governmental Licenses are valid and
in full force and effect, except when the invalidity of such Governmental
Licenses or the failure of such Governmental Licenses to be in full force
and effect would not have a Material Adverse Effect; and neither the
Company nor any of its subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such Governmental
Licenses which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a Material Adverse
Effect.
(xviii) TITLE TO PROPERTY. The Company and the Subsidiaries have good
and marketable title to all real property owned by the Company and the
Subsidiaries and good title to all other properties owned by them, in each
case, free and clear of all mortgages, pledges, liens, security interests,
claims, restrictions or encumbrances of any kind except such as (a) are
described in the Prospectus or (b) are not materially significant in
relation to the business of the Company and the Subsidiaries, considered as
one enterprise; and all of the leases and subleases material to the
business of the Company and the Subsidiaries, considered as one enterprise,
and under which the Company or any of the Subsidiaries holds properties
described in the Prospectus, are in full force and effect, and neither the
Company nor any of the Subsidiaries has any notice of any material claim of
any sort that has been asserted by anyone adverse to the rights of the
Company or any of the Subsidiaries under any of the leases or subleases
mentioned above, or affecting or questioning the rights of the Company or
such Subsidiary of the continued possession of the leased or subleased
premises under any such lease or sublease.
(xix) INVESTMENT COMPANY ACT. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus
will not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 Act").
(xx) ENVIRONMENTAL LAWS. Except as described in the Registration
Statement and except such violations as would not, singly or in the
aggregate, result in a Material Adverse Effect, to the Company's knowledge,
after due inquiry (A) neither the Company nor any of its subsidiaries is in
violation of any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, policy or rule of common law and any judicial
or administrative interpretation thereof including any judicial or
administrative order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata)
or wildlife, including, without limitation, laws and regulations relating
to the release or threatened release of chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum or
petroleum products (collectively, "Hazardous Materials") or to the
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manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials (collectively, "Environmental
Laws"), (B) the Company and its subsidiaries have all permits,
authorizations and approvals required under any applicable Environmental
Laws and are each in compliance with their requirements, (C) there are no
pending or threatened administrative, regulatory or judicial actions,
suits, demands, demand letters, claims, liens, notices of noncompliance or
violation, investigation or proceedings relating to any Environmental Law
against the Company or any of its subsidiaries and (D) there are no events
or circumstances that might reasonably be expected to form the basis of an
order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting the
Company or any of its subsidiaries relating to any Hazardous Materials or
the violation of any Environmental Laws.
(xxi) QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST. At all times
since the date of formation of the Company's predecessor, the Company has
operated and qualified as a real estate investment trust under Section 856
through 860 of the Code and the related regulations, and has met all
applicable organizational and operational requirements for qualification as
a real estate investment trust, including the requirements relating to
stock ownership and annual stockholder reporting, sources of income, nature
of assets and annual distributions. Based on the Company's current and
anticipated status and operations, the Company will qualify as a real
estate investment trust for the Company's current taxable year and the
Company has no reason to believe that it will be unable to maintain that
status in subsequent taxable years.
(b) REPRESENTATIONS AND WARRANTIES BY THE SELLING STOCKHOLDERS. Each of
the Selling Stockholders severally represents and warrants to, and agrees with,
each Underwriter as follows:
(i) On the date hereof and at the Closing Time (and, if any
Option Securities are purchased, at such Date of Delivery), (A) such parts
of the Registration Statement and any amendments and supplements thereto as
specifically refer to such Selling Stockholder will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading and (B) such parts of the Prospectus as specifically refer to
such Selling Stockholder will not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
(ii) Such Selling Stockholder has duly executed and delivered, in the
form heretofore furnished to you, a Power of Attorney and Custody Agreement
(the "Custody Agreement") with ____________________ as custodian (the
"Custodian"), and _________________________, ____________________ and
____________________ as attorneys-in-fact (the "Attorneys-in-Fact"); the
Attorneys-in-Fact are authorized to execute and deliver this Agreement
(including the Price Determination Agreement) on behalf of such Selling
Stockholder and otherwise to act on behalf of such Selling Stockholder in
connection with this Agreement, and the
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Attorneys-in-Fact and the Custodian are each authorized to deliver the
shares of Common Stock to be sold by such Selling Stockholder pursuant to
this Agreement and to accept payment therefor.
(iii) All authorizations and consents necessary for the execution and
delivery by such Selling Stockholder of the Custody Agreement, the
execution and delivery by or on behalf of such Selling Stockholder of this
Agreement and the sale and delivery pursuant to this Agreement of the
shares to be sold by such Selling Stockholder have been given and are in
full force and effect on the date hereof and will be in full force and
effect at the Closing Time and, if any Option Securities are purchased, on
the Date of Delivery.
(iv) The execution and delivery of this Agreement and the consummation
of the transactions contemplated in this Agreement will not result in a
breach by such Selling Stockholder of, or constitute a default by such
Selling Stockholder under, any agreement, instrument, decree, judgment or
order to which such Selling Stockholder is a party, to which the properties
of such Selling Stockholder may be subject or by which such Selling
Stockholder may be bound.
(v) Such Selling Stockholder will, at the Closing Time and, if any
Option Securities are purchased, on the Date of Delivery, have good and
marketable title to the shares of Common Stock to be sold by such Selling
Stockholder pursuant to this Agreement, free and clear of any pledge, lien,
security interest, charge, claim, equity or encumbrance of any kind, other
than pursuant to this Agreement; such Selling Stockholder has full right,
power and authority to sell, transfer and deliver such shares of Common
Stock pursuant to this Agreement; and upon delivery of such shares of
Common Stock and payment of the purchase price therefor as contemplated in
this Agreement, each of the Underwriters will receive good and marketable
title to the shares of Common Stock purchased by it from such Selling
Stockholder, free and clear of any pledge, lien, security interest, charge,
claim, equity or encumbrance of any kind.
(vi) Certificates for all of the shares of Common Stock to be sold by
such Selling Stockholder pursuant to this Agreement, in suitable form for
transfer by delivery or accompanied by duly executed instruments of
transfer or assignment in blank have been placed in custody with the
Custodian for the purpose of effecting delivery under this Agreement.
(vii) For a period of 90 days from the date hereof, such Selling
Stockholder will not, without your prior written consent, directly or
indirectly, sell, offer to sell, grant any option for the sale of, or
otherwise dispose of, any shares of Common Stock or securities convertible
into Common Stock, other than to the Underwriters pursuant to this
Agreement; provided that during such period such Selling Stockholder may
make gifts of shares of Common Stock or securities convertible into Common
Stock upon the condition that the donees agree to be bound by the foregoing
restriction in the same manner as it applies to such Selling Stockholder.
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(c) OFFICER'S CERTIFICATES. Any certificate signed by any officer of the
Company or any Subsidiary and delivered to you or to counsel for the
Underwriters shall be deemed a representation and warranty by the Company to
each Underwriter as to the matters covered thereby; and any certificate signed
by or on behalf of the Selling Stockholders as such and delivered to you or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Selling Stockholders to each Underwriter as to the matters covered thereby.
SECTION 2. SALE AND DELIVERY TO UNDERWRITERS; CLOSING.
(a) INITIAL SECURITIES. On the basis of the representations and
warranties herein contained, and subject to the terms and conditions herein set
forth, the Company and each Selling Stockholder agree, severally and not
jointly, to sell to each Underwriter, and each Underwriter agrees, severally and
not jointly, to purchase from the Company and each Selling Stockholder, at the
purchase price per share for the Initial Securities to be agreed upon by the
Representatives the Company and the Selling Stockholders as set forth in
Schedule C hereto, (i) in the case of the Company, the number of Initial
Securities that bears the same relation to the total number of Initial
Securities to be Sold by the Company as the number of Initial Securities set
forth opposite the name of such Underwriter in Schedule A bears to the total
number of Initial Securities (such proportion is hereinafter referred to as such
Underwriter's "underwriting obligation proportion") and (ii) in the case of each
Selling Stockholder, the underwriting obligation proportion of such Underwriter
of the aggregate number of Initial Securities as are proposed to be sold by such
Selling Stockholder and set forth opposite such Selling Stockholder's name in
column 2 on Schedule B, subject, in each case, to such adjustments as you, in
your discretion, shall make to eliminate any sales or purchases of fractional
shares.
(b) OPTION SECURITIES. In addition, on the basis of the representations
and warranties herein contained, and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the Underwriters, severally
and not jointly, to purchase up to an additional __________ Option Securities
and each Selling Stockholder grants an option to the Underwriters, severally and
not jointly, to purchase up to the additional number of Option Securities set
forth opposite such Selling Stockholder's name in the appropriate column of
Schedule B at the same purchase price per share set forth in Schedule C, less an
amount per share equal to any dividend of distribution declared by the Company
and paycheck or the Initial Securities but not payable on the Option Securities.
The option hereby granted will expire 30 days after the date hereof, and may be
exercised, in whole or in part (but not more than once) in whole or from time to
time in part, only for the purpose of covering over-allotments that may be made
in connection with the offering and distribution of the Initial Securities upon
notice by you to the Representatives to the Company setting forth the number of
Option Securities as to which the several Underwriters are exercising the
option, and the time and date of payment and delivery of such Option Securities.
Such time and date of delivery (the "Date of Delivery") shall be determined by
you but shall not be later than seven full business days after the exercise of
said option, nor in any event prior to the Closing Time as hereinafter defined.
If the option is exercised as to only a portion of the Option Shares, the
Company and cash of the Selling Stockholders will sell their pro rata portion of
the Option
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Securities to be purchased by the Underwriters. If the option is exercised as
to all or any portion of the Option Shares, the Option Shares as to which the
option is exercised shall be purchased by the Underwriters, severally and not
jointly, in their respective underwriting obligation proportions.
(c) PAYMENT. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Shearman & Sterling, 555 California Street, San Francisco, CA, 599 Lexington
Avenue, New York, New York, 10022, or at such other place as shall be agreed
upon by the Representatives and the Company, at 7:00 A.M. (California time) on
the third (fourth, if the pricing occurs after 4:30 P.M. (Washington D.C. time)
on any given day) business day after date hereof (unless postponed in accordance
with the provisions of Sections 10 or 11 hereof, or such other time not more
than ten full business days after such date as shall be agreed upon by the
Representatives and the Company (such time and date of payment and delivery
being herein called "Closing Time") the Selling Stockholders, and your at 10:00
A.M. either (i) on the [fifth] full business day after the effective date of the
Registration Statement, or (ii) if the Company has elected to rely upon
Rule 430A, the [fifth] full business day after execution of the Price
Determination Agreement (unless, in either case, postponed pursuant to
Section 11 or 12), or at such other time not more than ten full business days
thereafter as you , the Company and the Selling Stockholders shall determine
(such date and time of payment and delivery being herein called the "Closing
Time").
In addition, in the event that any or all of the Option Securities are
purchased by the Underwriters, payment of the purchase price for, and delivery
of certificates for, such Option Securities shall be made at the above mentioned
offices of Shearman & Sterling set forth above, or at such other place as shall
be agreed upon by the Representatives and the Company and the Selling
Stockholders and you shall determine, on the Date of Delivery as specified in
the notice from the Representatives to the Company. Payment shall be made to
the Company and the Selling Stockholders (or to a custodian or other
representative of the Selling Stockholders) drawn in, or wire transfer of,
immediately available funds payable to the order of the Company and to the
Selling Stockholders (or to a custodian or other representative of the Selling
Stockholders) against delivery to the Representatives for the respective
accounts of the several Underwriters of certificates for the Securities to be
purchased by them.
(d) DENOMINATIONS; REGISTRATION. Certificates for the Initial Securities
and the Option Securities, if any, shall be in such denominations and registered
in such names as the Representatives may request in writing at least two full
business days before the Closing Time or the relevant Date of Delivery, as the
case may be. The certificates for the Initial Securities and the Option
Securities, if any, will be made available for examination and packaging by the
Representatives in The City of New York not later than 10:00 A.M. on the
business day prior to the Closing Time or the relevant Date of Delivery, as the
case may be.
SECTION 3. COVENANTS OF THE COMPANY. The Company covenants with each
Underwriter as follows:
(a) PREPARATION OF PROSPECTUS SUPPLEMENT. If reasonably requested by you
in
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connection with the offering of the Securities, the Company will prepare a
preliminary prospectus supplement containing such information as you and the
Company deem appropriate, and, prior to or immediately following the execution
of this Agreement, the Company will have prepared or will prepare a Prospectus
Supplement that complies with the 1933 Act and the 1933 Act Regulations and that
sets forth the number of Securities and their terms not otherwise specified in
the Prospectus, the name of each Underwriter participating in the offering and
number of Securities that each severally has agreed to purchase, the name of
each Underwriter, if any, acting as representative of the Underwriters in
connection with the offering, the price at which the Securities are to be
purchased by the Underwriters from the Company, any initial public offering
price, any selling concession and reallowance, and such other information as you
and the Company deem appropriate in connection with the offering of the
Securities. The Company will promptly transmit copies of the Prospectus
Supplement to the Commission for filing pursuant to Rule 424 of the 1933 Act
Regulations and will furnish to the Underwriters as many copies of any
preliminary prospectus supplement and the Prospectus as you shall reasonably
request.
(b) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION REQUESTS.
During the period when the Prospectus is required by the 1933 Act to be
delivered in connection with sales of the Securities, the Company will notify
you immediately, and confirm the notice in writing, (i) of the effectiveness of
any amendment to the Registration Statement, (ii) of the transmission to the
Commission for filing of any supplement to the Prospectus or any document that
would as a result thereof be incorporated by reference in the Prospectus,
(iii) of the receipt of any comments from the Commission with respect to the
Registration Statement, the Prospectus or the Prospectus Supplement, (iv) of any
request by the Commission for any amendment to the Registration Statement or any
supplement to the Prospectus or for additional information relating thereto or
to any document incorporated by reference in the Prospectus and (v) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement, of the suspension of the qualification of the Securities
for offering or sale in any jurisdiction, or of the institution or threatening
of any proceeding for any of such purposes. The Company will use every
reasonable effort to prevent the issuance of any such stop order or of any order
suspending such qualification and, if any such order is issued, to obtain the
lifting thereof at the earliest possible moment.
(c) FILING OF AMENDMENTS. During the period when the Prospectus is
required by the 1933 Act to be delivered in connection with sales of the
Securities, the Company will inform you of its intention to file any amendment
to the Registration Statement (including any filing under Rule 462(b) of the
1933 Act Regulations), any supplement to the Prospectus or any document that
would as a result thereof be incorporated by reference in the Prospectus; will
furnish you with copies of any such amendment, supplement or other document a
reasonable time in advance of filing; and will not file any such amendment,
supplement or other document in a form to which you or your counsel shall
reasonably object; except that the Company shall inform you of its intention to
file documents pursuant to Section 14(d) of the 1934 Act and shall furnish you
with copies of such documents immediately upon the filing thereof, and you or
your counsel shall not be entitled to object thereto other than pursuant to
Section 3(f). The Prospectus and any amendments or supplements thereto
furnished to the Underwriters will be identical to the electronically
transmitted copies thereof filed with the
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Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(d) DELIVERY OF REGISTRATION STATEMENT. The Company has furnished or will
furnish to you as many signed copies of the Registration Statement (as
originally filed) and of all amendments thereto, whether filed before or after
the Registration Statement became effective, copies of all exhibits and
documents filed therewith or incorporated by reference therein (through the end
of the period when the Prospectus is required by the 1933 Act to be delivered in
connection with sales of the Securities) and signed copies of all consents and
certificates of experts, as you may reasonably request, and has furnished or
will furnish to you, for each of the Underwriters, one conformed copy of the
Registration Statement (as originally filed) and of each amendment thereto
(including documents incorporated by reference into the Prospectus but without
exhibits, but excluding any such documents filed by the Company under the 1934
Act prior to the end of the most recent fiscal year for which the Company has
filed an Annual Report on Form 10-K). The copies of the Registration Statement
and each amendment thereto furnished to the Underwriters will be identical to
the electronically transmitted copies thereof filed with the Commission pursuant
to EDGAR, except to the extent permitted by Regulation S-T.
(e) DELIVERY OF PROSPECTUSES. The Company will furnish to each
Underwriter, without charge, during the period when the Prospectus is required
to be delivered under the 1933 Act or the 1934 Act, such number of copies of the
Prospectus (including the Prospectus Supplement) (as amended or supplemented) as
such Underwriter may reasonably request. The Prospectus and any amendments or
supplements thereto furnished to the Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission pursuant to
EDGAR, except to the extent permitted by Regulation S-T.
(f) CONTINUED COMPLIANCE WITH SECURITIES LAWS. If, at any time when the
Prospectus is required by the 1933 Act to be delivered in connection with sales
of the Securities, any event shall occur or condition exist as a result of which
it is necessary, in the opinion of counsel for the Underwriters or counsel for
the Company, to amend the Registration Statement or amend or supplement the
Prospectus in order that the Prospectus will not include an untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein not misleading in the light of the circumstances existing at
the time it is delivered to a purchaser, or if it shall be necessary, in the
opinion of either such counsel, at any such time to amend the Registration
Statement or amend or supplement the Prospectus in order to comply with the
requirements of the 1933 Act or the 1933 Act Regulations, the Company will
promptly prepare and file with the Commission, subject to Section 3(c), such
amendment or supplement as may be necessary to correct such untrue statement or
omission or to make the Registration Statement or the Prospectus comply with
such requirements.
(g) BLUE SKY QUALIFICATIONS. The Company will use its best efforts, in
cooperation with the Underwriters, to qualify the Securities for offering and
sale under the applicable securities laws of such states and other jurisdictions
as you may designate and to maintain such qualifications in effect for a period
of not less than one year from the date hereof; PROVIDED, HOWEVER, that the
Company shall not be obligated to file any general consent to service of
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process or to qualify as a foreign corporation or as a dealer in securities in
any jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is not
otherwise so subject. The Company will file such statements and reports as may
be required by the laws of each jurisdiction in which the Securities have been
qualified as above provided. The Company will also supply you with such
information as is necessary for the determination of the legality of the
Securities for investment under the laws of such jurisdictions as you may
request.
(h) RULE 158. The Company will make generally available to its security
holders as soon as practicable, but not later than 45 days after the close of
the period covered thereby, an earnings statement of the Company (in form
complying with the provisions of Rule 158 of the 1933 Act Regulations), covering
(i) a period of 12 months beginning after the effective date of the Registration
Statement but not later than the first day of the Company's fiscal quarter next
following such effective date and (ii) a period of 12 months beginning after the
date of this Agreement but not later than the first day of the Company's fiscal
quarter next following the date of this Agreement.
(i) USE OF PROCEEDS. The Company will apply the proceeds from the sale of
the Securities for the purposes set forth under the caption "Use of Proceeds" in
the Prospectus.
(j) LISTING. The Company will comply with all rules and regulations of
the New York Stock Exchange and the Pacific Stock Exchange in respect of the
listing of the Common Stock and will use its best efforts to cause the
Securities to be eligible for trading thereon.
(k) RESTRICTION ON SALE OF SECURITIES. During a period of 90 days from
the date hereof, the Company will not, without the prior written consent of
___________, (i) directly or indirectly, offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of any share of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock or file any registration statement
under the 1933 Act with respect to any of the foregoing or (ii) enter into any
swap or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Securities to be sold hereunder, (B) any shares of Common Stock issued by
the Company upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof and referred to in the Prospectus, (C)
any shares of Common Stock issued or options to purchase Common Stock granted
pursuant to existing employee benefit plans of the Company referred to in the
Prospectus, any non-employee director stock option plan or dividend reinvestment
plan or (D) the issuance of partnership units exchangeable for shares of Common
Stock in connection with property acquisitions by the Company.
(l) REPORTING REQUIREMENTS. During the period when the Prospectus is
required by the 1933 Act to be delivered in connection with sales of the
Securities, the Company will, subject to Section 3(c), file promptly all
documents required to be filed with the Commission
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pursuant to Section 13, 14 or 15(d) of the 1934 Act.
SECTION 4. PAYMENT OF EXPENSES. (a) EXPENSES. The Company will pay
all expenses incident to the performance of its and the Selling Stockholders'
obligations under this Agreement, including (i) the preparation, printing and
filing of the Registration Statement (including financial statements and
exhibits) as originally filed and of each amendment thereto, (ii) the
preparation, printing and delivery to the Underwriters of this Agreement, any
Agreement among Underwriters and such other documents as may be required in
connection with the offering, purchase, sale and delivery of the Securities,
(iii) the preparation, issuance and delivery of the certificates for the
Securities to the Underwriters, including any stock or other transfer taxes or
duties payable upon the sale of the Securities to the Underwriters, (iv) the
fees and disbursements of the Company's counsel, accountants and other advisors,
(v) the qualification of the Securities under securities laws in accordance with
the provisions of Section 3(g) hereof, including filing fees and the reasonable
fees and disbursements of counsel for the Underwriters in connection therewith
and in connection with the preparation of the Blue Sky Survey and any supplement
thereto, (vi) the printing and delivery to the Underwriters of copies of any
preliminary prospectus supplements, and the Prospectus and any amendments or
supplements thereto, (vii) the preparation, printing and delivery to the
Underwriters of copies of the Blue Sky Survey and any supplement thereto, (viii)
the fees and expenses of any transfer agent or registrar for the Securities,
(ix) the filing fees incident to, and the reasonable fees and disbursements of
counsel to the Underwriters in connection with, the review by the NASD of the
terms of the sale of the Securities and (x) the fees and expenses incurred in
connection with the listing of the Securities on the NYSE and the PSE.
(b) TERMINATION OF AGREEMENT. If this Agreement is terminated by the
Representatives in accordance with the provisions of Section 5 or
Section 9(a)(i) hereof, the Company shall reimburse the Underwriters for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
The provisions of this Section shall not affect any agreement that the
Company and the Selling Stockholders may make for the sharing of such costs and
expenses.
SECTION 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the several Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company and the Selling Stockholders,
respectively, contained in Section 1 hereof or in certificates of any officer of
the Company or any of its subsidiaries or certificates by or on behalf of the
Selling Stockholders delivered pursuant to the provisions hereof, to the
performance by the Company and the Selling Stockholders of their covenants and
other obligations hereunder, and to the following further conditions:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT AND 462(b) REGISTRATION
STATEMENT. The Registration Statement has become effective not later than
5:30 P.M., Washington D.C. time, on the date hereof, any Rule 462(b)
Registration Statement has become effective not later than 10:00 P.M.,
Washington D.C. time, on the date hereof, and at Closing Time no stop order
suspending the effectiveness of the Registration Statement or 462(b)
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor initiated or threatened by
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the Commission, and any request on the part of the Commission for additional
information shall have been complied with to the reasonable satisfaction of
counsel to the Underwriters.
(b) OPINIONS OF COUNSEL FOR COMPANY. At Closing Time the Representatives
shall have received the favorable opinion, dated as of Closing Time, of Shearman
& Sterling, counsel for the Company, together with the favorable opinion of
Ballard Spahr Andrews & Ingersoll, special Maryland counsel for the Company,
each in form and substance satisfactory to counsel for the Underwriters,
together with signed or reproduced copies of each such letter for each of the
other Underwriters to the effect set forth in Exhibit A-1 and Exhibit A-2 hereto
and to such further effect as counsel to the Underwriters may reasonably
request.
(c) OPINION OF COUNSEL FOR SELLING STOCKHOLDERS. At the Closing Time, you
shall have received a signed opinion of _________________________, counsel for
the Selling Stockholders, dated as of the Closing Time, together with signed or
reproduced copies of such opinion for each of the other Underwriters, in form
and substance satisfactory to counsel for the Underwriters, to the effect that:
(i) This Agreement and the Custody Agreement have been duly executed
and delivered by the Selling Stockholders or by an Attorney-in-Fact on
behalf of the Selling Stockholders, and each of the Selling Stockholders
has duly executed and delivered such Selling Stockholder's respective Power
of Attorney.
(ii) To the best knowledge of such counsel, each Selling Stockholder
has valid and marketable title to the shares of Common Stock to be sold by
such Selling Stockholder pursuant to this Agreement, free and clear of any
pledge, lien, security interest, charge, claim, equity or encumbrance of
any kind, and has full right, power and authority to sell, transfer and
deliver such shares of Common Stock pursuant to this Agreement. By
delivery of a certificate or certificates therefor such Selling Stockholder
will transfer to the Underwriters who have purchased such shares of Common
Stock pursuant to this Agreement (without notice of any defect in the title
of such Selling Stockholder and who are otherwise bona fide purchasers for
purposes of the Uniform Commercial Code) valid and marketable title to such
shares of Common Stock, free and clear of any pledge, lien, security
interest, charge, claim, equity or encumbrance of any kind.
(iii) Each Attorney-in-Fact has been duly authorized by each Selling
Stockholder to deliver the shares of Common Stock on behalf of such Selling
Stockholder in accordance with the terms of this Agreement.
Such opinion shall be to such further effect with respect to other
legal matters relating to this Agreement and the sale of the shares of
Common Stock pursuant to this Agreement by the Selling Stockholders as
counsel for the Underwriters may reasonably request. Such counsel may also
state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of the Selling
Stockholders and certificates of public officials; provided that such
certificates have been delivered to the Underwriters.
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(d) OPINION OF COUNSEL FOR UNDERWRITERS. At Closing Time the
Representatives shall have received the favorable opinion, dated as of Closing
Time, of _______________________, counsel for the Underwriters, together with
signed or reproduced copies of such letter for each of the other Underwriters
with respect to the matters set forth in __________________. In giving such
opinion such counsel may rely, as to all matters governed by the laws of
jurisdictions other than the law of the States of New York and California and
the federal law of the United States, upon the opinions of counsel satisfactory
to you. Such counsel may also state that, insofar as such opinion involves
factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiaries and certificates of
public officials.
(e) OFFICERS' CERTIFICATE. At Closing Time there shall not have been,
since the date hereof or since the respective dates as of which information is
given in the Prospectus, any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, and the Representatives shall have
received a certificate of the Chief Executive Officer or a Vice President of the
Company and of the chief financial or chief accounting officer of the Company,
dated as of Closing Time, to the effect that (i) there has been no such material
adverse change, (ii) the representations and warranties in Section 1 hereof are
true and correct with the same force and effect as though expressly made at and
as of Closing Time, (iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior to
Closing Time, and (iv) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been initiated or threatened by the Commission.
(f) ACCOUNTANT'S COMFORT LETTER. At the time of the execution of this
Agreement, the Representatives shall have received from KPMG Peat Marwick LLP a
letter dated such date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of such letter for
each of the other Underwriters containing statements and information of the type
ordinarily included in accountants' "comfort letter" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.
(g) BRING-DOWN COMFORT LETTER. At Closing Time the Representatives shall
have received from KPMG Peat Marwick LLP a letter, dated as of Closing Time, to
the effect that they reaffirm the statements made in the letter furnished
pursuant to subsection (e) of this Section, except that the specified date
referred to shall be a date not more than three business days prior to Closing
Time.
(h) APPROVAL OF LISTING. At the Closing Time the Securities shall have
been approved for listing on the NYSE and the PSE, subject only to official
notice of issuance.
[(i) LOCK-UP AGREEMENTS. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the form of
Exhibit B hereto signed by the persons
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listed on Schedule C hereto.]
(j) ADDITIONAL DOCUMENTS. At Closing Time and at each Date of Delivery
counsel for the Underwriters shall have been furnished with such documents and
opinions as they may require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance and sale of the Securities
as herein contemplated shall be satisfactory in form and substance to the
Representatives and counsel for the Underwriters.
(k) CONDITIONS TO PURCHASE OF OPTION SECURITIES. In the event that the
Underwriters exercise their option provided in Section 2(b) hereof to purchase
all or any portion of the Option Securities, the representations and warranties
of the Company and the Selling Stockholders, respectively, contained herein and
the statements in any certificates furnished by the Company and the Selling
Stockholders, respectively, hereunder shall be true and correct as of each Date
of Delivery and, at the relevant Date of Delivery, the Representatives shall
have received:
(i) OFFICER'S CERTIFICATE. A certificate, dated such Date of Delivery, of
the President or a Vice President of the Company and of the chief financial
or chief accounting officer of the Company confirming that the certificate
delivered at the Closing Time pursuant to Section 5(d) hereof remains true
and correct as of such Date of Delivery.
(ii) OPINIONS OF COUNSEL FOR COMPANY. The favorable opinion of Shearman &
Sterling, counsel for the Company, together with the favorable opinion of
Ballard Spahr Andrews & Ingersoll, special Maryland counsel for the
Company, each in form and substance satisfactory to counsel for the
Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise to the
same effect as the opinions required by Section 5(b) hereof.
[(iii) OPINION OF COUNSEL FOR SELLING STOCKHOLDERS. The favorable opinion
of _______________, counsel for the Selling Stockholders, dated such Date
of Delivery, relating to the Option Securities to be purchased on such Date
of Delivery and otherwise to the same effect as the opinion required by
Section 5(c) hereof.]
(iv) OPINION OF COUNSEL FOR UNDERWRITERS. The favorable opinion of
_______________, counsel for the Underwriters, dated such Date of Delivery,
relating to the Option Securities to be purchased on such Date of Delivery
and otherwise to the same effect as the opinion required by Section 5(d)
hereof.
(v) BRING-DOWN COMFORT LETTER. A letter from KPMG Peat Marwick LLP, in
form and substance satisfactory to the Representatives and dated such Date
of Delivery, substantially in the same form and substance as the letter
furnished to the Representatives pursuant to Section 5(g) hereof, except
that the "specified date" on the letter furnished pursuant to this
paragraph shall be a date not more than five days prior
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to such Date of Delivery.
(l) TERMINATION OF AGREEMENT. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Representatives by notice to the Company at
any time at or prior to Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4 and
except that Sections 1, 6 and 7 shall survive any such termination and remain in
full force and effect.
SECTION 6. INDEMNIFICATION.
(a) INDEMNIFICATION OF UNDERWRITERS. The Company agrees and each Selling
Stockholder, jointly (except as provided in clause (iii) or (iv) below) and
severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the
Rule 434 Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus supplement or the Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
6(d) hereof) any such settlement is effected with the written consent of
(A) the Company, to the extent indemnification pursuant to this Section
6(a)(ii) is sought from the Company, and (B) each Selling Stockholder, to
the extent indemnification pursuant to this Section 6(a)(ii) is sought from
such Selling Stockholder; and
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by ______________),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid
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under(i) or (ii) above;
PROVIDED, HOWEVER, that (x) this indemnity agreement shall not apply to any
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through ______________ expressly for use in the
Registration Statement (or any amendment thereto) or any preliminary prospectus
supplement or the Prospectus (or any amendment or supplement thereto); (y) the
aggregate liability of each Selling Stockholder under this Section 6 shall be
limited to an amount equal to the net proceeds (after deducting the aggregate
Underwriters' discount, but before deducting expenses) received by such Selling
Stockholder from the sale of his or her Securities pursuant to this Agreement
and (z) each Selling Stockholder will be liable in any case only to the extent
that any such loss, liability, claim, damage or expense arises out of or is
based upon statements in or omissions from the Registration Statement (or any
amendment thereto) based upon information furnished to the Company by such
Selling Stockholder expressly for use therein;and PROVIDED, FURTHER, that this
indemnity agreement with respect to any preliminary prospectus supplement shall
not inure to the benefit of any Underwriter from whom the person asserting any
such losses, liabilities, claims, damages or expenses purchased Securities, or
any person controlling such Underwriter, if a copy of the Prospectus (as then
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of any Underwriter to
such person, if such is required by law, at or prior to the written confirmation
of the sale of such Securities to such person and if the Prospectus (as so
amended or supplemented) would have cured the defect giving rise to such loss,
liability, claim, damage or expense.
(b) INDEMNIFICATION OF COMPANY, DIRECTORS AND OFFICERS AND SELLING
STOCKHOLDERS. Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act or Section 20 of the 1934 Act, each Selling
Stockholder and each person, if any, who controls any Selling Stockholder within
the meaning of Section 15 of the 1933 Act, against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary prospectus
supplement or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company or any Selling Stockholder by such Underwriter through _____________
expressly for use in the Registration Statement (or any amendment thereto) or
such preliminary prospectus supplement or the Prospectus (or any amendment or
supplement thereto).
(c) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve
such indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
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from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by _____________, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) hereof effected without its written consent if (i) such
settlement is entered into more than 45 days after receipt by such indemnifying
party of the aforesaid request, (ii) such indemnifying party shall have received
notice of the terms of such settlement at least 30 days prior to such settlement
being entered into and (iii) such indemnifying party shall not have reimbursed
such indemnified party in accordance with such request prior to the date of such
settlement.
(e) OTHER AGREEMENTS WITH RESPECT TO INDEMNIFICATION. The provisions of
this Section shall not affect any agreement among the Company and the Selling
Stockholders with respect to indemnification.
SECTION 7. CONTRIBUTION. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company, the Selling Stockholders and the Underwriters from the offering of the
Securities pursuant to this Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company, the Selling Stockholders and
the Underwriters in connection with the statements or omissions which resulted
in such losses,
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liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company, the Selling Stockholders and
the Underwriters in connection with the offering of the Securities pursuant to
this Agreement shall be deemed to be in the same respective proportions as the
total net proceeds from the offering of the Securities pursuant to this
Agreement (before deducting expenses) received by the Company and the total
underwriting discount received by the Underwriters, in each case as set forth on
the cover of the Prospectus Supplement, or, if Rule 434 is used, the
corresponding location on the Term Sheet, bear to the aggregate initial public
offering price of the Securities as set forth on such cover.
The relative fault of the Company, the Selling Stockholders and the
Underwriters shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company, the Selling Stockholders or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company, the Selling Stockholders and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation (even if the Selling Stockholders and the
Underwriters were each treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this Section 7. The aggregate amount of losses,
liabilities, claims, damages and expenses incurred by an indemnified party and
referred to above in this Section 7 shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue or alleged untrue statement or
omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter;
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company; and each director of,
member of,
24
<PAGE>
partner in, officer of or person controlling a Selling Stockholder, if any,
shall have the same rights to contribution as the Selling Stockholder. The
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial Securities set forth opposite
their respective names in Schedule A hereto and not joint.
The provisions of this Section shall not affect any agreement among the
Company and the Selling Stockholders with respect to contribution.
SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or the Selling
Stockholders submitted pursuant hereto, shall remain operative and in full force
and effect, regardless of any investigation made by or on behalf of any
Underwriter or controlling person, by or on behalf of the Company or by or on
behalf of any Selling Stockholder or any person that controls a Selling
Stockholder and shall survive delivery of the Securities to the Underwriters.
SECTION 9. TERMINATION OF AGREEMENT.
(a) TERMINATION; GENERAL. The Representatives may terminate this
Agreement, by notice to the Company and the Selling Stockholders, at any time at
or prior to Closing Time (i) if there has been, since the time of execution of
this Agreement or since the respective dates as of which information is given in
the Registration Statement, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business, or (ii) if there has
occurred any material adverse change in the financial markets in the United
States, any outbreak of hostilities or escalation thereof or other calamity or
crisis or any change or development involving a prospective change in national
or international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Representatives,
impracticable to market the Securities or to enforce contracts for the sale of
the Securities, or (iii) if trading in any securities of the Company has been
suspended or limited by the Commission or the NYSE or the PSE, or if trading
generally on the American Stock Exchange or the NYSE or in the over-the-counter
market has been suspended or limited, or minimum or maximum prices for trading
have been fixed, or maximum ranges for prices have been required, by any of said
exchanges or by such system or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental authority, or
(iv) if a banking moratorium has been declared by Federal, California or New
York authorities.
(b) LIABILITIES. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
6 and 7 hereof shall survive such termination and remain in full force and
effect.
SECTION 10. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one or more
of the Underwriters shall fail at Closing Time or a Date of Delivery to purchase
the Securities which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the
25
<PAGE>
Representatives shall have the right, within 24 hours thereafter, to make
arrangements for one or more of the non-defaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the Defaulted
Securities in such amounts as may be agreed upon and upon the terms herein set
forth; if, however, the Representatives shall not have completed such
arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of Securities to be purchased on such date, each of the
non-defaulting Underwriters shall be obligated, severally and not jointly,
to purchase the full amount thereof in the proportions that their
respective underwriting obligations with respect to the Initial Securities
hereunder bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number
of Securities to be purchased on such date, this Agreement shall terminate
without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement, either the Representatives or the Company shall have the right
to postpone Closing Time or a Date of Delivery for a period not exceeding seven
days in order to effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements. As used herein, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 10.
SECTION 11. DEFAULT BY A SELLING STOCKHOLDER OR THE COMPANY. If any
Selling Stockholder shall fail at the Closing Time to sell and deliver the
number of Initial Securities that such Selling Stockholder is obligated to sell,
the Company shall have the right, within 24 hours thereafter, to make
arrangements for it to sell upon the terms set forth in this Agreement all, but
not less than all, of such defaulted Initial Securities in such amounts as may
be agreed upon and to which the Underwriters do not reasonably object; if,
however, such arrangements have not been completed within such 24-hour period,
then the Underwriters may, at your option, by notice from you to the Company,
either (a) terminate this Agreement without any liability on the part of any
non-defaulting party except to the extent provided in Section 4 or (b) elect to
purchase the Initial Securities that the Company and the remaining Selling
Stockholders have agreed to sell pursuant to this Agreement.
In the event of a default under this Section that does not result in
the termination of this Agreement, either you or the Company shall have the
right to postpone the Closing Time for a period not exceeding seven days in
order to effect any required changes in the Registration Statement or Prospectus
or in any other documents or arrangements.
If the Company shall fail at the Closing Time to sell and deliver the
number of shares of Common Stock that it is obligated to sell, then this
Agreement shall terminate
26
<PAGE>
without any liability on the part of any non-defaulting party, except to the
extent provided in Section 4 and except that the provisions of Sections 6, 7 and
8 shall remain in effect.
No action taken pursuant to this Section shall relieve the Company or
any Selling Stockholder so defaulting from liability, if any, in respect of such
default.
SECTION 12. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed to the Representatives at ____________________,
attention of _____________________; notices to the Company shall be directed to
it at 270 Lafayette Circle, Lafayette, California 94549, attention of Peter B.
Bedford and notices to the Selling Stockholders shall be directed to them at
____________________________, attention of __________________.
SECTION 13. PARTIES. This Agreement shall each inure to the benefit of
and be binding upon the Underwriters, the Company, the Selling Stockholders and
their respective successors. Nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any person, firm or corporation, other
than the Underwriters, the Company, the Selling Stockholders and their
respective successors and the controlling persons and officers and directors
referred to in Sections 6 and 7 and their heirs and legal representatives, any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision herein contained. This Agreement and all conditions and
provisions hereof are intended to be for the sole and exclusive benefit of the
Underwriters, the Company and the Selling Stockholders and their respective
successors, and said controlling persons and officers and directors and their
heirs and legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Securities from any Underwriter shall be deemed to
be a successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SAID STATE. EXCEPT AS OTHERWISE SET
FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 15. EFFECT OF HEADINGS. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
27
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the Underwriters, the Company and the Selling Stockholders in accordance with
its terms.
Very truly yours,
BEDFORD PROPERTY INVESTORS, INC.
By
-------------------------------------
Title:
SELLING STOCKHOLDERS NAMED IN SCHEDULE B
By
-------------------------------------
Attorney-in-Fact
CONFIRMED AND ACCEPTED,
as of the date first above written:
[Names of underwriters]
- ---------------------------------------
By:
------------------------------------
By
------------------------------------
Authorized Signatory
For themselves and as Representatives of the other Underwriters named in
Schedule A hereto.
28
<PAGE>
Exhibit 5.1
October 14, 1997
Bedford Property Investors, Inc.
270 Lafayette Circle
Lafayette, California 94549
Re: Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have served as Maryland counsel to Bedford Property Investors,
Inc., a Maryland corporation (the "Company"), in connection with certain
matters of Maryland law arising out of the Registration Statement on Form S-3
filed by the Company to register an aggregate of 24,166,667 shares of Common
Stock, $.02 par value per share (the "Shares"), for an offering to be made on
a delayed or continuous basis in the future pursuant to Rule 415 under the
Securities Act of 1933, as amended (the "Registration Statement"). Of the
Shares, up to 20,000,000 (the "Company Shares") may be offered by the Company
and up to 4,166,667 (the "Selling Stockholder Shares") may be offered by Bed
Preferred No. 1 Limited Partnership ("BPLP"). The Selling Stockholder Shares
will be issued to BPLP upon conversion of its 8,333,334 shares of Series A
Convertible Preferred Stock, par value $.01 per share (the "Convertible
Preferred Stock"), into shares of Common Stock. Unless otherwise defined
herein, capitalized terms used herein shall have the meanings ascribed to
them in the Registration Statement.
In connection with our representation of the Company, and as a basis
for the opinion hereinafter set forth, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of the following
documents (hereinafter collectively referred to as the "Documents"):
1. The Registration Statement;
2. The charter of the Company (the "Charter"), certified as of a
recent date by the State Department of Assessments and Taxation of Maryland
(the "SDAT");
3. The Amended and Restated Bylaws of the Company, certified as of
the date hereof by the Secretary of the Company;
<PAGE>
4. Resolutions of the Board of Directors of the Company and relating
to the sale and issuance of the Shares and the filing of the Registration
Statement with the Securities and Exchange Commission, certified as of the
date hereof by the Secretary of the Company (the "Resolutions");
5. A form of certificate representing the Shares (the
"Certificate"), certified as of the date hereof by the Secretary of the
Company;
6. A certificate executed by Jennifer I. Mori, Secretary of the
Company, dated August 14, 1997 and October 14, 1997;
7. A certificate of the SDAT as to the good standing of the Company,
dated October 14, 1997; and
8. Such other documents and matters as we have deemed necessary or
appropriate to express the opinion set forth in this letter, subject to the
assumptions, limitations and qualifications stated herein.
In expressing the opinion set forth below, we have assumed, and so
far as is known to us, there are no facts inconsistent with the following:
1. Each individual executing any of the Documents, whether on behalf
of such individual or another person, is legally competent to do so.
2. Each individual executing any of the Documents on behalf of a
party (other than the Company) is duly authorized to do so.
3. Each of the parties (other than the Company) executing any of the
Documents has duly and validly executed and delivered each of the Documents
to which such party is a signatory, and such party's obligations set forth
therein are legal, valid and binding and are enforceable in accordance with
all stated terms.
4. All Documents submitted to us as originals are authentic. All
Documents submitted to us as certified or photostatic copies conform to the
original documents. All signatures on all Documents are genuine. All public
records
<PAGE>
reviewed or relied upon by us or on our behalf are true and complete. All
statements and information contained in the Documents are true and complete.
There are no modifications or amendments to the Documents, and there has been
no waiver of any of the provisions of the Documents, by action or omission
of the parties or otherwise.
5. The Shares will not be issued in violation of any restriction or
limitation contained in Article VII of the Charter.
The phrase "known to us" is limited to the actual knowledge, without
independent inquiry, of the lawyers at our firm who have performed legal
services in connection with the issuance of this opinion.
Based upon the foregoing, and subject to the assumptions, limitations
and qualifications stated herein, it is our opinion that:
1. Upon adoption by the Board of Directors of the Company, or a duly
authorized committee thereof, of resolutions in the form and content as
required by applicable law, and upon issuance and delivery of the Company
Shares represented by certificates in the form of the Certificate and payment
therefor in the manner contemplated by the Registration Statement and/or the
applicable Prospectus Supplement and by such resolutions, such Company Shares
will be (assuming that the sum of (i) any shares of Common Stock issued
between the date hereof and the date on which the Company Shares are actually
issued (not including any Company Shares), (ii) all shares of Common Stock
issued as of the date hereof and (iii) the Company Shares, will not exceed
the total number of shares of Common Stock that the Company is authorized to
issue) duly authorized, validly issued, fully paid and nonassessable.
2. The Selling Stockholder Shares, when issued and delivered to BPLP
in accordance with the terms of the Charter, will be duly authorized, validly
issued, fully paid and nonassessable.
The foregoing opinion is limited to the substantive laws of the State
of Maryland, and we do not express any opinion herein concerning any other
law. We express no opinion as to the applicability or effect of any federal
or state securities laws, including the securities laws of the State of
Maryland. To the extent that any matter to which our opinion is expressed
herein would be governed by the laws of any jurisdiction other than the State
of Maryland, we do not express any opinion on such matter.
We assume no obligation to supplement this opinion if any applicable
law changes after the date hereof or if we become aware of any fact that
might change the opinion expressed herein after the date hereof.
<PAGE>
This opinion is being furnished to you solely for your benefit and
may not be relied upon by, quoted in any manner to, or delivered to any other
person or entity without, in each instance, our prior written consent (except
that Shearman & Sterling, counsel to the Company may rely upon this opinion
as if it were addressed to them).
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of the name of our firm therein. In
giving this consent, we do not admit that we are within the category of
persons whose consent is required by Section 7 of the 1933 Act.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Bedford Property Investors, Inc.:
We consent to the use of our report dated February 25, 1997, relating to the
consolidated financial statements and financial statement schedule of Bedford
Property Investors, Inc., incorporated by reference herein, and to the reference
to our firm under the heading "Experts" in the prospectus.
We also consent to the use of our reports dated January 31, 1997, relating
to the combined historical summary of gross income and direct operating expenses
of O'Toole Business Center, Signal Systems Building and 6500 Kaiser Drive;
August 1, 1997, relating to the historical summary of gross income and direct
operating expenses of Orillia Office Park; and August 1, 1997, relating to the
combined historical summary of gross income and direct operating expenses of
Executive Center at South Bank, Bedford Fremont Business Center, U.S. Bank
Centre, Scripps Wateridge Corporate Center and Phoenix Airport Center
(collectively, the Summaries), incorporated by reference herein. Our reports on
the Summaries contain a paragraph that states that the Summaries were prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission, as described in note A to the Summaries. The Summaries
are not intended to be complete presentations of income and expense of O'Toole
Business Center, Signal Systems Building, 6500 Kaiser Drive, Orillia Office
Park, Executive Center at South Bank, Bedford Fremont Business Center, U.S. Bank
Centre, Scripps Wateridge Corporate Center and Phoenix Airport Center.
/s/ KPMG Peat Marwick LLP
San Francisco, California
October 14, 1997
