<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-14166
MERIDIAN INDUSTRIAL TRUST, INC.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
MARYLAND 94-3224765
- ----------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
455 MARKET STREET
17TH FLOOR
SAN FRANCISCO, CALIFORNIA 94105
- ---------------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 281-3900
------------------------
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of the common and
preferred stock, as of the latest practicable date:
<TABLE>
<S> <C>
SHARES OF SERIES B CONVERTIBLE PREFERRED STOCK AS OF AUGUST 1, 1998: 1,623,376
SHARES OF SERIES D CUMULATIVE REDEEMABLE PREFERRED STOCK AS OF AUGUST 1, 1998: 2,000,000
SHARES OF COMMON STOCK AS OF AUGUST 1, 1998: 31,672,388
</TABLE>
<PAGE>
- ------------------------------------------------------------------------------
PART I: FINANCIAL INFORMATION
- ------------------------------------------------------------------------------
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with the Annual Report on Form 10-K
for the year ended December 31, 1997 and the Quarterly Report on Form 10-Q
for the three months ended March 31, 1998 of Meridian Industrial Trust, Inc.
(the "Company"). These condensed consolidated statements have been prepared
in accordance with the instructions of the Securities and Exchange Commission
Form 10-Q and do not include all the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of the Company's management, all material
adjustments of a normal, recurring nature considered necessary for a fair
presentation of the results of operations for the interim periods have been
included. The results of consolidated operations for the six months ended
June 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998.
1
<PAGE>
MERIDIAN INDUSTRIAL TRUST, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
1998 1997
(unaudited) (audited)
----------- ----------
<S> <C> <C>
Investment in Real Estate Assets:
Rental Properties Held for Investment $ 974,076 $813,389
Less: Accumulated Depreciation (23,912) (14,374)
---------- --------
950,164 799,015
Rental Properties Held for Divestiture 267 9,492
---------- --------
950,431 808,507
Investment in Unconsolidated Joint Venture 21,500 21,500
---------- --------
Total Investment in Real Estate Assets 971,931 830,007
Other Assets:
Investment in and Advances to Unconsolidated Subsidiaries 46,019 --
Cash and Cash Equivalents 8,195 7,855
Cash Held in Consolidated Limited Partnerships 2,506 992
Restricted Cash and Cash Held in Escrow 7,031 11,267
Note Receivable 8,000 --
Accounts Receivable, Net of Reserves of $468 and $228 at
June 30, 1998 and December 31, 1997, respectively 4,837 3,460
Capitalized Loan Fees, Lease Commissions and Other Assets, Net 23,739 9,931
---------- --------
Total Assets $1,072,258 $863,512
---------- --------
---------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Unsecured Notes, Including Unamortized Debt Premium of $105
and $109 at June 30, 1998 and December 31, 1997, respectively $ 160,105 $160,109
Mortgage Loan 66,094 66,094
Unsecured Credit Facility 145,800 20,500
Mortgage Notes Payable, Including Unamortized Debt Premium of $12
and $153 at June 30, 1998 and December 31, 1997, respectively 31,580 10,503
Accrued Dividends Payable 10,723 9,473
Accounts Payable, Prepaid Rent, Tenant Deposits and Other Liabilities 22,439 21,562
---------- --------
Total Liabilities 436,741 288,241
---------- --------
Minority Interest in Consolidated Limited Partnerships 17,024 5,132
---------- --------
Commitments and Contingencies -- --
Stockholders' Equity:
Authorized Shares - 175,000,000 shares of Common Stock and
25,000,000 shares of Preferred Stock authorized, each with par
value of $0.001; 30,799,933 and 30,165,662 shares of Common Stock
issued and outstanding at June 30, 1998 and December 31, 1997,
respectively; 1,623,376 and 2,272,727 shares of Series B
Convertible Preferred Stock issued and outstanding with a
liquidation preference of $25,000 and $35,000 at June 30, 1998 and
December 31, 1997, respectively; and 2,000,000 shares of Series D
Preferred Stock issued and outstanding with a liquidation preference
of $50,000 at June 30, 1998 35 32
Additional Paid-in Capital 621,912 574,848
Distributions in Excess of Income (3,454) (4,741)
---------- --------
Total Stockholders' Equity 618,493 570,139
---------- --------
Total Liabilities and Stockholders' Equity $1,072,258 $863,512
---------- --------
---------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
MERIDIAN INDUSTRIAL TRUST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Rentals from Real Estate Investments $ 28,393 $ 12,870 $ 54,653 $ 24,564
Income from Unconsolidated Joint Venture 495 -- 990 --
Income from Unconsolidated Subsidiaries 563 -- 750 --
Interest and Other Income 427 147 528 304
----------- ----------- ----------- -----------
TOTAL REVENUES 29,878 13,017 56,921 24,868
----------- ----------- ----------- -----------
EXPENSES:
Interest Expense 5,888 2,160 10,480 3,784
Property Taxes 3,515 1,764 6,824 3,393
Property Operating 2,263 956 4,262 2,042
General and Administrative 2,087 1,350 3,976 2,501
Depreciation and Amortization 5,467 2,211 10,470 4,216
----------- ----------- ----------- -----------
TOTAL EXPENSES 19,220 8,441 36,012 15,936
----------- ----------- ----------- -----------
Income Before Minority Interest 10,658 4,576 20,909 8,932
Minority Interest in Net (Income) (158) -- (247) --
----------- ----------- ----------- -----------
Income Before Gain (Loss) on Divestiture of
Properties and Extraordinary Item 10,500 4,576 20,662 8,932
Gain (Loss) on Divestiture of Properties, Net 1,993 (877) 2,054 (448)
----------- ----------- ----------- -----------
Income Before Extraordinary Item 12,493 3,699 22,716 8,484
Extraordinary Item - Expenses Incurred in
Connection with Debt Restructuring
and Retirements -- (808) -- (808)
----------- ----------- ----------- -----------
NET INCOME $ 12,493 $ 2,891 $ 22,716 $ 7,676
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net Income $ 12,493 $ 2,891 $ 22,716 $ 7,676
Less Preferred Dividends Declared:
Series B Preferred Stock (536) (705) (1,286) (1,409)
Series D Preferred Stock (12) -- (12) --
----------- ----------- ----------- -----------
NET INCOME ALLOCABLE TO COMMON $ 11,945 $ 2,186 $ 21,418 $ 6,267
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
BASIC PER SHARE DATA:
Income Before Extraordinary Item $ 0.40 $ 0.22 $ 0.71 $ 0.52
Extraordinary Item -- (0.06) -- (0.06)
----------- ----------- ----------- -----------
NET INCOME ALLOCABLE TO COMMON PER BASIC
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING
$ 0.40 $ 0.16 $ 0.71 $ 0.46
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
DILUTED PER SHARE DATA:
Income Before Extraordinary Item $ 0.37 $ 0.22 $ 0.68 $ 0.51
Extraordinary Item -- (0.06) -- (0.06)
----------- ----------- ----------- -----------
NET INCOME ALLOCABLE TO COMMON PER DILUTED
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING
$ 0.37 $ 0.16 $ 0.68 $ 0.45
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic 30,182,754 13,598,756 30,180,624 13,597,570
Diluted 33,331,951 14,015,823 33,212,739 14,030,853
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
MERIDIAN INDUSTRIAL TRUST, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
1998 1997
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 22,716 $ 7,676
Adjustments to Reconcile Net Income to Cash Provided by
Operating Activities:
Depreciation and Amortization 10,470 4,216
Amortization of Debt Premium (146) (22)
Amortization of Financing Costs 202 176
Straight Line Rent (1,893) (851)
Income Allocated to Minority Partner Interest 247 --
(Gain) Loss on Divestiture of Properties (2,054) 448
Extraordinary Item - Expenses Incurred in Connection with
Debt Restructuring and Retirements -- 808
Increase in Accounts Receivable and Other Assets (5,105) (6,004)
Decrease in Accounts Payable, Prepaid Rent,
Tenant Deposits and Other Liabilities (1,199) (75)
----------- ---------
Net Cash Provided by Operating Activities 23,238 6,372
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net Proceeds from Property Sales 3,693 11,195
Decrease in Restricted Cash and Cash Held In Escrow 34 317
Increase in Cash Held In Consolidated Limited Partnerships (1,311) --
Investment in and Advances to Unconsolidated Subsidiaries (46,007) --
Investments in Real Estate (117,897) (57,148)
Recurring Building Improvements (1,465) (228)
Recurring Tenant Improvements (480) (637)
Recurring Leasing Commissions (1,892) (735)
Receipt of Note Receivable -- 503
Purchase of Minority Partner Interest (1,089) --
Distributions Paid to Minority Partners (105) --
Purchase of Other Assets (6,753) (94)
----------- ---------
Net Cash Used in Investing Activities (173,272) (46,827)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments for Capitalized Loan Fees (82) (121)
Principal Payments on Mortgage Notes Payable (170) (24)
Borrowings on Unsecured Credit Facility 183,800 53,500
Repayment of Borrowings on Unsecured Credit Facility (58,500) (4,500)
Distributions Paid to Stockholders (20,178) (9,295)
Net Proceeds from issuance of Common and Preferred Stock, Exercise
of Warrants and Stock Options 51,362 48
Repurchase and Cancellation of Shares and Offering Costs (5,858) --
----------- ---------
Net Cash Provided by Financing Activities 150,374 39,608
----------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 340 (847)
Cash and Cash Equivalents at Beginning of Period 7,855 2,942
----------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 8,195 $ 2,095
----------- ---------
----------- ---------
CASH PAID FOR INTEREST $ 12,365 $ 4,023
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
MERIDIAN INDUSTRIAL TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA AND PROPERTY DATA)
1. ORGANIZATION
Meridian Industrial Trust, Inc. (the "Company") was incorporated
in the state of Maryland on May 18, 1995. The Company is a self-administered
and self-managed real estate investment trust ("REIT") engaged primarily in
the business of owning, acquiring, developing, managing and leasing
income-producing warehouse/distribution and light industrial properties. At
June 30, 1998, the Company's principal asset was its portfolio of 213
warehouse/distribution and light industrial properties, two retail properties
and eleven properties under development. As of June 30, 1998 and 1997, the
Company's properties were 96% and 97% occupied, respectively.
On February 23, 1996, the Company merged with Meridian Point
Realty Trust IV Co., Meridian Point Realty Trust VI Co. and Meridian Point
Realty Trust VII Co. ("Trust IV," "Trust VI" and "Trust VII," respectively;
collectively referred to as the "Merged Trusts"), with the Company as the
surviving entity (that transaction is referred to below as the "Merger").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION The accompanying consolidated financial
statements include the results of the Company, its wholly-owned subsidiaries
and its majority-owned and controlled partnerships. All intercompany
transactions have been eliminated.
(B) USE OF ESTIMATES The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
(C) RENTAL PROPERTIES HELD FOR INVESTMENT Investments in rental
properties are stated at cost unless circumstances indicate that cost cannot
be recovered, in which case, the carrying value of the property is reduced to
estimated fair value. Estimated fair value: (i) is based upon the Company's
plans for the continued operation of each property and (ii) is computed using
estimated sales price, as determined by prevailing market values for
comparable properties and/or the the application of capitalization rates to
annualized rental income. The capitalization rate is based upon the age,
construction and use of the building. The fulfillment of the Company's plans
related to each of its properties is dependent upon, among other things, the
presence of economic conditions which will enable the Company to continue to
hold and operate the properties to yield an acceptable return on the
Company's investment. Due to uncertainties inherent in the valuation process
and in the economy, management can provide no assurances that the actual
results of operating and disposing of the Company's properties will not be
materially different than current expectations.
Rental Properties Held for Investment are depreciated over 35
years using the straight-line method. Expenditures for maintenance, repairs,
and improvements which do not materially prolong the normal useful life of an
asset are charged to operations as incurred. Tenant improvements are
capitalized and amortized under the straight-line method over the term of the
related lease.
5
<PAGE>
Rental Properties Held for Divestiture are stated at the lower of
cost or estimated fair value. Estimated fair value is based upon prevailing
market values for comparable properties or the application of capitalization
rates to annualized rental income. The capitalization rate is based upon the
age, construction and use of building. No depreciation is recorded on Rental
Properties Held for Divestiture.
(D) CONSTRUCTION IN PROGRESS Costs clearly associated with the
development and construction of a real estate project are capitalized as
construction in progress. In addition, interest, real estate taxes, insurance
and other holding costs are capitalized until the property is placed in
service.
(E) CASH AND CASH EQUIVALENTS For the purposes of reporting cash
flows, Cash and Cash Equivalents include cash on hand and short-term
investments with an original maturity of three months or less when purchased.
(F) CAPITALIZED LOAN FEES, LEASE COMMISSIONS AND OTHER ASSETS
Capitalized Loan Fees are amortized as interest expense over the term of the
related debt. Lease Commissions are amortized into depreciation and
amortization expense on a straight-line basis over the term of the related
lease. Other Assets are comprised of a loan extended to a minority limited
partner, security deposits for future acquisitions and deferred rent
receivable.
(G) FAIR VALUE OF FINANCIAL INVESTMENTS Statement of Financial
Accounting Standards No. 107, "Accounting for Fair Value of Financial
Instruments," requires disclosure of fair value for all financial
instruments. Based on the borrowing rates currently available to the Company,
the carrying amount of its debt approximates fair value. The carrying amount
of Cash and Cash Equivalents also approximates fair value.
(H) OFFERING COSTS Underwriting commissions, offering costs and
other expenses incurred in connection with stock offerings of the Company's
Common and Preferred Stock have been reflected as a reduction of
Stockholders' Equity.
(I) RENTALS FROM REAL ESTATE INVESTMENTS All leases are classified
as operating leases. The Company recognizes rental income on a straight-line
basis over the term of the lease. Deferred rent receivable, included in Other
Assets, represents the excess of rental revenue on a straight-line basis over
the cash received under the applicable lease provision.
Certain of the Company's leases relating to its properties require
tenants to pay all or a portion of real estate taxes, insurance and operating
expenses ("Expense Recaptures"). Expense Recaptures are recognized as
revenues in the same period the related expenses are incurred by the Company.
For the three months ended June 30, 1998 and 1997, Expense Recaptures of
$3,741 and $1,731, respectively, have been included in Rentals from Real
Estate Investments. For the six months ended June 30, 1998 and 1997, Expense
Recaptures of $7,507 and $3,111, respectively, have been included in Rentals
from Real Estate Investments.
(J) INCOME TAXES The Company has previously elected to be taxed as
a REIT for federal and, where the federal rules are allowed, state income tax
purposes. To continue to qualify for REIT status, the Company must meet a
number of ongoing organizational and operational requirements. If the Company
satisfies those REIT requirements and the Company currently distributes all
of its net taxable income (including net capital gains) to its stockholders,
the Company should generally owe no federal or state income tax. The REIT
provisions of the Internal Revenue Service Code of 1986, as amended,
generally allow a REIT to deduct dividends paid to stockholders. If the
Company fails to qualify as a REIT in any taxable year, it will be subject to
certain state and federal taxes imposed on its income and properties.
As a result of deductions allowed for the dividends paid to
stockholders and the utilization of net operating loss carryovers of the
Merged Trusts, the Company has no federal or state taxable income.
Accordingly, no provisions for federal or state income taxes have been made
in the accompanying consolidated statements of operations for the three and
six months ended June 30, 1998.
6
<PAGE>
(K) EARNINGS PER SHARE During the first quarter of 1997, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share." SFAS 128 requires the
disclosure of basic earnings per share and modifies existing guidance for
computing diluted earnings per share. Under the new standard, basic earnings
per share is computed as net income or loss divided by the weighted average
number of shares of Common Stock outstanding, excluding the dilutive effects
of stock options and other potentially dilutive securities. SFAS No. 128 is
effective for periods ending after December 15, 1997. Earnings per share for
the three and six months ended June 30, 1997 have been restated to conform to
the new standards as follows:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------------- -------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Income - Basic $ 11,945 $ 2,186 $ 21,418 $ 6,267
Net Income - Diluted 12,481 2,186 22,704 6,267
Weighted Average Shares Outstanding:
Basic 30,182,754 13,598,756 30,180,624 13,597,570
Stock options 315,459 275,550 358,539 285,861
Warrants 137,400 141,517 160,931 147,422
Series B Preferred Stock 2,258,456 -- 2,265,552 --
Operating Limited Partnership Units 437,882 -- 247,093 --
----------- ----------- ----------- -----------
Diluted 33,212,739 33,331,951 14,015,823 14,030,853
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net Income (Loss) Per Share:
Basic $ 0.40 $ 0.16 $ 0.71 $ 0.46
Diluted 0.37 0.16 0.68 0.45
</TABLE>
In connection with the Merger, the Company issued approximately
553,000 warrants to purchase an equal number of shares of the Company's
Common Stock (the "Merger Warrants"). Each Merger Warrant entitles the holder
to purchase one share of the Company's Common Stock at the exercise price of
$16.23. The exercise period began May 23, 1997 and ends February 23, 1999. As
of June 30, 1998, the Company had issued 94,034 shares pursuant to exercise
of the Merger Warrants.
On June 29, 1998, 649,351 shares of the Company's Series B
Preferred Stock were converted into shares of Common Stock on a one-for-one
basis.
On June 30, 1998, the Company completed a public offering of
2,000,000 shares of Series D Cumulative Redeemable Preferred Stock for an
aggregate offering price of $50,000 or $25.00 per share. The net proceeds of
$48,425 were used to reduce borrowings under the Company's unsecured credit
facility. Shares of the Series D Preferred Stock are redeemable by the
Company on or after June 30, 2003 and have a liquidation preference of
$50,000. Shares of the Series D Preferred Stock are not convertible into any
other securities of the Company. Dividends on the Series D Preferred Shares
are cumulative and payable quarterly at the rate of 8.75% of the liquidation
preference per annum.
(L) NEW ACCOUNTING PRONOUNCEMENT In June, 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
(SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related
Information." SFAS 131 is effective for fiscal years beginning after December
15, 1997. Management has not yet determined the level of additional
disclosure, if any, that may be required by SFAS No. 131. Additional
disclosure that may be required will be provided beginning with the financial
statements of the Company for the year ending December 31, 1998.
(M) RECLASSIFICATIONS Certain 1997 items have been reclassified
to conform to the 1998 presentation.
7
<PAGE>
3. INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES
The Company has an investment in an unconsolidated subsidiary,
Meridian Refrigerated, Inc. ("MRI"), formed for the purpose of acquiring and
operating companies providing refrigerated distribution services. In the six
months ended June 30, 1998, MRI completed two strategic operating company
acquisitions: Arctic Cold Storage, Inc. ("Arctic") and C.E.G.F. (USA), Inc.
("CEGF"). In its first acquisition on February 19, 1998, MRI acquired for an
aggregate purchase price of $36,000, the real estate, business, and operating
assets including $15,263 in cash of Arctic, a refrigerated distribution and
freight consolidation company operating three refrigerated warehouses. The
facilities are located in the Los Angeles Basin and aggregate 7.2 million
cubic feet and 299,000 square feet.
In its second acquisition on June 11, 1998, MRI acquired for
$29,741 the common stock of CEGF, a refrigerated distribution services
company located in Tampa, Florida. CEGF operates two facilities in Tampa,
Florida and one facility in Houston, Texas aggregating 9.2 million cubic feet
and 332,924 square feet.
The Company's investment in MRI is comprised of secured and
unsecured notes and non-voting participating preferred stock. The voting
common stock of MRI is owned by certain officers of the Company. The Company
accounts for its investment in MRI using the equity method. At June 30, 1998,
the outstanding balances on the secured and unsecured notes totaled $30,650
and $5,879, respectively.
4. LONG-TERM DEBT
The Company assumed a fixed rate facility (the "Mortgage Loan") in
connection with the Merger. The Mortgage Loan has a principal balance of
$66,094, bears interest at an annual rate of 8.63%, requires interest only
payments until its maturity in 2005 and is secured by a pool of the Company's
properties with a net book value of $137,311 as of June 30, 1998.
Concurrent with the Merger, the Company entered into an unsecured
credit facility (the "Unsecured Credit Facility"). The Unsecured Credit
Facility originally bore interest at LIBOR plus 1.7%, was scheduled to mature
in February 1998, and provided for a maximum borrowing amount of $75,000. On
April 21, 1997, the Unsecured Credit Facility was amended and restated. This
amendment and restatement of the Unsecured Credit Facility provided for (i)
an increase in the borrowing limit from $75,000 to $150,000, (ii) a decrease
in the interest rate spread over LIBOR from 1.7% to 1.4%, and (iii) an
extension of the maturity date to April 3, 2000, from February 26, 1998. The
Company recorded an extraordinary expense of $808 in loan costs in the second
quarter of 1997 in connection with this restructuring.
On September 23, 1997, the Unsecured Credit Facility was further
amended and restated to provide for (i) an increase of the borrowing limit
from $150,000 to $250,000 and (ii) a decrease in the interest rate spread
over LIBOR from 1.4% to 1.3%. Effective, May 26, 1998, the interest rate
spread over LIBOR for the Unsecured Credit Facility was further decreased
from 1.3% to 1.2%. At June 30, 1998, the weighted average interest rate on
the Unsecured Credit Facility was 6.9%. The Company paid a fee totaling $250
in connection with this amendment.
On November 20, 1997, the Company completed a private offering to
institutional investors of $160,000 in principal of unsecured senior notes
(the "Unsecured Notes"). The Unsecured Notes were issued in two tranches,
$135,000 maturing on November 20, 2007, bearing an interest rate of 7.25% per
annum, and $25,000 maturing on November 20, 2009, bearing an interest rate of
7.30% per annum. Interest on these notes is payable semiannually. The
proceeds were used to repay borrowings on the Unsecured Credit Facility. In
connection with this transaction, the Company entered into two forward
exchange rate contracts which resulted in a payment to the Company totaling
$109, which was accounted for as a premium.
8
<PAGE>
In the opinion of the Company's management, the Company was in
compliance with all loan covenants related to the debt instruments discussed
above at June 30, 1998.
5. MORTGAGE NOTES PAYABLE
On May 13, 1997, the Company purchased a property located in
Montebello, California, subject to a mortgage note payable bearing an
interest rate different from the prevailing market rate at the date of
acquisition. This interest rate differential was recorded as a premium. This
mortgage note payable had a maturity date of July 15, 1998, an outstanding
balance of $10,429 and provided for monthly principal and interest payments
of $96 based on an interest rate of 9.89% per annum and a 30-year
amortization schedule. The premium totaling $324 was amortized over the term
of the mortgage note payable using the effective interest method. As of June
30,1998, this mortgage note payable and debt premium had outstanding balances
of $10,286 and $12, respectively. Subsequent to June 30, 1998, the mortgage
note payable was repaid from borrowings made under the Company's Unsecured
Credit Facility.
The Company, through one of its consolidated partnerships, assumed
a mortgage note payable in the principal amount of $3,676 in connection with
a contribution of a property located in Orlando, Florida (see Note 6). The
mortgage note payable has a maturity date of February 1, 2006, and provides
for monthly principal and interest payments of $28 based on an interest rate
of 7.90% per annum and a 25-year amortization schedule. As of June 30, 1998,
this mortgage note payable had an outstanding balance of $3,656.
During the six months ended June 30, 1998, the Company, through
one of its consolidated partnerships, assumed three mortgage notes payable in
connection with the acquisition of three properties located in Las Vegas,
Nevada and four properties located in Plano, Texas. Two of the mortgage notes
payable are secured by properties located in Las Vegas, Nevada. One mortgage
note payable had a principal balance of $6,212 as of June 30, 1998, matures
on July 1, 2011 and provides for monthly principal and interest payments of
$47 based on an interest rate of 7.50% per annum and a 23-year amortization
schedule. The second mortgage note payable had a principal balance of $7,505
as of June 30, 1998, matures on December 1, 2009 and provides for monthly
principal and interest payments of $63 based on an interest rate of 8.30% per
annum and a 22-year amortization schedule. The third mortgage note payable,
which is secured by a property in Texas, had a principal balance of $3,909 as
of June 30, 1998, matures on April 15, 2006 and provides for monthly
principal and interest payments of $28 based on an interest rate of 6.95% per
annum.
6. PROPERTY ACQUISITIONS AND DEVELOPMENTS
During the six months ended June 30, 1998, the Company, either
directly or through one of its consolidated partnerships, purchased 16
properties located in California, Massachusetts, Nevada, Ohio and Texas, with
an aggregate square footage of approximately 1,771,000. The aggregate
purchase price for these properties totaled $88,121. The Company funded a
portion of these acquisitions from cash reserves and funded the majority of
the remaining costs with borrowings under the Unsecured Credit Facility. In
addition, the Company assumed three mortgage notes payable totaling $17,713.
In connection with the acquisition relating to the consolidated partnership,
the Company's minority partners' contribution is valued at $11,000.
During the six months ended June 30, 1998, the Company, either
directly or through one of its consolidated partnerships, acquired
approximately 172 acres of land scheduled for future development for an
aggregate purchase price of $21,262. The aggregate cost to develop these
parcels is expected to be approximately $108,774, to be funded from
borrowings under the Unsecured Credit Facility and from cash reserves. These
properties, when complete, will total approximately 2,576,000 square feet.
During the six months ended June 30, 1998, the Company, either
directly or through consolidated partnerships, completed development of and
placed in service three warehouse/distribution properties comprising
approximately 803,000 square feet with an aggregate cost of $29,228.
9
<PAGE>
At June 30, 1998, the Company had, directly or through
consolidated partnerships, eleven warehouse/distribution properties either
under development or scheduled for development which will total approximately
4,447,000 square feet upon completion. The aggregate cost for the design and
construction of these development projects is estimated to be approximately
$171,409. As of June 30, 1998, the Company had incurred total project costs
of approximately $45,512 on these development projects. The Company
anticipates funding the balance of such development costs from cash reserves
and borrowings under the Unsecured Credit Facility.
In connection with land acquisitions and development activities
relating to the consolidated partnerships, the Company's minority partners
contributed land and other consideration valued at $4,948.
On April 2, 1998, the minority partners of one of the Company's
consolidated partnerships contributed a property located in Orlando, Florida
with a square footage of approximately 120,000. The minority partners'
contribution totaled $950. With regard to this transaction, the partnership
assumed a mortgage note payable in the principal amount of $3,676 (see Note
5).
On April 22, 1998, the Company and a minority partner of one of
its consolidated partnerships, executed an Assignment of Partnership
Interests, whereby the Company, as the managing general partner, exercised
its right to purchase the partnership interest of the minority partner. The
Company purchased the partnership interest for a total purchase price of
$1,089.
On May 7, 1998, the Company entered into a property exchange
transaction. This transaction involved the Company's transfer of its interest
in three properties located in Nashville, Tennessee with a net book value of
$6,174 to the other property owner in exchange for five properties owned by
the other property owner located in Memphis, Tennessee. The Company paid $350
to the other property owner representing the difference in the exchange
values of the properties. In addition, the Company paid closing costs and
prorated items totaling $317.
7. PROPERTY DIVESTITURES
During the six months ended June 30, 1998, the Company divested
two properties located in California and Tennessee for an aggregate sales
price of $12,080. After closing costs and pro-rated items which totaled $387
and acceptance of a note receivable of $8,000, the Company received net cash
proceeds of $3,693.
10
<PAGE>
8. SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS
The following table summarizes the Company's non-cash investing
and financing transactions for the six months ended June 30, 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Property Acquisitions:
Acquisition Price $ 141,122 $ 49,557
Land for Built-to-Suit Facilities 1,196 9,410
Restricted Cash (4,228) --
Minority Limited Partners' Capital Contributions (11,992) 1,130
Purchase of Minority Partner Interest 637 --
Mortgage Notes Payable Assumed (21,389) (16,136)
Shares of Common Stock Issued (1,525) --
Accrued Closing Costs and Pro-rated Items (1,864) (386)
Property Divestitures:
Net Basis (15,835) (11,543)
Note Receivable 8,000 --
Other Assets Net of Other Liabilities 105 44
</TABLE>
During the six months ended June 30, 1998 and 1997, interest
expense totaling $1,857 and $684, respectively, was capitalized for
properties under development. For the three months ended June 30, 1998 and
1997, interest expense totaling $1,061 and $473, respectively, was
capitalized for properties under development.
9. SUBSEQUENT EVENTS
ACQUISITIONS
Subsequent to June 30, 1998, the Company purchased a property
located in Indiana comprising approximately 133,000 square feet for a
purchase price of $4,400. This acquisition was funded through borrowings
under the Unsecured Credit Facility.
Subsequent to June 30, 1998, the Company acquired approximately 61
acres of land scheduled for future development for an aggregate purchase
price of $4,416. The costs to develop these parcels are expected to aggregate
to approximately $29,600, to be funded from borrowings under the Unsecured
Credit Facility and from cash reserves. These properties, when complete, will
total approximately 909,000 square feet.
Subsequent to June 30, 1998, the Company completed development of
and placed in service two warehouse/distribution properties comprising
approximately 1,069,000 square feet. The aggregate development cost for
these properties was approximately $40,655.
DIVESTITURE
Subsequent to June 30, 1998, the Company divested a property
located in California for a sales price of $335. After closing costs and
pro-rated items which totaled $18, the Company received net proceeds of $317.
11
<PAGE>
OTHER
Subsequent to June 30, 1998, the Company completed a direct
placement of 850,000 shares of the Company's Common Stock at an offering
price of $23.50 per share, resulting in gross proceeds of $19,975. The
Company used the net proceeds of the direct placement to reduce borrowings
under the Unsecured Credit Facility.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
(DOLLARS IN THOUSANDS, UNLESS INDICATED OTHERWISE)
INTRODUCTION
The Company is a self-administered and self-managed real estate
investment trust engaged primarily in the business of owning, acquiring,
managing, leasing and developing income-producing warehouse/distribution and
light industrial properties. At June 30, 1998, the Company's principal asset
was its portfolio of 213 warehouse/distribution and light industrial
properties, two retail properties and eleven properties under development. As
of June 30, 1998 and 1997, the Company's properties were 96% and 97%
occupied, respectively.
The following discussion should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 31, 1997,
the Company's Quarterly Report on Form 10-Q for the three months ended March
31, 1998 and the Condensed Consolidated Balance Sheets, Condensed
Consolidated Statements of Operations and Condensed Consolidated Statements
of Cash Flows and the notes thereto included in pages 2 through 12 of this
report. Unless otherwise defined in this report, or unless the context
otherwise requires, the capitalized words or phrases used in this section
either (i) describe accounting terms that are used as line items in such
financial statements, or (ii) have the meanings ascribed to them in such
financial statements and the notes thereto.
This report, including the financial information and statements,
and the notes thereto appearing elsewhere in this report, contains
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 (the "Securities Act"), and Section 21E of the
Securities Exchange Act of 1934 (the "Exchange Act"). Forward-looking
statements are inherently subject to risks and uncertainties, many of which
cannot be predicted with accuracy and some of which might not even be
anticipated. Future events and actual results, financial and otherwise, may
differ materially from the events and results discussed in the
forward-looking statements. Factors that might cause such a difference
include, but are not limited to, the general economic climate, competition
and the supply of and demand for industrial properties in the Company's
markets, interest rate levels, the availability of financing, potential
environmental liability and other risks associated with the ownership,
development and acquisition of properties, including risks that tenants will
not take or remain in occupancy or pay rent, or that construction or
operating costs may be greater than anticipated, and additional factors
discussed in detail in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, as amended.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
The Company intends to finance its operating cash needs,
distributions to common and preferred stockholders, property acquisitions,
development, expansions and renovations using a combination of cash flow from
operations and bank and institutional debt financing, supplemented with
private or public debt or equity placements. Where intermediate or long-term
debt financing is employed, the Company generally seeks to obtain fixed
interest rates or enter into agreements intended to cap the effective
interest rate on floating rate debt. The Company intends to operate with a
ratio of debt-to-total market capitalization that generally will not exceed
50%. Total market capitalization is the sum of total indebtedness, Series D
Preferred Stock with a liquidation preference of $50,000, and the market
value of the Company's Common Stock, after giving effect to the conversion of
the Company's 1,623,376 outstanding shares of Series B Preferred Stock and
limited partnership units. At June 30, 1998, the Company's debt-to-total
market capitalization rate was 33.4%.
SOURCES OF LIQUIDITY
The Company's main sources of liquidity are: (i) cash flows from
operating activities, (ii) cash reserves, (iii) borrowings under the
Unsecured Credit Facility, (iv) proceeds from private or public equity or
debt placements, and (iv) proceeds from the divestiture of properties. A
summary of the Company's historical cash flows for the six months ended June
30, 1998 and 1997 is as follows:
13
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1998 JUNE 30, 1997
------------- -------------
<S> <C> <C>
Cash flows provided by (used in):
Operating activities $ 23,238 $ 6,372
Investing activities (173,272) (46,827)
Financing activities 150,374 39,608
</TABLE>
In addition to cash flows and net income, management considers
Funds From Operations to be one additional measure of the performance of an
equity REIT because, together with net income and cash flows, Funds From
Operations provides investors with an additional basis to evaluate the
ability of the Company to incur and service debt and to fund acquisitions and
other capital expenditures. However, Funds From Operations does not measure
whether cash flow is sufficient to fund all of the Company's cash needs
including principal amortization, capital improvements and distributions to
stockholders. Funds From Operations also does not represent cash generated
from operating, investing or financing activities as determined in accordance
with generally accepted accounting principles. Funds From Operations should
not be considered as an alternative to net income as an indicator of the
Company's operating performance or as an alternative to cash flow as a
measure of liquidity. Funds From Operations is defined by the National
Association of Real Estate Investment Trusts ("NAREIT") as net income or loss
(computed in accordance with generally accepted accounting principles),
excluding gains or losses from debt restructurings and divestitures of
properties, plus depreciation and amortization of real estate assets, and
after adjustment for unconsolidated partnerships and joint ventures. The
Company calculates Funds From Operations as defined by NAREIT and as
interpreted in NAREIT's White Paper (i.e. the Company does not add back
amortization of deferred financing costs and depreciation of non-rental real
estate assets to net income). In addition, other real estate companies may
calculate Funds From Operations differently than the Company. A
reconciliation of the Company's income before gains or losses on divestiture
of properties, minority interest in net income and extraordinary item to
Funds From Operations for the six months ended June 30, 1998 and 1997 is as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------
1998 1997
------------- --------------
<S> <C> <C>
Income Before Minority Interest, Gain (Loss) on
Divestiture of Properties and Extraordinary Item $20,909 $ 8,932
Reconciling Items:
Depreciation and Amortization
Relating to Real Estate Operations 10,562 4,179
Series D Preferred Stock Dividends
and Other (57) --
------- -------
Funds From Operations $31,414 $13,111
------- -------
------- -------
</TABLE>
As of June 30, 1998, the Company had approximately $8,195 in
unrestricted cash and cash equivalents.
At June 30, 1998, the outstanding balance on the Mortgage Loan was
$66,094. The Mortgage Loan bears interest at the annual rate of 8.63% and
requires interest only payments until its maturity in 2005.
14
<PAGE>
During the six months ended June 30, 1998, the Company borrowed
$183,800 under its Unsecured Credit Facility to fund property acquisitions
and developments.
At June 30, 1998, the outstanding balances on the Company's
Unsecured Notes and corresponding premium were $160,000 and $105,
respectively. The Unsecured Notes were issued in two tranches, $135,000
maturing on November 20, 2007, bearing an interest rate of 7.25% per annum,
and $25,000 maturing on November 20, 2009, bearing an interest rate of 7.30%
per annum. Interest on these notes is payable semiannually.
On May 13, 1997, the Company purchased a property located in
Montebello, California, subject to a mortgage note payable bearing an
interest rate different from the prevailing market rate at the date of
acquisition. This interest rate differential was recorded as a premium. This
mortgage note payable had a maturity date of July 15, 1998, an outstanding
balance of $10,429 and provided for monthly principal and interest payments
of $96 based on an interest rate of 9.89% per annum and a 30-year
amortization schedule. The premium totaling $324 was amortized over the term
of the mortgage note payable using the effective interest method. As of June
30,1998, this mortgage note payable and debt premium had outstanding balances
of $10,286 and $12, respectively. Subsequent to June 30, 1998, the mortgage
note payable was repaid from borrowings made under the Company's Unsecured
Credit Facility.
The Company, through one of its consolidated partnerships, assumed
a mortgage note payable in the principal amount of $3,676 in connection with
a contribution of a property located in Orlando, Florida. The mortgage note
payable has a maturity date of February 1, 2006, and provides for monthly
principal and interest payments of $28 based on an interest rate of 7.90% per
annum and a 25-year amortization schedule. As of June 30, 1998, this mortgage
note payable had an outstanding balance of $3,656.
During the six months ended June 30, 1998, the Company, through
one of its consolidated partnerships, assumed three mortgage notes payable in
connection with the acquisition of three properties located in Las Vegas,
Nevada and four properties located in Plano, Texas. Two of the mortgage notes
payable are secured by properties located in Las Vegas, Nevada. One mortgage
note payable had a principal balance of $6,212 as of June 30, 1998, matures
on July 1, 2011 and provides for monthly principal and interest payments of
$47 based on an interest rate of 7.50% per annum and a 23-year amortization
schedule. The second mortgage note payable had a principal balance of $7,505
as of June 30, 1998, matures on December 1, 2009 and provides for monthly
principal and interest payments of $63 based on an interest rate of 8.30% per
annum and a 22-year amortization schedule. The third mortgage note payable,
which is secured by a property in Texas, had a principal balance of $3,909 as
of June 30, 1998, matures on April 15, 2006 and provides for monthly
principal and interest payments of $28 based on an interest rate of $6.95%
per annum.
The Company currently has a policy of incurring debt only if, upon
such incurrence, the Company's debt-to-total market capitalization would be
50% or less. However, the Company's organizational documents do not contain
any limitation on the amount of indebtedness the Company may incur.
Accordingly, the Board could alter or eliminate this policy and would do so
if, for example, it were necessary in order for the Company to continue to
qualify as an REIT. If this policy were changed, the Company could become
more highly leveraged, resulting in an increase in debt service that could
adversely affect the cash available for distribution to stockholders and
could increase the risk of default on the Company's indebtedness.
In addition to the variable interest rate contracts on the
Unsecured Credit Facility, the Company may incur indebtedness in the future
that bears interest at a variable rate or may be required to refinance its
debt at higher rates. As a result, increases in interest rates could increase
the Company's interest expense, which could adversely affect the Company's
ability to pay distributions to stockholders.
In connection with the Merger, the Company issued approximately
553,000 warrants to purchase an equal number of shares of the Company's
Common Stock. Each Merger Warrant entitles the holder to purchase one share
of the Company's Common Stock at the exercise price of $16.23. The exercise
period began May 23, 1997 and ends February 23, 1999. As of June 30, 1998,
the Company had issued 94,034 shares pursuant to exercise of the Merger
Warrants.
15
<PAGE>
On June 30, 1998, the Company completed a public offering of
2,000,000 shares of Series D Cumulative Redeemable Preferred Stock for an
aggregate offering price of $50,000 or $25.00 per share. The net proceeds of
$48,425 were used to reduce borrowings under the Company's Unsecured Credit
Facility. Shares of the Series D Preferred Stock are redeemable by the
Company on or after June 30, 2003 and have a liquidation preference of
$50,000. Shares of the Series D Preferred Stock are not convertible into any
other securities of the Company. Dividends on the Series D Preferred Shares
are cumulative and payable quarterly at the rate of 8.75% of the liquidation
preference per annum.
Subsequent to June 30, 1998, the Company completed a direct
placement of 850,000 shares of the Company's Common Stock at an offering
price of $23.50 per share, resulting in gross proceeds of $19,975. The
Company used the net proceeds of the direct placement to reduce borrowings
under the Unsecured Credit Facility.
During the six months ended June 30, 1998, the Company divested
two properties located in California and Tennessee for an aggregate sales
price of $12,080. After closing costs and pro-rated items which totaled $387
and acceptance of a note receivable of $8,000, the Company received net cash
proceeds of $3,693.
Subsequent to June 30, 1998, the Company divested a property
located in California for a sales price of $335. After closing costs and
pro-rated items which totaled $18, the Company received net proceeds of $317.
USES OF LIQUIDITY
The Company's principal applications of its cash resources are:
(i) funding of property acquisitions and developments; (ii) payments of
capital improvements and leasing costs; (iii) payment of distributions; (iv)
payment of property operating costs including property expenses, property
taxes, general and administrative expenses, and interest expense; and (v)
principal payments on debt. Planned capital improvements on the Company's
properties consist of tenant improvements and other expenditures necessary to
lease and maintain the properties.
During the six months ended June 30, 1998, the Company declared
dividends to holders of its Common Stock, Series B Preferred Stock in the
aggregate amounts of $20,131 and $1,286 respectively, or $0.33 and $0.33 per
share, respectively. In addition, during the six months ended June 30, 1998,
the Company accrued $12 in dividends to holders of its Series D Preferred
Stock.
During the six months ended June 30, 1998, the Company repaid
borrowings on its Unsecured Credit Facility totaling $58,500 using the net
proceeds from the issuance of 2,000,000 shares of the Series D Preferred
Stock and the direct placement of 850,000 shares of Common Stock.
DEVELOPMENT PROJECTS
During the six months ended June 30, 1998, the Company, either
directly or through one of its consolidated partnerships, acquired
approximately 172 acres of land scheduled for future development for an
aggregate purchase price of $21,262. The aggregate cost to develop these
parcels is expected to be approximately $108,774. These properties, when
complete, will total approximately 2,576,000 square feet.
16
<PAGE>
During the six months ended June 30, 1998, the Company, either
directly or through consolidated partnerships, completed development of and
placed in service three warehouse/distribution properties comprising
approximately 803,000 square feet with an aggregate cost of $29,228.
At June 30, 1998, the Company had, directly or through
consolidated partnerships, eleven warehouse/distribution properties either
under development or scheduled for development which will total approximately
4,447,000 square feet upon completion. The aggregate cost for the design and
construction of these development projects is estimated to be approximately
$171,409. As of June 30, 1998, the Company had incurred total project costs
of approximately $45,512 on these development projects.
In connection with land acquisitions and development activities
relating to the consolidated partnerships, the Company's minority partners
contributed land and other consideration valued at $4,948.
Subsequent to June 30, 1998, the Company acquired approximately 61
acres of land scheduled for future development for an aggregate purchase
price of $4,416. The costs to develop these parcels are expected to aggregate
to approximately $29,600. These properties, when complete, will total
approximately 909,000 square feet.
Subsequent to June 30, 1998, the Company completed development of
and placed in service two warehouse/distribution properties comprising
approximately 1,069,000 square feet. The aggregate development cost for these
properties was approximately $40,655.
The Company expects to fund its future development costs with
Borrowings under the Unsecured Credit Facility, cash reserves, bank and
institutional debt financing, and private or public debt and equity placements.
ACQUISITIONS
During the six months ended June 30, 1998, the Company, either
directly or through one of its consolidated partnerships, purchased 16
properties located in California, Massachusetts, Nevada, Ohio and Texas, with
an aggregate square footage of approximately 1,771,000. The aggregate
purchase price for these properties totaled $88,121. The Company funded a
portion of these acquisitions from cash reserves and funded the majority of
the remaining costs with borrowings under the Unsecured Credit Facility. In
addition, the Company assumed three mortgage notes payable totaling $17,713.
In connection with the acquisition relating to the consolidated partnership,
the Company's minority partners' contribution is valued at $11,000.
On April 2, 1998, the minority partners of one of the Company's
consolidated partnerships contributed a property located in Orlando, Florida
with a square footage of approximately 120,000. The minority partners'
contribution totaled $950. With regard to this transaction, the partnership
assumed a mortgage note payable in the principal amount of $3,676 (see Note
5).
On April 22, 1998, the Company and a minority partner of one of
its consolidated partnerships, executed an Assignment of Partnership
Interests, whereby the Company, as the managing general partner, exercised
its right to purchase the partnership interest of the minority partner. The
Company purchased the partnership interest for a total purchase price of
$1,089.
On May 7, 1998, the Company entered into a property exchange
transaction. This transaction involved the Company's transfer of its interest
in three properties located in Nashville, Tennessee with a net book value of
$6,174 to the other property owner in exchange for five properties owned by
the other property owner located in Memphis, Tennessee. The Company paid $350
to the other property owner representing the difference in the exchange
values of the properties. In addition, the Company paid closing costs and
prorated items totaling $317.
17
<PAGE>
The Company has an investment in an unconsolidated subsidiary,
MRI, formed for the purpose of acquiring and operating companies providing
refrigerated distribution services. In the six months ended June 30, 1998,
MRI completed two strategic operating company acquisitions: Arctic and CEGF.
In its first acquisition on February 19, 1998, MRI acquired for an aggregate
purchase price of $36,000, the real estate, business, and operating assets
including $15,263 in cash of Arctic, a refrigerated distribution and freight
consolidation company operating three refrigerated warehouses. The facilities
are located in the Los Angeles Basin and aggregate 7.2 million cubic feet and
299,000 square feet.
In its second acquisition on June 11, 1998, MRI acquired for
$29,741 the common stock of CEGF, a refrigerated distribution services
company located in Tampa, Florida. CEGF operates two facilities in Tampa,
Florida and one facility in Houston, Texas aggregating 9.2 million cubic feet
and 332,924 square feet.
The investment in MRI is comprised of secured and unsecured notes
and non-voting participating preferred stock. The Company accounts for its
investment in MRI using the equity method. At June 30, 1998, the outstanding
balances on the secured and unsecured notes totaled $30,650 and $5,879
respectively.
Subsequent to June 30, 1998, the Company purchased a property
located in Indiana comprising approximately 133,000 square feet for a
purchase price of $4,400. This acquisition was funded through borrowings
under the Unsecured Credit Facility.
YEAR 2000 COMPLIANCE
The Company utilizes a number of computer software programs and
operating systems, including applications used in financial business systems
and various administrative functions. To the extent that the Company's
software applications contain source code that is unable to appropriately
interpret the upcoming calendar year "2000" and beyond, replacement or some
level of modification of such application will be necessary. The Company's
current information systems environment is based on a WINTEL platform (Intel
PC/LAN/WAN) configuration. The environment does not contain mainframe
computers.
The Company has substantially completed its assessment of the
effect of Year 2000 compliance on its information systems. Based on its
assessment, the Company believes that substantially all of its systems are
currently Year 2000 compliant. The Company also believes that its
non-information-technology systems are Year 2000 compliant.
If material suppliers of products or services purchased by the
Company and others with whom the Company does business are not Year 2000
compliant, the Company's results of operations could be negatively impacted.
Although the Company has no reason to believe that its material vendors and
other material third parties with whom it does business are not Year 2000
compliant (or will not be compliant on a timely basis), the Company is unable
to determine at this time the effect that any such non-compliance would have
on the Company's operations. The Board of Directors of the Company has
directed the Company's management team to assess the potential impact on the
Company of the Year 2000 compliance status of material third parties with
whom the Company does business. This assessment is currently in its
preliminary stage.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Rentals from Real Estate Investments for the six months ended June
30, 1998 and 1997 totaled $54,653 and $24,564, respectively. The increase of
$30,089 was due to primarily to (i) Properties acquired during 1997 and 1998
("Property Acquisitions") which increased rental revenues by $28,067 and (ii)
the rental revenues generated by the build-to-suit properties placed in
service during 1997 and 1998 ("Completed Build-to-Suits") totaling $3,066.
These increases were offset by Properties divested during 1997 and 1998
("Property Divestitures") which reduced rental revenues by $988.
Income from Unconsolidated Joint Venture totaled $990 for the six
months ended June 30, 1998 resulting from interest income on the $21,500
participating mortgage loan purchased by the Company in 1997 in connection
with the property-for-stock transaction with Ameritech Pension Trust.
Income from Unconsolidated Subsidiaries totaled $750 for the six
months ended June 30, 1998 resulting from MRI's secured and unsecured notes
payable to the Company and equity earnings of MRI.
Interest and Other Income totaled $528 and $304 for the six months
ended June 30, 1998 and 1997, respectively. The increase of $224 was
primarily due to interest income from the note receivable from the
divestiture of a property located in California and a loan extended to a
minority limited partner.
Interest Expense increased by $6,696 to $10,480 during the six
months ended June 30, 1998 from the same period in 1997. The increase was
primarily due to (i) the Company's completion of a private offering of
$160,000 in principal of unsecured senior notes to institutional investors in
November 1997 resulting in an increase of $5,806 and (ii) the assumption of
mortgage notes payable relating to the acquisitions in Florida, Nevada and
Texas resulting in an increase of $790.
Compared to the same period in 1997, Property Taxes increased by
$3,431 to $6,824 during the six months ended June 30, 1998. The increase was
primarily due to (i) the Property Taxes attributable to the Property
Acquisitions totaling $3,355 and (ii) the Property Taxes for the Completed
Build-to-Suits amounting to $209. These increases were partially offset by
Property Divestitures, which reduced Property Taxes by $112.
Compared to the same period in 1997, Property Operating Expenses
increased by $2,220 to $4,262 during the six months ended June 30, 1998. The
increase was primarily due to (i) the Property Operating Expenses
attributable to the Property Acquisitions totaling $2,192 and (iii) the
Property Operating Expenses for the Completed Build-to-Suits amounting to
$422. These increases were offset in part by Property Divestitures, which
reduced Property Operating Expenses by $213.
18
<PAGE>
General and Administrative Expenses totaled $3,976 and $2,501 for
the six months ended June 30, 1998 and 1997, respectively. The increase of
$1,475 was primarily due to (i) an increase in personnel and administrative
costs of $708 arising from the growth of the Company, (ii) an increase of
$332 in fees relating to terminated property deals and (iii) an increase of
$367 in accounting, legal, marketing and system conversion costs resulting
from the increased size of the Company's property portfolio.
Compared to the same period in 1997, Depreciation and Amortization
Expense increased by $6,254 to $10,470 during the six months ended June 30,
1998. The increase was primarily due to (i) Depreciation Expense attributable
to the Property Acquisitions totaling $5,639 and (ii) Depreciation Expense
for the Completed Build-to-Suits amounting to $538. These increases were
offset by Property Divestitures, which reduced Depreciation and Amortization
Expenses by $185.
The Gain on Divestiture of Properties totaling $2,054 for the six
months ended June 30, 1998 was attributable to the divestiture of the San
Carlos property located in California and the 4013 Premier property located
in Tennessee.
The Net Loss on Divestiture of Properties totaling $448 for the six
months ended June 30, 1997 was attributable to the divestiture of the
Wildwood and Golden Cove properties which resulted in a total loss of $1,158.
The losses were partially offset by gains on the divestiture of the
Birmingham I, Birmingham II and Phoenix North 23rd properties totaling $710.
The Extraordinary Item totaling $808 for the six months ended June
30, 1997 was attributable to the restructuring of the Company's Unsecured
Credit Facility.
19
<PAGE>
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PART II: OTHER INFORMATION
- ------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company or
any of its subsidiaries is a party or to which any of the assets of the
Company or any of its subsidiaries is subject.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of stockholders on May 15, 1998. At
that meeting, the stockholders voted on and approved the following
proposals:
1. The election of seven directors for terms expiring in 1999.
2. A proposal to ratify the selection of Arthur Andersen LLP as
the Company's independent auditors for the fiscal year ending
December 31, 1998.
The proposals were approved by the following votes:
1. Election of Directors
---------------------
<TABLE>
<CAPTION>
Name For Withheld
---- --- --------
<S> <C> <C>
Allen J. Anderson 28,316,538 77,557
C. E. Cornutt 28,316,312 77,783
T. Patrick Duncan 28,118,582 275,513
Peter O. Hanson 28,312,396 81,699
John S. Moody 28,139,406 254,689
Kenneth N. Stensby 28,118,351 275,744
Lee W. Wilson 28,312,730 81,365
</TABLE>
2. Ratification of Independent Auditors
<TABLE>
<CAPTION>
For Against Abstentions Broker Non-Votes
--- ------- ----------- ----------------
<S> <C> <C> <C>
28,332,476 19,655 41,964 N/A
</TABLE>
ITEM 5. OTHER INFORMATION
None.
20
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<C> <S>
1.1(1) Underwriting Agreement dated June 24, 1998, among Meridian
Industrial Trust, Inc., Goldman Sachs & Co., Prudential
Securities Incorporated, ABN AMRO Incorporated, A.G.
Edwards & Sons, Inc., Legg Mason Wood Walker, Incorporated,
and PaineWebber, Incorporated, as representatives of the
several underwriters.
1.2(1) Pricing Agreement dated June 24, 1998, among Meridian
Industrial Trust, Inc., Goldman Sachs & Co., Prudential
Securities Incorporated, ABN AMRO Incorporated, A.G.
Edwards & Sons, Inc., Legg Mason Wood Walker, Incorporated,
and PaineWebber, Incorporated, as representatives of the
several underwriters.
3.1(2) The Company's Third Amended and Restated Articles of Incorporation.
3.2(1) Articles Supplementary dated June 25, 1998, classifying 2,300,000
shares of 8.75% Series D Cumulative Redeemable Preferred Stock.
3.3(2) The Company's Second Amended and Restated Bylaws.
3.4(3) Amendment to Second Amended and Restated Bylaws adopted January
26, 1996.
3.5(3) Second Amendment to Second Amended and Restated Bylaws adopted September 17, 1997.
3.6(4) Amendment to Second Amended and Restated Bylaws adopted January
20, 1998.
10.1(5) Second Amendment dated June 23, 1998 to Third Amended and
Restated Revolving Credit Agreement dated February 19, 1998
among (i) the Company, (ii) MIT Unsecured L.P. and Meridian
Refrigerated, Inc. (iv) BankBoston, N.A., Chase Bank of
Texas, National Association, NationsBank of Texas, N.A.,
Wells Fargo Bank, N.A., Dresdner Bank AG, New York Branch
and Grand Cayman Branch, and First American Bank Texas,
S.S.B., (collectively, the "Banks"), (iii) BankBoston, N.A.
as Agent for the Banks, (iv) Chase Bank of Texas, National
Association as Documentation Agent for the Banks, and (v)
NationsBank of Texas, N.A. as Syndication Agent for the
Banks.
10.2(5) Registration Rights Agreement dated June 30, 1998 among
Meridian Industrial Trust, Inc., R. William Gardner,
Douglas C. Gardner, Steven D. Gardner, and Todd L. Platt.
27.1(5) Financial Data Schedule.
</TABLE>
- --------
(1) Filed on June 26, 1998, as part of the Company's Current Report on Form
8-K dated June 25, 1998, and incorporated herein by reference.
(2) Filed with the Company's Amendment No. 1 to Registration Statement No.
333-02322 on March 25, 1996, and incorporated herein by reference.
(3) Filed on November 14, 1997, with the Company's Form 10-Q for the quarter
ended September 30, 1997 and incorporated herein by reference.
(4) Filed on March 31, 1998, with the Company's Form 10-K for 1997 and
incorporated herein by reference.
(5) Filed with this report.
21
<PAGE>
(b) Reports on Form 8-K: The following reports on Form 8-K were filed
during the quarter ended June 30, 1998:
Current Report on Form 8-K dated and filed May 29, 1998,
filing financial statements related to the Company's
acquisition of properties located in Arlington, Carrollton,
and Grand Prairie, Texas.
Current Report on Form 8-K dated and filed June 23, 1998,
filing financial statements related to the Company's
acquisition of properties located in Las Vegas, Nevada, and
Dallas, Texas.
Current Report on Form 8-K dated June 25, 1998, (filed June
26, 1998) filing exhibits related to the Company's sale of
Series D preferred stock.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
MERIDIAN INDUSTRIAL TRUST, INC.
Dated: August 14, 1998 By: /s/ Allen J. Anderson
---------------------------
Allen J. Anderson
Chairman and Chief Executive Officer
(Principal Executive Officer)
Dated: August 14, 1998 By: /s/ Milton K. Reeder
---------------------------
Milton K. Reeder
President and Chief Financial Officer
(Principal Financial Officer)
23
<PAGE>
MERIDIAN INDUSTRIAL TRUST, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number
(corresponding to the Sequentially
Exhibit Table of Item Numbered
601 of Regulation S-K) Description Page
---------------------- ----------- ------------
<C> <S> <C>
1.1(1) Underwriting Agreement dated June 24, 1998,
among Meridian Industrial Trust, Inc., Goldman
Sachs & Co., Prudential Securities Incorporated,
ABN AMRO Incorporated, A.G. Edwards & Sons,
Inc., Legg Mason Wood Walker, Incorporated, and
PaineWebber, Incorporated, as representatives of
the several underwriters.
1.2(1) Pricing Agreement dated June 24, 1998, among
Meridian Industrial Trust, Inc., Goldman Sachs &
Co., Prudential Securities Incorporated, ABN
AMRO Incorporated, A.G. Edwards & Sons, Inc.,
Legg Mason Wood Walker, Incorporated, and
PaineWebber, Incorporated, as representatives of
the several underwriters.
3.1(2) The Company's Third Amended and Restated Articles of
Incorporation.
3.2(1) Articles Supplementary dated June 25, 1998, classifying
2,300,000 shares of 8.75% Series D Cumulative Redeemable
Preferred Stock.
3.3(2) The Company's Second Amended and Restated Bylaws.
3.4(3) Amendment to Second Amended and Restated Bylaws adopted
January 26, 1996.
3.5(3) Second Amendment to Second Amended and Restated Bylaws
adopted September 17, 1997.
3.6(4) Amendment to Second Amended and Restated Bylaws adopted
January 20, 1998.
</TABLE>
- --------
(1) Filed on June 26, 1998, as part of the Company's Current Report on Form
8-K dated June 25, 1998, and incorporated herein by reference.
(2) Filed with the Company's Amendment No. 1 to Registration Statement No.
333-02322 on March 25, 1996, and incorporated herein by reference.
(3) Filed on November 14, 1997, with the Company's Form 10-Q for the quarter
ended September 30, 1997 and incorporated herein by reference.
(4) Filed on March 31, 1998, with the Company's Form 10-K for 1997 and
incorporated herein by reference.
24
<PAGE>
MERIDIAN INDUSTRIAL TRUST, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number
(corresponding to the Sequentially
Exhibit Table of Item Numbered
601 of Regulation S-K) Description Page
---------------------- ----------- ------------
<C> <S> <C>
10.1 Second Amendment dated June 23, 1998 to Third
Amended and Restated Revolving Credit Agreement
dated February 19, 1998 among (i) the Company,
(ii) MIT Unsecured L.P. and Meridian
Refrigerated, Inc. (iv) BankBoston, N.A., Chase
Bank of Texas, National Association, NationsBank
of Texas, N.A., Wells Fargo Bank, N.A., Dresdner
Bank AG, New York Branch and Grand Cayman
Branch, and First American Bank Texas, S.S.B.,
(collectively, the "Banks"), (iii) BankBoston,
N.A. as Agent for the Banks, (iv) Chase Bank of
Texas, National Association as Documentation
Agent for the Banks, and (v) NationsBank of
Texas, N.A. as Syndication Agent for the Banks.
10.2 Registration Rights Agreement dated June 30, 1998
among Meridian Industrial Trust, Inc., R. William
Gardner, Douglas C. Gardner, Steven D. Gardner, and
Todd L. Platt
27.1 Financial Data Schedule.
</TABLE>
25
<PAGE>
SECOND AMENDMENT TO THIRD AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
THIS SECOND AMENDMENT TO THIRD AMENDED AND RESTATED REVOLVING CREDIT
AGREEMENT (this "Amendment") made this 23rd day of June, 1998, by and among
MERIDIAN INDUSTRIAL TRUST, INC., a Maryland corporation ("Borrower"), MIT
UNSECURED L.P., a California limited partnership ("MIT Unsecured"), MERIDIAN
REFRIGERATED, INC., a Delaware corporation ("Meridian Refrigerated"; Meridian
Refrigerated and MIT Unsecured, collectively, "Guarantor"), BANKBOSTON, N.A.,
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, NATIONSBANK, N.A., SUCCESSOR BY
MERGER WITH NATIONSBANK OF TEXAS, N.A., WELLS FARGO BANK, N.A., DRESDNER BANK
AG, NEW YORK BRANCH AND GRAND CAYMAN BRANCH, FIRST AMERICAN BANK TEXAS,
S.S.B. and the other lending institutions which may become parties to the
Credit Agreement, as hereinafter defined (collectively, the "Banks"), and
BANKBOSTON, N.A., as Agent for the Banks (the "Agent"), CHASE BANK OF TEXAS,
NATIONAL ASSOCIATION, as Documentation Agent for the Banks (the
"Documentation Agent"), and NATIONSBANK, N.A., SUCCESSOR BY MERGER WITH
NATIONSBANK OF TEXAS, N.A., as Syndication Agent for the Banks (the
"Syndication Agent").
W I T N E S S E T H:
WHEREAS, Borrower, Agent and the Banks entered into that certain Third
Amended and Restated Revolving Credit Agreement dated September 23, 1997, as
amended by that certain First Amendment to Third Amended and Restated
Revolving Credit Agreement dated February 19, 1998 (as amended, the "Credit
Agreement"); and
WHEREAS, MIT Unsecured executed and delivered to the Agent and the Banks
that certain Unconditional Guaranty of Payment and Performance dated
September 23, 1997 (the "MIT Unsecured Guaranty"), and Meridian Refrigerated
executed and delivered that certain Unconditional Guaranty of Payment and
Performance dated February 19, 1998 (the "Meridian Refrigerated Guaranty";
the Meridian Refrigerated Guaranty and the MIT Unsecured Guaranty,
collectively, the "Guaranty"); and
WHEREAS, Borrower has requested that Agent and the Banks modify certain
provisions under the Credit Agreement; and
WHEREAS, as a condition to such modification, Agent and the Banks have
required that Borrower and Guarantor execute this Amendment;
<PAGE>
NOW, THEREFORE, for and in consideration of the sum of TEN and NO/100
DOLLARS ($10.00), and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto do hereby
covenant and agree as follows:
1. DEFINITIONS. All the terms used herein which are not otherwise
defined herein shall have the meanings set forth in the Credit Agreement.
2. MODIFICATION OF THE CREDIT AGREEMENT. Borrower, the Banks and
Agent do hereby modify and amend the Credit Agreement by deleting the date
"June 23, 1998" in the first line of Section 3.7 of the Credit Agreement
appearing on page 28 thereof and inserting in lieu thereof the date "July 23,
1998".
3. REFERENCES TO CREDIT AGREEMENT. All references in the Loan
Documents to the Credit Agreement shall be deemed a reference to the Credit
Agreement, as modified and amended herein.
4. CONSENT OF GUARANTOR. By execution of this Amendment, Guarantor
hereby expressly consents to the modifications and amendments to the Credit
Agreement as set forth herein, and Borrower and Guarantor hereby acknowledge,
represent and agree that the Loan Documents (including without limitation the
Guaranty) remain in full force and effect and constitute the valid and
legally binding obligation of the Borrower and Guarantor enforceable against
such Persons in accordance with their respective terms, and that the
execution and delivery of this Amendment does not constitute, and shall not
be deemed to constitute, a release, waiver or satisfaction of Borrower's or
Guarantor's obligations under the Loan Documents (including without
limitation the Guaranty).
5. REPRESENTATIONs. Borrower and Guarantor represent and warrant to
Agent and the Banks as follows:
(a) AUTHORIZATION. The execution, delivery and performance of
this Amendment and the transactions contemplated hereby (i) are within the
power and authority of Borrower and Guarantor, (ii) have been duly authorized
by all necessary proceedings on the part of such Persons, (iii) do not and
will not conflict with or result in any breach or contravention of any
provision of law, statute, rule or regulation to which any of such Persons is
subject or any judgment, order, writ, injunction, license or permit
applicable to such Persons, (iv) do not and will not conflict with or
constitute a default (whether with the passage of time or the giving of
notice, or both) under any provision of the partnership agreement or
certificate, certificate of formation, operating agreement, articles of
incorporation or other charter documents or bylaws of, or any mortgage,
indenture, agreement, contract or other instrument binding upon, any of such
Persons or any of its properties or to which any of such Persons is subject,
and (v) do not and will not result in or require the imposition of any lien
or other encumbrance on any of the properties, assets or rights of such
Persons, other than the liens and encumbrances created by the Loan Documents.
-2-
<PAGE>
(b) ENFORCEABILITY. The execution and delivery of this Amendment
are valid and legally binding obligations of Borrower and Guarantor
enforceable in accordance with the respective terms and provisions hereof,
except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally
the enforcement of creditors' rights and the effect of general principles of
equity.
(c) APPROVALS. The execution, delivery and performance of this
Amendment and the transactions contemplated hereby do not require the
approval or consent of or approval of any Person or the authorization,
consent, approval of or any license or permit issued by, or any filing or
registration with, or the giving of any notice to, any court, department,
board, commission or other governmental agency or authority other than those
already obtained and the filing of the Security Documents in the appropriate
records office with respect thereto.
6. NO DEFAULT. By execution hereof, the Borrower and Guarantor
certify that such Persons are and will be in compliance with all covenants
under the Loan Documents after the execution and delivery of this Amendment,
and that no Default or Event of Default has occurred and is continuing.
7. WAIVER OF CLAIMS. Borrower and Guarantor acknowledge, represent and
agree that none of such Persons has any defenses, setoffs, claims,
counterclaims or causes of action of any kind or nature whatsoever with
respect to the Loan Documents, the administration or funding of the Loan or
with respect to any acts or omissions of Agent or any Bank, or any past or
present officers, agents or employees of Agent or any Bank, and each of such
Persons does hereby expressly waive, release and relinquish any and all such
defenses, setoffs, claims, counterclaims and causes of action, if any.
8. RATIFICATION. Except as hereinabove set forth, all terms,
covenants and provisions of the Credit Agreement remain unaltered and in full
force and effect, and the parties hereto do hereby expressly ratify and
confirm the Loan Documents and the Credit Agreement as modified and amended
herein. Nothing in this Amendment shall be deemed or construed to
constitute, and there has not otherwise occurred, a novation, cancellation,
satisfaction, release, extinguishment or substitution of the indebtedness
evidenced by the Notes or the other obligations of Borrower and Guarantor
under the Loan Documents.
9. AMENDMENT AS LOAN DOCUMENT. This Amendment shall constitute a Loan
Document.
10. COUNTERPARTS. This Amendment may be executed in any number of
counterparts which shall together constitute but one and the same agreement.
11. MISCELLANEOUS. This Amendment shall be construed and enforced in
accordance with the laws of the Commonwealth of Massachusetts. This Amendment
shall be binding upon
-3-
<PAGE>
and shall inure to the benefit of the parties hereto and their respective
permitted successors, successors-in-title and assigns as provided in the
Credit Agreement and the Guaranty.
IN WITNESS WHEREOF, the parties hereto have hereto set their hands and
affixed their seals as of the day and year first above written.
BORROWER:
MERIDIAN INDUSTRIAL TRUST, INC., a Maryland
corporation
By: [SEAL]
--------------------------------------
Name:
Title:
[SIGNATURES CONTINUED ON NEXT PAGE]
-4-
<PAGE>
GUARANTOR:
MIT UNSECURED L.P., a California limited
partnership
By:
--------------------------------------------
Name:
Title:
[CORPORATE SEAL]
MERIDIAN REFRIGERATED, INC., a Delaware
corporation
By:
-------------------------------------------
Name:
Title:
[CORPORATE SEAL]
[SIGNATURES CONTINUED ON NEXT PAGE]
-5-
<PAGE>
BANKS:
BANKBOSTON, N.A., individually and as Agent
By:
-------------------------------------------
Its:
-------------------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
-6-
<PAGE>
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
individually and as Documentation Agent
By:
-------------------------------------------
Its:
-------------------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
-7-
<PAGE>
NATIONSBANK, N.A., SUCCESSOR BY MERGER WITH
NATIONSBANK OF TEXAS, N.A., individually and as
Syndication Agent
By:
-------------------------------------------
Its:
-------------------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
-8-
<PAGE>
WELLS FARGO BANK, N.A.
By:
-------------------------------------------
Its:
-------------------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
-9-
<PAGE>
DRESDNER BANK AG, NEW YORK BRANCH AND GRAND CAYMAN
BRANCH
By:
-------------------------------------------
Its:
-------------------------------------
By:
-------------------------------------------
Its:
-------------------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
-10-
<PAGE>
FIRST AMERICAN BANK TEXAS, S.S.B.
By:
-------------------------------------------
Its:
-------------------------------------
-11-
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") dated June 30, 1998,
is entered into by and among Meridian Industrial Trust, Inc., a Maryland
corporation ("MIT"), and the securityholders listed on the signature pages
hereto (individually, a "HOLDER" and collectively, the "HOLDERS").
WHEREAS, concurrently herewith, MIT, Meridian Gateway, Inc., a Delaware
corporation and a wholly-owned subsidiary of MIT ("MERGER SUB"), DPI-Venture I,
Inc., an Ohio corporation ("DPI"), and the stockholders of DPI are entering into
that certain Agreement and Plan of Merger of even date herewith (the "MERGER
AGREEMENT"), providing for the merger (the "MERGER") of DPI with and into Merger
Sub (capitalized terms used without definition herein having the meanings
ascribed thereto in the Merger Agreement);
WHEREAS, the Holders are the record and beneficial owners of the number of
shares of DPI Common Stock without par value (the "DPI COMMON STOCK") set forth
in Column I of SCHEDULE I attached hereto, which will be converted into, and
each Holder will receive, the number of shares of MIT Common Stock as set forth
in Column II of SCHEDULE I opposite each Holder's name; and
WHEREAS, pursuant to the terms of the Merger Agreement, MIT has agreed to
register the MIT Common Stock to be received by each Holder pursuant to the
terms and conditions set forth herein.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINITIONS. As used herein, the following terms shall have
the meanings indicated.
(a) "AFFILIATE" shall have the meaning ascribed to it in
Rule 144 of the Securities Act.
(b) "COMMISSION" shall mean the United States Securities and
Exchange Commission.
(c) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934.
(d) "INDEMNIFYING PARTY" shall have that meaning ascribed to it
in Section 4.3 of this Agreement.
<PAGE>
(e) "INDEMNIFIED PARTY" shall have that meaning ascribed to it
in Section 4.3 of this Agreement.
(f) "INSPECTORS" shall have that meaning ascribed to it in
Section 2.2(c) of this Agreement.
(g) "MIT COMMON STOCK" shall mean the common stock, par value
$.001 per share, of MIT.
(h) "NYSE" shall mean the New York Stock Exchange or any
securities exchange or quotation system on which similar securities issued
by MIT are then listed.
(i) "RECORDS" shall have that meaning ascribed to it in Section
2.2(c) of this Agreement.
(j) "REGISTRABLE SECURITIES" shall mean (i) the aggregate number
of shares of MIT Common Stock listed in Column II of SCHEDULE I hereto;
PROVIDED, HOWEVER, that no Holder shall have the right to have his or her
MIT Common Stock registered under this Agreement, when (x) such securities
are no longer held of record by such Holder or (y) the Holder has the right
to resell such securities without the requirement of an effective
registration statement under the Securities Act, whether pursuant to
Rule 144 under the Securities Act or otherwise.
(k) "REGISTRATION STATEMENT" shall have that meaning ascribed to
it in Article 2 of this Agreement.
(l) "SECURITIES ACT" shall mean the Securities Act of 1933.
ARTICLE 2
REGISTRATION RIGHTS
Section 2.1 REGISTRATION STATEMENT. On or before the date that is six
months following the Effective Time, MIT shall file a registration statement on
Form S-3 or amend an existing MIT registration statement on Form S-3 or other
appropriate form pursuant to Rule 415 under the Securities Act, or other similar
rule of the Commission covering the resale by the Holders of the Registrable
Securities set forth in Column II of SCHEDULE I hereto (however constituted,
hereinafter referred to as the "REGISTRATION STATEMENT"). MIT shall use all
commercially reasonable efforts to cause the Registration Statement to be
declared effective and to keep the Registration Statement continuously effective
for a period of two years following the date on which the Registration Statement
is first declared effective or, if sooner, until the date on which each Holder
shall have sold such securities, or is otherwise able to sell all of such
securities then
<PAGE>
held by such Holder without the requirement of an effective registration
statement under the Securities Act, whether pursuant to Rule 144(k) under the
Securities Act or otherwise. MIT further agrees, if necessary, to amend or
supplement the Registration Statement when required by the registration form,
by the instructions applicable to Form S-3, or by the Securities Act or the
rules and regulations thereunder and at the request of a Holder whenever a
Holder has assigned such Holder's rights to have the resale of such Holder's
Registrable Securities registered hereunder to another Holder in accordance
with the terms of this Agreement.
Section 2.2 REGISTRATION PROCEDURES. MIT will as expediently as
commercially possible:
(a) Furnish to each Holder such number of copies of the
Registration Statement, any amendments thereto, any documents incorporated by
reference therein, the prospectus included in the Registration Statement,
including any preliminary prospectus, and such other documents as such Holder
may reasonably request in writing in order to facilitate the disposition of the
Registrable Securities owned by such Holder;
(b) Promptly notify each Holder of Registrable Securities, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the occurrence of an event requiring the preparation of a
supplement to such prospectus or an amendment of the Registration Statement
necessary in order to maintain the effectiveness of the Registration Statement
and to ensure that such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and to promptly file
with the Commission and make available to such Holder any such supplemented
prospectus or amended Registration Statement;
(c) Make available for inspection by the Holders, and any
attorney, accountant, or other professional retained by the Holders
(collectively, the "INSPECTORS") all financial and other records, pertinent
corporate documents, and properties of MIT (collectively, the "RECORDS") as
shall be reasonably necessary to enable such Inspectors to exercise their due
diligence responsibility with respect to the Registration Statement, and cause
MIT officers, directors, and employees to supply all information reasonably
requested by any such Inspectors in connection with the Registration Statement.
Records which MIT determines, in good faith, to be confidential and which it
notifies the Inspectors are confidential shall not be disclosed by the
Inspectors unless (i) in the judgment of counsel to MIT the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in the
Registration Statement, or (ii) the release of such Records is ordered pursuant
to a subpoena or other order from a court of competent jurisdiction. Each
Holder agrees that information obtained by it as a result of such inspections
shall be deemed confidential and shall not be used by it as the basis for any
market transactions in the securities of MIT unless and until such is made
generally available to the public. Each Holder further agrees that it will,
upon learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to MIT and allow MIT, at its expense, to undertake
appropriate action to prevent disclosure of the Records deemed confidential.
MIT may require such Holder to promptly furnish in writing to MIT such
information regarding the
3
<PAGE>
distribution of the Registrable Securities as it may from time to time
reasonably request and such other information regarding such Holder as may be
legally required in connection with such registration. Each Holder agrees
that, upon receipt of written notice from MIT of the happening of any event
of the kind described in Section 2.2(b) hereof, such Holder will immediately
discontinue the disposition of Registrable Securities pursuant to the
Registration Statement until such Holder's receipt of the copies of the
revised prospectus contemplated by Section 2.2(b) hereof, and, if so directed
by MIT, such Holder will deliver to MIT all copies, other than permanent file
copies then in such Holder's possession, of the most recent prospectus
covering such MIT Common Stock at the time of receipt of such notice;
(d) Use every reasonable effort to register or qualify the
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as each Holder shall reasonably request, and do any and all other
acts and things which may be necessary under such securities or blue sky laws to
enable each such Holder to consummate the public sale or other disposition in
such jurisdictions of the Registrable Securities owned by such Holder, except
that MIT shall not for any such purpose be required to qualify to do business as
a foreign corporation in any jurisdiction wherein it is not so qualified;
(e) Within a reasonable time before each filing of the
Registration Statement or prospectus, or amendments or supplements thereto with
the Commission (or any materials to be provided to the staff of the Commission),
furnish to R. William Gardner, as representative of the other Holders, copies of
such documents proposed to be filed (or provided to the staff of the
Commission);
(f) Use all commercially reasonable efforts to prevent the
issuance of any order suspending the effectiveness of the Registration
Statement, and if one is issued use its best efforts to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement at the
earlier possible moment;
(g) Use all commercially reasonable efforts to cause the
Registrable Securities to be listed on the securities exchange or quoted on the
quotation system on which the MIT Common Stock is then listed or quoted; and
(h) Otherwise use all commercially reasonable efforts to comply
with all applicable rules and regulations of the Commission and make generally
available to MIT's security holders, in each case as soon as practicable, but
not later than 45 days after the close of the period covered thereby (90 days in
case the period covered corresponds to a fiscal year of MIT), an earnings
statement of MIT which will satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any comparable successor provisions).
(i) Notwithstanding any provision of this Agreement to the
contrary, remove any and all restrictive legends from the certificates of MIT
Common Stock issued to Holders two years from the date of this Agreement to the
extent permitted by applicable law.
4
<PAGE>
Section 2.3 REGISTRATION EXPENSES. In connection with the Registration
Statement, MIT shall pay the following registration expenses: (i) all
registration and filing fees; (ii) the fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of MIT
counsel in connection with blue sky qualifications of the Registrable
Securities); (iii) printing expenses; (iv) the reasonable fees and disbursements
of counsel for MIT and the customary fees and expenses for independent certified
public accountants retained by MIT; and (v) the reasonable fees and expenses of
any experts retained by MIT in connection with such registration. MIT shall not
have any obligation to pay any legal fees of the Holders, any underwriting fees,
discounts, or commissions attributable to the sale of Registrable Securities, or
any out-of-pocket expenses of the Holders.
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.1 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE HOLDERS.
As a condition to MIT's obligation to register the Registrable Securities and
any and all other obligations of MIT under this Agreement, each Holder hereby
represents and warrants to, and covenants and agrees with MIT as follows:
(a) this Agreement has been duly executed by such Holder and
constitutes a valid and binding agreement of such Holder enforceable against
such Holder in accordance with its terms, except that (i) such enforcement may
be subject to applicable bankruptcy, insolvency, fraudulent transfer, or other
laws, now or hereafter in effect, affecting creditors' rights generally,
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses (including commercial
reasonableness, good faith, and fair dealing) and to the discretion of the court
before which any proceeding therefore may be brought; and (iii) subject to
limitations as to enforceability of the indemnification and contribution
provisions hereof;
(b) the execution, delivery and performance by each Holder of
this Agreement and the consummation of the transactions contemplated hereby will
not (i) require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority or other
person, except in connection with the Securities Act, or (ii) conflict with or
result in any breach or violation of any provision of any agreement to which
such Holder is a party or by which he or she is bound;
(c) such Holder will furnish to MIT the information requested
opposite such Holder's signature below, which shall include such Holder's name
exactly as it is to appear in the stock transfer records of MIT, such Holder's
current street address, phone number, telecopy number and such other information
reasonably available to such Holder as MIT may reasonably request;
5
<PAGE>
(d) such Holder will not take, directly or indirectly, any
action that is designed to or which has constituted or that might reasonably be
expected to cause or result in stabilization or manipulation of the price of any
security of MIT to facilitate the sale or resale of the Registrable Securities;
(e) such Holder will comply with Regulation M under the Exchange
Act, which, among other things, requires a seller of Registrable Securities and
all affiliates of the that seller to suspend all bids for or purchases of shares
of MIT Common Stock at least one business day before and during any offers and
sales of Registrable Securities by that seller and until that seller's offers
and sales terminate and prohibits any person from stabilizing the prices of a
security to facilitate an offering of that security. The Holders agree that,
upon receipt of any notice from MIT of the happening of any event of the kind
described in subsection 2.2(b) hereof, such Holder will immediately discontinue
disposition of Registrable Securities pursuant to the Registration Statement
until such Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by subsection 2.2(b) hereof, and, if so directed by MIT,
each Holder will deliver to MIT all copies, other than permanent file copies in
such Holder's possession, of the most recent prospectus covering such
Registrable Securities at the time of receipt of such notice; and
(f) if such Holder was an affiliate of DPI at the time of the
Merger, such Holder acknowledged that he or she is subject to Rule 145
promulgated under the Securities Act and agrees that any certificates
representing MIT Common Stock issued to such Holder shall bear an appropriate
legend to such effect and that such Holder shall comply with the provisions of
Rule 145.
Section 3.2 REPRESENTATIONS AND WARRANTIES OF MIT. MIT represents and
warrants to each Holder as follows:
(a) MIT is a corporation, duly organized, validly existing and
in good standing under the laws of the State of Maryland;
(b) this Agreement has been duly authorized by all necessary
corporate action on the part of MIT, has been duly executed by a duly authorized
officer of MIT, and constitutes a valid and binding agreement of MIT enforceable
against MIT in accordance with its terms; and
(c) the execution, delivery and performance of this Agreement by
MIT and the consummation of the transactions contemplated hereby will not (i)
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority except in connection
with the Securities Act, or (ii) conflict with the Third Amended and Restated
Articles of Incorporation or Second Amended and Restated By-laws of MIT or any
material agreement to which it is a party or by which it is bound.
Section 3.3 RULE 144. MIT covenants that it will file any reports
required to be filed by it under the Securities Act and the Exchange Act (or, if
MIT is not required to file such
6
<PAGE>
reports, it will, upon the request of any Holder, make publicly available
other information so long as necessary to permit sales under Rule 144 under
the Securities Act), and it will take such further action as any Holder may
request, all to the extent required from time to time to enable such Holder
to sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission.
Section 3.4 FURTHER ASSURANCES. Each party hereto shall execute and
deliver such additional instruments and other documents and shall take such
further actions as may be necessary or appropriate to effectuate, carry out and
comply with all of such party's obligations under this Agreement, including
without limitation any actions reasonably requested by MIT in connection with
obtaining any required consents or approvals to the actions contemplated hereby
under the Securities Act. Without limiting the generality of the foregoing,
none of the parties hereto shall enter into any agreement or arrangement (or
alter, amend or terminate any existing agreement or arrangement) if such action
would materially impair the ability of any party to effectuate, carry out or
comply with all of the terms of this Agreement.
ARTICLE 4
INDEMNIFICATION
Section 4.1 INDEMNIFICATION BY MIT. MIT agrees to indemnify and hold
harmless each Holder, its directors and officers, if any, and each person, if
any, who controls each Holder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages, liabilities, and expenses (including reasonable costs
of investigation) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement or
prospectus contained therein or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as such
losses, claims, damages, liabilities, or expenses arise out of, or are based
upon, any such untrue statement or omission or allegation thereof based upon
information furnished in writing to MIT by such Holder or on such Holder's
behalf expressly for use therein; and, PROVIDED FURTHER, that, with respect to
any untrue statement or omission or alleged untrue statement or omission made in
any preliminary prospectus, the indemnity agreement contained in this subsection
shall not apply to the extent that it has been established that any such loss,
claim, damage, liability, or expense results from the fact that a current copy
of the prospectus was not sent or given to the person asserting any such loss,
claim, damage, liability, or expense at or prior to the written confirmation of
the sale of the Registrable Securities to such person and such current copy of
the prospectus was previously provided to the Holder and such current copy of
the prospectus would have cured the defect giving rise to such loss, claim,
damage, liability, or expense.
7
<PAGE>
Section 4.2 INDEMNIFICATION BY HOLDER. Each Holder, severally but not
jointly, agrees to indemnify and hold harmless MIT, its directors and officers,
and each person, if any, who controls MIT within the meaning of either Section
15 of the Securities Act or Section 20 of the Exchange Act to the same extent as
the foregoing indemnity from MIT to such Holder, but only with respect to
information furnished in writing by such Holder or on such Holder's behalf
expressly for use in the Registration Statement or prospectus relating to the
Registrable Securities, any amendment or supplement thereto, or any preliminary
prospectus; PROVIDED, HOWEVER, that such Holder shall not be obligated to
provide such indemnity to the extent that such losses, claims, damages,
liabilities or expenses result from the failure of MIT to promptly amend or take
action to correct or supplement any such Registration Statement or Prospectus on
the basis of corrected or supplemental information provided in writing by such
Holder to MIT expressly for such purpose. In case any action or proceeding
shall be brought against MIT or its directors or officers, or any such
controlling person, in respect of which indemnity may be sought against such
Holder, such Holder and its directors, officers and controlling persons shall
have the rights and duties given to MIT, and MIT or its directors or officers or
such controlling person shall have the rights and duties given to such Holder,
by the preceding subsection hereof. In no event shall the liability of any
Holder of Registrable Securities hereunder be greater in amount than the amount
of the proceeds received by such Holder upon the sale of the Registrable
Securities giving rise to such indemnification obligation.
Section 4.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any action or
proceeding (including any governmental investigation) shall be brought or
asserted against any person entitled to indemnification under Section 4.1 or 4.2
above (an "INDEMNIFIED PARTY") in respect of which indemnity may be sought from
any party who has agreed to provide such indemnification (an "INDEMNIFYING
PARTY"), the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Party, and
shall assume the payment of all expenses. Such Indemnified Party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless (i) the Indemnifying Party has agreed
to pay such fees and expenses, (ii) the Indemnifying Party has failed to assume
the defense of such action within a reasonable time following written notice
thereof from the Indemnified Party or fails to employ counsel reasonably
satisfactory to such Indemnified Party, or (iii) the named parties to any such
action or proceeding (including any impleaded parties) include both such
Indemnified Party and the Indemnifying Party, and such Indemnified Party shall
have been advised by counsel that there is a conflict of interest on the part of
counsel employed by the Indemnifying Party to represent such Indemnified Party
(in which case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense of such action or proceeding on behalf of such Indemnified Party; it
being understood, however, that the Indemnifying Party shall not, in connection
with any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (together with appropriate local
8
<PAGE>
counsel) at any time for all such Indemnified Parties, which firm shall be
designated in writing by such Indemnified Parties). The Indemnifying Party
shall not be liable for any settlement of any such action or proceeding
effected without its written consent, but if settled with its written
consent, or if there be a final judgment for the plaintiff in any such action
or proceeding, the Indemnifying Party shall indemnify and hold harmless such
Indemnified Parties from and against any loss or liability (to the extent
stated above) by reason of such settlement or judgment. No Indemnifying
Party shall, without the prior written consent of the Indemnified Party,
effect any settlement of any pending or threatened proceeding in respect of
which such Indemnified Party is a party, and indemnity could have been sought
hereunder by such Indemnified Party from all liability on claims that are the
subject matter of such proceeding.
Section 4.4 CONTRIBUTION. If the indemnification provided for in this
Article 4 is unavailable to the Indemnified Parties in respect of any losses,
claims, damages, liabilities, or judgments referred to herein, then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages, liabilities and judgments in the following
manner: as between MIT on the one hand and Holder on the other, in such
proportion as is appropriate to reflect the relative fault of MIT on the one
hand and each selling Holder on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
fault of MIT on the one hand and of Holder on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by such party, and the party's relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. No person guilty of fraudulent misrepresentation (within
the meaning of subsection 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
Notwithstanding the provisions of this Section 4.4, no Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such Holder were offered to the
public exceeds the amount of any damages which such Holder has otherwise been
required to pay by reason of such untrue statement or omission. Each Holder's
obligation to contribute pursuant to this Section 4.4 is several in the
proportion that the proceeds of the offering received by such Holder bears to
the total proceeds of the offering received by all the Holders and not joint.
Section 4.5 SURVIVAL. The indemnity and contribution agreements
contained in this Article 4 shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any investigation made
by or on behalf of any Indemnified Party or by or on behalf of MIT, and (iii)
the consummation of the sale or successive resale of the Registrable Securities.
ARTICLE 5
9
<PAGE>
GENERAL
Section 5.1 AMENDMENTS AND WAIVERS. The provisions of this Agreement
may not be amended, modified, or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, other than as initially
agreed upon in writing by MIT and the Holders.
Section 5.2 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
upon receipt, if delivered personally, sent by nationally recognized overnight
courier service, mailed by registered or certified mail (postage prepaid, return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like changes of address) or sent by
electronic transmission to the telecopier number specified below:
(a) If to MIT, to:
Meridian Industrial Trust, Inc.
455 Market Street, 17th Floor
San Francisco, California 94105
Attention: General Counsel
Fax: (415) 284-2840
with copies to:
Vinson & Elkins L.L.P.
2001 Ross Avenue
Suite 3700
Dallas, Texas 75201
Attention: Michael D. Wortley
Mark Early
Fax: (214) 220-7716
(b) If to a Holder, to the address set forth opposite such
Holder's name on the signature pages hereto.
Section 5.3 SUCCESSORS AND ASSIGNS. No Holder may assign any rights or
benefits under this Agreement, other than (a) the assignment by a Holder of all
or a portion of his rights to have the resale of his Registrable Securities
registered under this Agreement to any other Holder who holds Registrable
Securities, without the prior written consent of MIT. This Agreement shall
inure to the benefit of, and be binding upon, the successors and assigns of MIT
and the successors and permitted assigns of the Holders.
Section 5.4 COUNTERPARTS. This Agreement may be executed in a number of
identical counterparts and it shall not be necessary for MIT and each Holder to
execute each of such counterparts, but when each has executed and delivered one
or more of such counterparts, the
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<PAGE>
several parts, when taken together, shall be deemed to constitute one and the
same instrument, enforceable against each in accordance with its terms. In
making proof of this Agreement, it shall not be necessary to produce or
account for more than one such counterpart executed by the party against whom
enforcement of this Agreement is sought.
Section 5.5 HEADINGS. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for convenience of reference only,
do not constitute a part of this Agreement and shall not limit or otherwise
affect the meaning or interpretation of this Agreement.
Section 5.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland, without regard
to principles of conflicts or choice of law. The parties hereto agree to submit
to the exclusive jurisdiction of the State of Maryland, for purposes of any
suit, action or other proceeding arising out of this Agreement.
Section 5.7 SEVERABILITY. If any provision of this Agreement is held
to be illegal, invalid, or unenforceable under present or future laws
effective during the term of this Agreement, such provision shall be fully
severable; this Agreement shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part of this
Agreement; and the remaining provisions of this Agreement shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance from this Agreement.
Furthermore, in lieu of each such illegal, invalid, or unenforceable
provision, there shall be added automatically as a part of this Agreement a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid and enforceable.
Section 5.8 ENTIRE AND CONTROLLING AGREEMENT. This Agreement is
intended by MIT and the Holders as a final expression of their agreement and is
intended to be a complete and exclusive statement of their agreement and
understanding in respect of the subject matter contained herein. This Agreement
supersedes all prior agreements and understandings between MIT and the Holders
with respect to such subject matter. The provisions of this Agreement shall
control in any conflict with the provisions of the Merger Agreement, with regard
to the Registrable Securities.
Section 5.9 THIRD PARTY BENEFICIARIES. Other than Indemnified Parties
not a party hereto, this Agreement is intended only for the benefit of MIT and
the Holders and their respective successors and permitted assigns and is not for
the benefit of, nor may any provision hereof be enforced by, any other person or
entity.
Section 5.10 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies
existing under this Agreement are in addition to, and not exclusive of, any
rights or remedies otherwise available.
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<PAGE>
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12
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
MERIDIAN INDUSTRIAL TRUST, INC.
By: /s/ Robert A. Dobbin
---------------------------------
Name: Robert A. Dobbin
---------------------------------
Title: Secretary and General Counsel
---------------------------------
HOLDERS:
Address: 1625 Bethel Rd. Suite 203 /s/ R. William Gardner
Columbus, Ohio 43220 --------------------------------
Telephone No. (614) 451-4454 R. William Gardner
Telecopier No. (614) 451-3008
Address: 1625 Bethel Rd. Suite 203 /s/ Douglas C. Gardner
Columbus, Ohio 43220 --------------------------------
Telephone No. (614) 451-4454 Douglas C. Gardner
Telecopier No. (614) 451-3008
Address: 1625 Bethel Rd. Suite 203 /s/ Steven D. Gardner
Columbus, Ohio 43220 --------------------------------
Telephone No. (614) 451-4454 Steven D. Gardner
Telecopier No. (614) 451-3008
Address: 13600 Heritage Parkway, /s/ Todd L. Platt
Suite 200 --------------------------------
Fort Worth, Texas 76177 Todd L. Platt
Telephone No. (817) 224-6000
Telecopier No. (817) 224-6060
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<PAGE>
SCHEDULE I
<TABLE>
DPI COMMON STOCK MIT COMMON STOCK
---------------- ----------------
<S> <C> <C>
R. William Gardner 10 shares 8,840
Douglas C. Gardner 20 shares 17,680
Steven D. Gardner 20 shares 17,680
Todd L. Platt 25 shares 22,100
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 10,701,000
<SECURITIES> 0
<RECEIVABLES> 5,306,000
<ALLOWANCES> (468,000)
<INVENTORY> 0
<CURRENT-ASSETS> 22,570,000
<PP&E> 974,355,000
<DEPRECIATION> (23,924,000)
<TOTAL-ASSETS> 1,072,258,000
<CURRENT-LIABILITIES> 43,459,000
<BONDS> 393,281,000
3,000
0
<COMMON> 31,000
<OTHER-SE> 618,460,000
<TOTAL-LIABILITY-AND-EQUITY> 1,072,258,000
<SALES> 0
<TOTAL-REVENUES> 56,921,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 25,532,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,480,000
<INCOME-PRETAX> 22,716,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,716,000
<EPS-PRIMARY> 0.71
<EPS-DILUTED> 0.68
</TABLE>
