EXHIBIT 99.1
1,150,000 Shares
Alexandria Real Estate Equities, Inc.
Common Stock
($.01 Par Value)
PURCHASE AGREEMENT
May 27, 1998
PAINEWEBBER INCORPORATED
1285 Avenue of the Americas
New York, New York 10019
Dear Ladies and Gentlemen:
Alexandria Real Estate Equities, Inc., a Maryland corporation (the
"Company"), confirms its agreement with PaineWebber Incorporated
("PaineWebber") in connection with the issuance and sale by the Company and
the purchase by PaineWebber of the Securities (as defined herein) on or about
May 29, 1998. PaineWebber intends to deposit the Securities with the trustee
of PaineWebber Equity Trust REIT Series I (A Unit Investment Trust), a
registered unit investment trust under the Investment Company Act of 1940, as
amended, for which PaineWebber acts as sponsor and depositor (the "Trust"),
in exchange for units in the Trust.
The Securities will be offered and sold to PaineWebber without being
registered under the Securities Act of 1933, as amended (the "1933 Act"), in
reliance upon one or more exemptions therefrom or in transactions not subject
thereto and will contain the stock legend set forth in Section 9 hereof. In
connection with such issuance, the Company has prepared a confidential
offering circular dated May 29, 1998 (as amended or supplemented, including
all exhibits thereto and all documents incorporated or deemed to be
incorporated by reference therein, the "Offering Circular"). All documents
filed by the Company with the Securities and Exchange Commission (the
"Commission") under the Securities Exchange Act of 1934, as amended (the
"1934 Act") prior to the Closing Date (as defined below) are deemed to be
incorporated by reference into the Offering Circular.
PaineWebber and its direct and indirect transferees (including the
Trust) will be entitled to the benefits of a Registration Rights Agreement,
to be dated as of the Closing Date and to be substantially in
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the form attached hereto as EXHIBIT A (the "Registration Rights Agreement"),
pursuant to which the Company will file a registration statement on an
appropriate registration form under the 1933 Act with the Commission covering
the resale by the Trust of the Securities to be delivered in connection with
the transactions contemplated herein (the "Registration Statement").
All references in this Agreement to financial statements and schedules
and other information which is "contained," "included" or "stated" (or other
references of like import) in the Offering Circular shall be deemed to mean
and include all such financial statements and schedules and other information
which is incorporated by reference in the Offering Circular; and all
references in this Agreement to amendments or supplements to the Offering
Circular shall be deemed to mean and include the filing of any document under
the 1934 Act which is incorporated by reference in the Offering Circular.
Capitalized terms used but not otherwise defined shall have the meanings
given to those terms in the Offering Circular.
The term "subsidiary" has the meaning set forth in Rule 405 promulgated
by the Commission pursuant to the 1933 Act.
1. DESCRIPTION OF SECURITIES. The Company proposes to issue and sell
to PaineWebber, 1,150,000 shares of common stock, $.01 par value (the "Common
Stock"). The shares of Common Stock to be issued and sold by the Company are
referred to herein as the "Securities".
2. PURCHASE, SALE AND DELIVERY OF SECURITIES. On the basis of the
representations, warranties and agreements contained herein, but subject to
the terms and conditions set forth herein, the Company agrees to issue and
sell the Securities to PaineWebber and PaineWebber agrees to purchase the
Securities from the Company at a purchase price of $29.0344 per share (the
"Purchase Price"), which reflects a discount of $1.5281 per share from the
closing market price on the date hereof of $30.5625. The Company is advised
by PaineWebber that PaineWebber proposes to deposit the Securities with the
trustee of the Trust, a registered unit investment trust under the Investment
Company Act of 1940, as amended, for which PaineWebber acts as sponsor and
depositor, in exchange for units in the Trust as soon after the execution and
delivery of this Agreement as in the judgment of PaineWebber is advisable.
The Securities to be purchased by PaineWebber will be delivered by the
Company to the address of PaineWebber as set forth in this Agreement, in
accordance with the terms of this Purchase Agreement and against payment of
the purchase price therefore in New York Clearing House (next-day) funds by
certified or official bank check to the order of the Company in the amount of
$33,389,560 at 10:00 a.m., New York time, on May 29, 1998 (or if the NYSE or
American Stock Exchange or commercial banks in The City of New York are not
open on such day, the next day on which such exchanges and banks are open),
or at such other time not later than eight full business days thereafter as
PaineWebber and the Company mutually agree, such time being herein referred
to as the "Closing Date." If requested by PaineWebber, the Securities will
be prepared in definitive form and in such authorized denominations and
registered in such names as PaineWebber shall request upon at least two
business days' prior notice to the Company and will be made available for
checking and packaging at PaineWebber's office at least one business day
prior to the Closing Date.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. For purposes of
this Section 3, "knowledge" of the Company means knowledge of the Company's
officers, directors and asset managers and property management personnel
employed by the Company or its Affiliates (as defined below). The Company
represents and warrants to PaineWebber, as of the date hereof and as of the
Closing Date:
(a) The Offering Circular does not, and at the Closing Date will
not, include an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(b) The documents incorporated by reference in the Offering
Circular which were or hereafter are filed with the Commission at the time
they were or hereafter are filed with the Commission, as the case may be,
complied and will comply in all material respects with the requirements of
the 1933 Act, the rules and regulations of the Commission thereunder (the
"1933 Act Regulations"), the 1934 Act and the rules and regulations of the
Commission thereunder (the "1934 Act Regulations") and, when read together
with the other information in the Offering Circular, at the date of the
Offering Circular, and at the Closing Date, do not and will not include an
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(c) Neither the Company nor any of its affiliates, as such term is
defined in Rule 501(b) under the 1933 Act (each, an "Affiliate"), has,
directly or indirectly, solicited any offer to buy, sold or offered to sell
or otherwise negotiated in respect of, or will solicit any offer to buy or
offer to sell or otherwise negotiate in respect of, in the United States or
to any United States citizen or resident, any security which is or would be
integrated with the sale of the Securities in a manner that would require the
Securities to be registered under the 1933 Act. None of the Company, its
Affiliates or any person acting on any of their behalf (other than
PaineWebber, as to whom the Company makes no representation) has engaged or
will engage, in connection with the offering of the Securities, in any form
of general solicitation or general advertising within the meaning of Rule
502(c) under the 1933 Act or in any manner involving a public offering,
within the meaning of Section 4(2) of the 1933 Act, or under circumstances
that would require the registration of the Securities under the 1933 Act or
securities laws of any of the states in the United States. Subject to
compliance by PaineWebber with the terms and conditions set forth herein, it
is not necessary, in connection with the offer, sale and delivery of the
Securities to PaineWebber and the deposit of the Securities with the trustee
by PaineWebber in exchange for units in the Trust in the manner contemplated
by this Agreement and the Offering Circular, to register the Securities under
the 1933 Act.
(d) The only Subsidiaries (as defined in the 1933 Act Regulations)
of the Company are the subsidiaries listed on SCHEDULE 3(d) hereto (the
"Subsidiaries"). The Company and each of its Subsidiaries is, and at the
Closing Date will be, a corporation, limited liability company or limited
partnership duly organized or formed, as the case may be, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
formation, as the case may be. The Company and each of its Subsidiaries has,
and at the Closing Date will have, all power and authority to conduct all the
activities conducted by it, to own or lease all the assets owned or leased by
it and to conduct its business as described in the Offering Circular. The
Company and each of its Subsidiaries is, and at the Closing Date will be,
duly licensed or qualified to do business and in good standing as a foreign
corporation, limited liability
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company or limited partnership in all jurisdictions in which it owns or
leases real property or in which the nature of the activities conducted by it
makes such licensing or qualification necessary except where the failure to
be so licensed, qualified or in good standing does not and will not have a
materially adverse effect on the condition (financial or otherwise),
business, properties, net worth, results of operations or prospects of the
Company and its Subsidiaries taken as a whole (a "Material Adverse Effect").
Except for the stock, membership interests and partnership interests of
the Subsidiaries listed on SCHEDULE 3(d), and except as otherwise provided in
SCHEDULE 3(d), the Company does not own, and at the Closing Date will not
own, directly or indirectly, any shares of stock or any other equity or
long-term debt securities of any corporation or have any equity interest in
any firm, limited liability company, partnership, joint venture, association
or other entity. Complete and correct copies of the organizational
documents, limited partnership agreements and limited liability company
operating agreements, as the case may be, of the Company and each of its
Subsidiaries and all amendments thereto, have been delivered to PaineWebber,
and no changes therein will be made subsequent to the date hereof and prior
to the Closing Date. At present, and on the Closing Date, the Company will
own directly or indirectly all of the issued and outstanding capital stock,
membership interests or partnership interests, as the case may be, in the
Subsidiaries, in each case free and clear of any security interest, mortgage,
pledge, lien, charge, encumbrance, claim, restriction or equity interest
(each of the forgoing a "Lien").
(e) The outstanding shares of Common Stock have been, and the
Securities to be issued and sold by the Company pursuant to the terms of this
Agreement upon such issuance will be, duly authorized, validly issued, fully
paid and non-assessable and will not be subject to any preemptive or similar
rights. The description of the Common Stock in the Offering Circular is, and
at the Closing Date will be, complete and accurate in all material respects.
At the Closing Date, the Company will have authorized and issued capital
stock as set forth in the Offering Circular under the caption
"Capitalization." Except as set forth in the Offering Circular and except
pursuant to the Company's 1997 Stock Award Incentive Plan, the Company does
not have outstanding, and at the Closing Date will not have outstanding, any
options to purchase, or any preemptive or other rights or warrants to
subscribe for, or any securities or obligations convertible into, or any
contracts or commitments to issue or sell, any shares of Common Stock, any
shares of capital stock of or membership interests or partnership interests
in any Subsidiary or any such warrants, convertible securities or
obligations. The offer, issuance and sale by the Company of any shares of
Common Stock subsequent to May 27, 1997 but prior to the date hereof is in
compliance with or exempt from the registration requirements of the 1933 Act
and with applicable state securities, real estate syndication and blue sky
laws.
(f) The financial statements and schedules included in the
Offering Circular present fairly in all material respects the financial
condition and position of the respective entity or entities and the
respective property or properties presented and reported on therein as of the
respective dates thereof and the results of operations and cash flows of such
entity or entities and such property or properties for the respective periods
covered thereby, all in conformity with generally accepted accounting
principles applied on a consistent basis throughout the entire period
involved, except as otherwise disclosed in the Offering Circular. The pro
forma financial statements of the Company included in the Offering Circular
comply in all material respects with the applicable requirements of Rule
11-02 of Regulation S-X of the Commission and the pro forma adjustments have
been properly applied to the historical amounts in the
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compilation of such statements. No other financial statements or schedules
of the Company, any predecessor or other entity or entities or any property
or properties owned or to be acquired by the Company are required by the 1933
Act, the 1934 Act, the 1933 Act Regulations or the 1934 Act Regulations to be
included in the Offering Circular. Ernst & Young LLP (the "Accountants"),
who have reported on such financial statements and schedules, are independent
accountants with respect to the Company as required by the 1933 Act and the
1933 Act Regulations.
(g) The Company and its Subsidiaries maintain and will maintain, a
system of internal accounting controls which the Company believes is
sufficient to provide reasonable assurance that (i) transactions are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit the preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (iii) access to financial assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(h) Since the respective dates as of which information is given in
the Offering Circular, except as otherwise stated therein or as disclosed on
SCHEDULE 3(h) attached hereto, (A) there has been no change, other than
changes affecting the economy or the industry generally, which, singly or in
the aggregate with other changes, is materially adverse to the condition
(financial or otherwise), business, properties, net worth, results of
operations or prospects of the Company and its Subsidiaries taken as a whole,
whether or not arising in the ordinary course of business, (B) no casualty
loss or condemnation or other adverse event has occurred with respect to any
real property currently owned by the Company or any of its Subsidiaries (the
"Properties") which singly or in the aggregate will have a Material Adverse
Effect, (C) there have been no acquisitions or other transactions entered
into by the Company or any of its Subsidiaries other than those in the
ordinary course of business, which are, singly or in the aggregate, material
with respect to the Company and its Subsidiaries taken as a whole, (D) there
has been no dividend or distribution of any kind declared, paid or made by
the Company on any class of its capital stock, and (E) there has been no
change in the capital stock of the Company or any of its Subsidiaries, and no
increase in the indebtedness of the Company or any of its Subsidiaries or any
default by the Company or any of its Subsidiaries under any of their
outstanding indebtedness, in either case, that is, singly or in the
aggregate, material to the Company and its Subsidiaries taken as a whole.
(i) Neither the Company nor any of its Subsidiaries is an
"investment company" as such term is defined in the Investment Company Act of
1940, as amended.
(j) Except as set forth in the Offering Circular, there are no
actions, suits or proceedings pending or, to the knowledge of the Company,
threatened against or affecting (i) the Company, any of its Subsidiaries, or
any of their respective shareholders, members, partners, directors or
officers in their capacity as such, or (ii) any of the Properties, before or
by any Federal or state court, commission, regulatory body, administrative
agency or other governmental body, domestic or foreign, which would, singly
or in the aggregate, have a Material Adverse Effect.
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(k) Each of the Company and its Subsidiaries has, and at the
Closing Date will have, (i) all material governmental licenses, permits,
consents, orders, approvals and other authorizations necessary to carry on
its business as described in the Offering Circular, and has not received
notice of any proceedings relating to the revocation or modification of any
such governmental license, permit, consent, order, approval or other
authorization, (ii) complied in all material respects with all material laws,
regulations and orders applicable to it or its business and (iii) performed
in all material respects all its material obligations required to be
performed by it, and is not, and at the Closing Date will not be, in material
default, under any material indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, bond, debenture, note agreement, lease, contract,
recorded covenant, land use approval or zoning agreement or other agreement
or instrument (collectively, a "contract or other agreement") to which it is
a party or by which its property is bound or affected. To the knowledge of
the Company and each of its Subsidiaries, no other party under any contract
or other agreement to which it is a party is in default in any respect
thereunder in a manner that would have a Material Adverse Effect. Neither
the Company nor any of its Subsidiaries is presently, nor at the Closing Date
will be, in violation of any provision of its respective charter, certificate
of incorporation, by-laws, limited partnership agreement, limited liability
company agreement or operating agreement, as the case may be.
(l) Other than filings to be made with the Commission in
connection with the registration of the Securities pursuant to the
Registration Rights Agreement, no consent, approval, authorization or order
of, or any filing or declaration with, any court or governmental agency or
body is required for the consummation by the Company and its Subsidiaries of
the transactions contemplated by this Agreement or the Registration Rights
Agreement. All consents of any nature whatsoever, including, without
limitation, all consents of stockholders and directors, required for the
consummation of the transactions contemplated hereby or by the Registration
Rights Agreement have been duly obtained in compliance with all applicable
laws, have not been revoked and remain in full force and effect.
(m) The Company has full corporate power and authority to enter
into this Agreement and the Registration Rights Agreement. This Agreement
and the Registration Rights Agreement have been duly authorized, executed and
delivered by the Company and constitute, and on the Closing Date will
constitute, valid and binding agreements of the Company, enforceable against
the Company in accordance with their terms. Except as set forth in the
Offering Circular, the performance of this Agreement and the Registration
Rights Agreement, the consummation of the transactions contemplated hereby
and thereby, and the application of the net proceeds from the offering in the
manner set forth in the Offering Circular under "Use of Proceeds" will not
result in the creation or imposition of any Lien upon any of the Properties
or any of the other assets of the Company or any of its Subsidiaries pursuant
to the terms or provisions of, or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, or give any other
party a right to terminate any of its obligations under, or result in the
acceleration of any obligation under, the organizational documents of the
Company or any of its Subsidiaries, any contract or other agreement to which
the Company or any of its Subsidiaries is a party or by which the Company or
any of its Subsidiaries, or any of their respective properties is bound or
affected, or violate or conflict with any judgment, ruling, decree, order,
statute, rule or regulation of any court or other governmental agency or body
applicable to the business or properties of the Company or any of its
Subsidiaries.
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(n) Except as disclosed on SCHEDULE (n) attached hereto, the
Company and its Subsidiaries have good and marketable title in fee simple to
or a condominium or leasehold interest in all of the Properties, free and
clear of all Liens and title defects, other than those (i) referred to in the
Offering Circular, (ii) identified in the Company's and its Subsidiaries'
existing title insurance policies or commitments therefor (copies of which
have been provided to PaineWebber) or (iii) which will not, singly or in the
aggregate, have a Material Adverse Effect. All Liens or title defects on or
affecting the Properties which, if the Offering Circular were governed by the
disclosure requirements for Form S-3 under the 1933 Act, would be required to
be disclosed in the Offering Circular (taking into consideration the
information set forth therein with respect to the Company and its
Subsidiaries on a consolidated basis) are disclosed therein. To the
knowledge of the Company after due inquiry (i) the current use and any
intended use set forth in the Offering Circular and occupancy of each of the
Properties, other than improvements which have not yet been constructed,
complies with all applicable codes and zoning laws and regulations, if any,
except for such failures to comply which would not, singly or in the
aggregate, have a Material Adverse Effect; and (ii) there is no pending or
threatened condemnation, zoning change, environmental or other governmental
proceeding or action that will in any material respect affect the size of,
use of, improvements on, construction on, or access to the Properties, except
such proceedings or actions that would not, singly or in the aggregate, have
a Material Adverse Effect. Except as described in the Offering Circular or
in SCHEDULE 3(hh) attached hereto, and except for rights of tenants to extend
their leases or expand their leased premises, no person (other than the
Company) will have any option or right of first refusal to purchase all or
part of any of the Properties or any interest in any of the Subsidiaries or
other assets of the Company.
(o) There is no document or contract of a character which, if the
Offering Circular were governed by the disclosure requirements for Form S-3
under the 1933 Act, would be required to be described in the Offering
Circular or to be filed as an exhibit to the Offering Circular which is not
described or filed as required (collectively, the "Contracts"). All of the
Contracts to which any of the Company or its Subsidiaries is a party have
been duly authorized, executed and delivered by such entity, constitute valid
and binding agreements of such entity and are enforceable against such entity
in accordance with the terms thereof, except as such enforcement may be
limited by (i) bankruptcy, insolvency, reorganization or similar other laws
affecting creditors' rights generally and (ii) general equity principles and
limitations on the availability of equitable relief or, in the case of any
Contract to be executed after the date of this Agreement but on or before the
Closing Date, will on the Closing Date be duly authorized, executed and
delivered by the Company and/or a Subsidiary, and constitute valid and
binding agreements of such entity enforceable against each entity in
accordance with the terms thereof, except as such enforcement may be limited
by (i) bankruptcy, insolvency, reorganization or similar other laws affecting
creditors' rights generally and (ii) general equity principles and
limitations on the availability of equitable relief.
(p) No statement, representation, warranty or covenant made by the
Company in this Agreement or the Registration Rights Agreement, or made (or
to be made) in any certificate or document required by Section 5 of this
Agreement to be delivered to PaineWebber was when made, or will be on the
Closing Date, inaccurate, untrue or incorrect.
(q) Neither the Company, its Subsidiaries nor, to the knowledge of
the Company, any of their directors, officers or controlling persons has
taken, directly or indirectly, any action intended, or
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which might reasonably be expected, to cause or result, under the 1933 Act,
the 1934 Act or otherwise, in, or which has constituted, stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities.
(r) Other than as disclosed in the Offering Circular or as
provided in the Registration Rights Agreement, no holder of securities of the
Company has rights to the registration of any securities of the Company
because of the execution or performance of this Agreement or the Registration
Rights Agreement.
(s) [Intentionally Omitted]
(t) Other than as disclosed in the Offering Circular, no material
labor dispute with the employees of the Company or any of its Subsidiaries
exists or, to the knowledge of the Company after due inquiry, is imminent or
threatened.
(u) The Company and its Subsidiaries own, or are licensed or
otherwise have the right to use the material patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, services marks and trade names
(collectively, "patent and proprietary rights") presently employed by them or
which are necessary in connection with the conduct of the business now
operated by them, and neither the Company nor any of its Subsidiaries has
received any written notice or otherwise has actual knowledge after due
inquiry of any infringement of rights of others or any other claims with
respect to any proprietary rights.
(v) Neither the Company nor any of its Subsidiaries nor, to the
knowledge of the Company, any other employee or agent of the Company or any
Subsidiary, has made any payment of funds of the Company or any Subsidiary or
received or retained any funds in violation of any law, rule or regulation.
(w) Title insurance or commitments therefor in favor of the
Company is, and on the Closing Date will be, in force with respect to each of
the Properties in an amount at least equal to the cost of acquisition of such
Property.
(x) Except as disclosed in the Offering Circular, there are no
mortgages or deeds of trust encumbering any of the Company's or its
Subsidiaries' interest in the Properties. The mortgages encumbering the
Company's or its Subsidiaries' interest in the Properties are not convertible
nor does the Company or any of its Subsidiaries hold a participating interest
therein and, except as disclosed in the Offering Circular, such mortgages are
not cross-defaulted or cross-collateralized to any other property (whether or
not owned by the Company or any Subsidiary).
(y) The Company has and maintains property and casualty insurance
in favor of the Company and its Subsidiaries with respect to them and each of
the Properties, in an amount and on such terms as is reasonable and customary
for businesses of the type proposed to be conducted by the Company and its
Subsidiaries. Neither the Company nor any of its Subsidiaries has received
from any insurance
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company written notice of any material defects or deficiencies affecting the
insurability of any such Properties.
(z) To the knowledge of the Company (which includes information
obtained as a result of its ordinary, periodic property inspections and
tenant inquiries), in each case, except such as would not have a Material
Adverse Effect, each of the Properties and the Company and its Subsidiaries,
(i) is and will be, as of the Closing Date, in compliance with any and all
applicable foreign, Federal, state and local laws and regulations relating to
the protection of human health and safety, the environment or hazardous or
toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), (ii) has received, or will have received, as of the Closing Date, all
permits, licenses and other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) is, and
will be, as of the Closing Date, in compliance with all terms and conditions
of any such permit, license or approval.
(aa) Except as disclosed in the Offering Circular or except as
would not, singly or in the aggregate, have a Material Adverse Effect:
(i) To the knowledge of the Company, none of the owners
of the Properties has at any time, and, no other party has at any
time, released (as such term is defined in CERCLA Section 101(22)) or
otherwise disposed of, Hazardous Materials (as hereinafter defined) on,
to or from the Properties in violation of applicable Environmental Laws.
The Company does not intend to use the Properties or any subsequently
acquired properties for the handling, generation, treatment, storage or
disposal of Hazardous Materials, except for Hazardous Materials utilized
in the ordinary course of business of the Company or of a tenant of any
Property in compliance with applicable Environmental Laws;
(ii) To the knowledge of the Company, there has been no
release (as such term is defined in CERCLA Section 101(22)) of
Hazardous Materials into waters on or adjacent to the Properties or onto
lands from which such hazardous or toxic waste or substances might seep,
flow or drain into such waters;
(iii) the Company has received no notice of, and has no
knowledge of, any occurrence or circumstance (except for Hazardous
Materials utilized in the ordinary course of business of the Company or of
a tenant of a Property in compliance with applicable Environmental Laws)
which, with notice or passage of time or both, would give rise to, any
claim under or pursuant to any Environmental Law pertaining to hazardous or
toxic waste or substances on or originating from the Properties or arising
out of the Company's conduct in relation to such Environmental Law.
(iv) neither the Properties nor any other land owned by the
Company or any of its Subsidiaries is included or, to the Company's
knowledge, proposed for inclusion on the National Priorities List issued
pursuant to CERCLA (as hereinafter defined) by the United States
Environmental Protection Agency (the "EPA") or on the inventory of other
potential "Problem" sites issued by the EPA and has not otherwise been
publicly identified by the EPA as a potential CERCLA site or included or,
to the Company's knowledge, proposed for inclusion on any list or
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inventory issued pursuant to any other Environmental Law or issued by any
other Governmental Authority (as hereinafter defined); and
(v) the Company has not entered into or been subject to any
consent decree, compliance order or administrative order with respect to
the environmental conditions at the Properties, any facilities or
improvements or any operations or activities thereon.
As used herein, "Hazardous Material" shall include, without
limitation, any flammable explosives, radioactive materials, oil, petroleum,
petroleum products, hazardous materials, hazardous wastes, hazardous or toxic
substances, asbestos or any material as defined by any Environmental Laws,
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601,
ET SEQ.) ("CERCLA"), the Hazardous Materials Transportation Act, as amended
(49 U.S.C. Section 1801, ET SEQ.), the Resource Conservation and Recovery
Act, as amended (42 U.S.C. Section 9601, ET SEQ.), and in the regulations
adopted pursuant to each of the foregoing or by any Federal, state or local
governmental authority having jurisdiction over the Properties as described
in the Offering Circular (a "Governmental Authority").
All of the Properties have been, and it is contemplated that all
future acquisitions will be subjected to a Phase I or similar environmental
assessment (which generally includes a site inspection, interviews and a
records review, but no subsurface sampling). These assessments and certain
follow-up investigations (including, as appropriate, asbestos, radon and lead
surveys, additional public records review, subsurface sampling and other
testing) of the Properties have not revealed any environmental liability that
the Company believes would have a Material Adverse Effect.
(ab) The Company has not distributed and, prior to the later to
occur of (i) the Closing Date and (ii) completion of the sale of the
Securities to PaineWebber and PaineWebber's sale of the Securities to the
Trust, will not distribute any offering material in connection with the
offering and sale of the Securities other than the Offering Circular or other
materials, if any, permitted by the 1933 Act.
(ac) Neither the assets of the Company nor the assets of its
Subsidiaries constitute, nor will such assets, as of the Closing Date,
constitute, "plan assets" under the Employee Retirement Income Security Act
of 1974, as amended, including the regulations and published interpretations
thereunder ("ERISA"). The Company and its Subsidiaries are, and as of the
Closing Date will be, in compliance in all material respects with all
presently applicable provisions of ERISA; no "reportable event" (as defined
in ERISA) has occurred with respect to any "pension plan" (as defined in
ERISA) for which the Company or any of its Subsidiaries would have any
material liability; neither the Company nor any of its Subsidiaries has
incurred or expects to incur any material liability under (i) Title IV of
ERISA with respect to termination of, or withdrawal from, any "pension plan"
or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as
amended, including the regulations and published interpretations thereunder
(the "Code"); and each "pension plan" for which the Company or any of its
Subsidiaries would have any liability that is intended to be qualified under
Section 401(a) of the Code is so qualified in all material respects and, to
the knowledge of the Company, nothing has occurred, whether by action or by
failure to act, which would cause the loss of such qualification.
10
(ad) The Company has continuously been organized and operated in
conformity with the requirements for qualification as a "real estate investment
trust" ("REIT") under Sections 856 through 860 of the Code for all taxable years
commencing with its taxable year ended December 31, 1996. The Company has filed
an election to be taxable as a REIT for its taxable year ended December 31,
1996, and such election has not been terminated.
(ae) The Company has filed all material Federal, state and foreign
income and franchise tax returns required to be filed on or prior to the date
hereof and has paid taxes shown as due thereon, other than taxes which are
being contested in good faith and for which adequate reserves have been
established in accordance with generally accepted accounting principles; and
the Company has no knowledge, after due inquiry, of any tax deficiency which
has been asserted or threatened against the Company. To the knowledge of the
Company, there are no tax returns of the Company or any of its Subsidiaries
that are currently being audited by state, local or Federal taxing
authorities or agencies which would have Material Adverse Effect.
(af) Except as noted in the notes to SCHEDULE 3(ff), each entity
identified in the Offering Circular or in the rent roll for each Property
attached as SCHEDULE 3(ff) (collectively, the "Rent Rolls") as a tenant of
any Property (each, a "Tenant") or such Tenant's subtenant is in actual
possession of such Property under a lease to such Tenant (each such lease, a
"Lease"). Except as disclosed in the Offering Circular, each Lease is in full
force and effect and neither the Company nor any of its Subsidiaries has
notice of any defense to the obligations of the Tenant thereunder or any
claim asserted or threatened by any person or entity, which claim would have
a Material Adverse Effect. To the knowledge of the Company, no Tenant of any
of the Properties is in default under any of the Leases governing such
Properties and there is no event which, but for the passage of time or the
giving of notice, or both, would constitute a material default under any of
such Leases, except for such defaults that would not, individually or in the
aggregate, have a Material Adverse Effect. The information contained in the
Rent Rolls is true, accurate and correct in all material respects as of the
date of the Rent Rolls.
(ag) All Tenant Leases generally provide that the Tenant is
responsible for environmental liabilities related to such Tenant's
operations, and that such Tenant must comply with all Environmental Laws
except as disclosed in SCHEDULE 3(GG) attached hereto.
(ah) Except as disclosed in the Offering Circular or on SCHEDULE
3(hh) attached hereto, no Tenant under any Lease has an option or right of
first refusal or similar right to purchase the premises leased thereunder or
any right to extend such Lease or reduce the rent payable thereunder.
(ai) Except as disclosed in SCHEDULE 3(ii) attached hereto, to the
knowledge of the Company, no tenant from which the Company has received or is
entitled to receive material lease payments fails to own or possess the
material governmental licenses, permits, certificates, consents, orders,
approvals and other authorizations including, without limitation,
certificates of occupancy and similar certificates and clearances
(collectively, the "Authorizations"), necessary to conduct the operations as
presently permitted to be conducted by such Tenant at each Property under the
applicable Lease, and to the Company's knowledge, no such Tenant has received
any notice of proceedings or administrative action relating to the revocation
or modification of any such Authorization. The Company or a Subsidiary
thereof owns or
11
possesses all material Authorizations necessary to conduct its operations and
to own its Properties and none of the Company or any such Subsidiary has
received notice of proceedings or administrative action relating to the
revocation or modification of any such Authorization.
(aj) Except as disclosed in the Offering Circular or on SCHEDULE
3(JJ) attached hereto, no rent under any Lease has been paid in advance for
more than one month and no "free rent" or other rental concession to the
Tenant thereunder is currently in effect.
(ak) To the knowledge of the Company, each Property is served by
all utilities necessary for its use and operation as currently used and
fronts on or has lawful access to a public road or right of way.
(al) Except as specifically disclosed in the Offering Circular or
on SCHEDULE 3(LL) attached hereto, (i) to the knowledge of the Company, there
is no material defect in the condition of any Property, the improvements
thereon, the structural elements thereof, or the mechanical systems therein,
nor any material damage from casualty or other cause, nor any soil condition
of any such Property that will not support all of the improvements thereon
without the need for unusual or new subsurface excavations, fill, footings,
caissons or other installations, except for (a) ordinary wear and tear and
(b) any such defect, damage or condition that has been corrected or will be
corrected in the ordinary course of the business of such Property as part of
the Company's scheduled maintenance and improvement program, (ii) to the
knowledge of the Company, there have been no material alterations to the
exteriors of any of the buildings or other improvements on any Property, and
no excavations landscaping, manmade or natural alterations to terrain of any
Property, since the date of the surveys provided to PaineWebber and counsel
to PaineWebber that would render any of such surveys inaccurate in any
material respect and which, singly or in the aggregate, would result in a
Material Adverse Effect, and (iii) there is no pending or planned substantial
renovation, remodeling, construction, or tenant improvement project relating
to any of the Properties.
4. COVENANTS. The Company covenants with PaineWebber that:
(a) The Company will immediately notify PaineWebber, and confirm
such notice in writing, of (x) any filing made by the Company of information
relating to the offering of the Securities with any securities exchange or
any other regulatory body in the United States or any other jurisdiction, and
(y) prior to the completion of the deposit of the Securities by PaineWebber
in the Trust as evidenced by a notice in writing from PaineWebber to the
Company, any material changes in or affecting the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries which (i) make any statement in the Offering
Circular false or misleading or (ii) are not disclosed in the Offering
Circular. In such event or if during such time any event shall occur as a
result of which it is necessary, in the reasonable opinion of any of the
Company, its counsel, PaineWebber or counsel for PaineWebber, to amend or
supplement the Offering Circular in order that the Offering Circular not
include any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading in the
light of the circumstances then existing, the Company will forthwith amend or
supplement the Offering Circular by preparing and furnishing to PaineWebber
an amendment or amendments of, or a supplement or supplements to, the
Offering Circular (in form and
12
substance satisfactory in the reasonable opinion of counsel for PaineWebber)
so that, as so amended or supplemented, the Offering Circular will not
include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to the Trust, not
misleading.
(b) The Company will deliver to PaineWebber, without charge, as
many copies of the Offering Circular. The Company consents to the delivery
of the Offering Circular and any amendment or supplement thereto by
PaineWebber to the Trust, in connection with the deposit of the Securities
with the trustee in exchange for units in the Trust, as contemplated herein.
(c) The Company will advise PaineWebber promptly of any proposal
to amend or supplement the Offering Circular. PaineWebber's delivery of any
such amendment or supplement, shall not constitute a waiver of any of the
conditions set forth in Section 5 hereof.
(d) The Company will use its reasonable best efforts, in
cooperation with PaineWebber, to qualify the Securities for offering and sale
under the applicable securities laws of such states and other jurisdictions
as PaineWebber may reasonably designate and to maintain such qualifications
in effect for a period of not less than one year from the date of this
Agreement; PROVIDED, HOWEVER, that the Company shall not be obligated to file
any general consent to service of process or to subject itself to taxation in
respect of doing business in any jurisdiction in which it is not otherwise so
subject. In each jurisdiction in which the Securities have been so qualified
or registered, the Company will file such statements and reports as may be
required by the laws of such jurisdiction to continue such qualification in
effect for a period of not less than one year from the date of this Agreement.
(e) During a period of three years from the Closing Date, the
Company will deliver to PaineWebber, (i) promptly upon their becoming
available, copies of all financial statements and current, regular and
periodic reports of the Company mailed to its stockholders or filed with any
securities exchange or with the Commission or any governmental authority
succeeding to any of the Commission's functions, and (ii) such other
information concerning the Company as PaineWebber may reasonably request.
(f) Whether or not the transactions contemplated by this Agreement
are consummated or this Agreement is terminated, the Company will pay, or
reimburse if paid by PaineWebber, all costs and expenses incident to the
performance of the obligations of the Company under this Purchase Agreement,
including but not limited to costs and expenses of or relating to (i) the
preparation, printing and filing of the Offering Circular and exhibits
thereto, and any amendment or supplement to the Offering Circular, (ii) the
preparation and delivery of certificates representing the Securities, (iii)
the costs incurred by the Company in furnishing (including costs of shipping,
mailing and courier) such copies of the Offering Circular, and all amendments
and supplements thereto, as may be requested for use in connection with the
offering and sale of the Securities to PaineWebber, (iv) the listing of the
Securities on the NYSE, (v) any filings required to be made by PaineWebber
with the NASD, and the fees, disbursements and other charges of PaineWebber's
counsel in connection therewith, (vi) the registration or qualification of
the Securities for offer and sale (including obtaining any exemptions
therefrom) and any broker/dealer registration, qualification or exemption
under the securities or blue sky laws of such jurisdictions designated by
13
PaineWebber, including the fees, disbursements and other charges of
PaineWebber's counsel in connection therewith, and the preparation and
printing of blue sky memoranda, (vii) counsel to the Company, (viii) the
transfer agent for the Securities and (ix) the Accountants.
(g) If this Purchase Agreement shall be terminated by the Company
pursuant to any of the provisions hereof or if for any reason the Company
shall be unable to perform its obligations hereunder, the Company will
reimburse PaineWebber for all out-of-pocket expenses (including the
reasonable fees and disbursements of one counsel to PaineWebber) reasonably
incurred by PaineWebber in connection herewith.
(h) The Company will not at any time, directly or indirectly, take
any action intended, or which might reasonably be expected, to cause or
result in, or which will constitute, stabilization of the price of the shares
of Common Stock to facilitate the sale or resale of any of the Securities.
(i) The Company will use the net proceeds received by it from the
sale of the Securities in the manner specified in the Offering Circular under
"Use of Proceeds."
(j) The Company intends to continue to operate in a manner which
would permit it to qualify as a "real estate investment trust" ("REIT") under
the Code. Unless the Board of Directors determines in good faith that
meeting such requirements is not in the best interest of the holders of the
Company's Common Stock, (i) the Company will use its best efforts to continue
to meet the requirements to qualify as a REIT under the Code for the taxable
year in which sales of the Securities are to occur and for its future taxable
years and (ii) the Company will not affirmatively revoke its election to be
taxable as a REIT under the Code.
(k) The Company, during the period when the Securities are
outstanding and are "restricted securities" within the meaning of Rule
144(a)(3) under the 1933 Act, will file all documents required to be filed
with the Commission pursuant to the 1934 Act within the time periods required
by the 1934 Act and the 1934 Act Regulations.
(l) The Company will use its best efforts to effect and maintain
the listing of the Securities, prior to the Closing Date, on the New York
Stock Exchange.
(m) The Company will comply with all of the terms and conditions
of the Registration Rights Agreement.
(n) In connection with the original distribution of the
Securities, the Company agrees that, prior to any offer or resale of
Securities by PaineWebber, PaineWebber and counsel for PaineWebber shall have
the right to make reasonable inquiries into the business of the Company and
its subsidiaries.
(o) The Company agrees that it will not and will cause its
Affiliates not to solicit any offer to buy or make any offer or sale of, or
otherwise negotiate in respect of, securities of the Company of any class if,
as a result of the doctrine of "integration" referred to in Rule 502 under
the 1933 Act, such offer or sale would render invalid (for the purpose of (i)
the sale of the Securities by the Company to
14
PaineWebber or (ii) the resale of the Securities by PaineWebber to the Trust
as described herein) the exemption from the registration requirements of the
1933 Act provided by Section 4(2) thereof or by Rule 144A thereunder or
otherwise.
5. CONDITIONS OF PAINEWEBBER'S OBLIGATIONS. PaineWebber's obligations
under this Agreement shall be subject to the performance by the Company of its
obligations hereunder and to the following additional conditions:
(a) Since the date as of which information is given in the
Offering Circular, (i) there shall not have been, and no development shall
have occurred which could reasonably be expected to result in, a change
which, singly or in the aggregate with other changes, would have a Material
Adverse Effect, whether or not arising from transactions in the ordinary
course of business, other than as set forth in or contemplated by the
Offering Circular and (ii) the Company and its Subsidiaries (taken as a
whole) shall not have sustained any loss or interference which, singly or in
the aggregate, is material with respect to its business or properties from
fire, explosion, flood or other casualty, whether or not covered by
insurance, or from any labor dispute or any court or legislative or other
governmental action, order or decree, which is not set forth in the Offering
Circular, if in the judgment of PaineWebber any such development makes it
impracticable or inadvisable to consummate the sale and delivery of the
Securities.
(b) Since the date as of which information is given in the
Offering Circular, there shall have been no litigation or other proceeding
instituted against the Company or any of its Subsidiaries or any of their
respective officers or directors in their capacities as such, before or by
any Federal, state or local court, commission, regulatory body,
administrative agency or other governmental body, domestic or foreign, in
which litigation or proceeding an unfavorable ruling, decision or finding
would, singly or in the aggregate, have a Material Adverse Effect.
(c) Each of the representations and warranties of the Company
contained herein shall be true and correct in all material respects at the
Closing Date as if made at the Closing Date. All covenants and agreements
contained herein to be performed on the part of the Company and all
conditions herein contained to be fulfilled or complied with by the Company
at or prior to the Closing Date shall have been duly performed, fulfilled or
complied with in all material respects.
(d) PaineWebber shall have received opinions, dated the Closing
Date, and satisfactory in form and substance to counsel for PaineWebber, from
Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Company, in the
forms set forth in EXHIBIT 5(d)-1 and EXHIBIT 5(d)-2.
(e) PaineWebber shall have received an opinion, dated the Closing
Date, and satisfactory in form and substance to counsel for PaineWebber from
Ballard Spahr Andrews & Ingersoll, special Maryland counsel to the Company,
in the form set forth in EXHIBIT 5(e).
(f) PaineWebber shall have received an opinion, dated the Closing
Date, and satisfactory in form and substance to counsel for PaineWebber from
Joel S. Marcus, counsel to the Company, in the form set forth in EXHIBIT 5(f).
15
(g) PaineWebber shall have received an opinion, dated the Closing
Date, from Goodwin, Procter & Hoar LLP, counsel to PaineWebber, with respect
to the organization of the Company, validity of the Securities and other
related matters as PaineWebber reasonably may request which opinion shall be
satisfactory in all respects to PaineWebber, and such counsel shall have
received such papers and information as they reasonably may request to enable
them to pass upon such matters.
(h) Concurrently with the execution and delivery of this
Agreement, the Accountants shall have furnished to PaineWebber a letter,
dated the date of its delivery, addressed to PaineWebber and in form and
substance satisfactory to PaineWebber, confirming that they are independent
accountants with respect to the Company as required by the 1933 Act and the
1933 Act Regulations and that the financial statements included in the
Offering Circular comply with the requirements of the 1933 Act and addressing
certain financial and other statistical and numerical information contained
in the Offering Circular. At the Closing Date, the Accountants shall have
furnished to PaineWebber a letter, dated the date of its delivery, which
shall confirm, on the basis of a review in accordance with the procedures set
forth in the letter from the Accountants, that nothing has come to their
attention during the period from the date of the letter referred to in the
prior sentence to a date (specified in the letter) not more than five days
prior to the Closing Date which would require any change in their letter
dated the date hereof if it were required to be dated and delivered at the
Closing Date.
(i) At the Closing Date there shall be furnished to PaineWebber an
accurate certificate, dated the date of its delivery, signed on behalf of the
Company by each of the Chief Executive Officer and the Chief Financial
Officer of the Company, in form and substance satisfactory to PaineWebber,
with respect to such matters as PaineWebber may reasonably request,
including, without limitation certificates to the effect that:
(i) Each signer of such certificate has examined the
Offering Circular (including any documents filed under the Exchange
Act and deemed to be incorporated by reference into the Offering
Circular) and no event has occurred as a result of which it is necessary
to amend or supplement the Offering Circular in order to make the
statements therein not misleading in any material respect and there has
been no document required to be filed under the 1934 Act or the 1934 Act
Regulations that has not been so filed;
(ii) Each of the representations and warranties of the
Company contained in this Agreement were, when originally made, and are,
at the time such certificate is delivered, true and correct in all
material respects; and
(iii) Each of the covenants required herein to be performed
by the Company on or prior to the delivery of such certificate has been
duly, timely and fully performed and each condition herein required to be
complied with by the Company on or prior to the date of such certificate
has been duly, timely and fully complied with.
(j) The Securities shall be qualified for sale in such states as
PaineWebber may reasonably request, each such qualification shall be in effect
and not subject to any stop order or other proceeding on the Closing Date.
16
(k) Prior to the Closing Date, the Securities shall have been duly
authorized for listing by the New York Stock Exchange upon official notice of
issuance.
(l) On or before the Closing Date, the Company shall have
delivered to PaineWebber UCC lien searches in form and substance reasonably
satisfactory to PaineWebber and its counsel confirming that the partnership
interests, member interests and shares of each Subsidiary, as the case may
be, are not subject to any Liens.
(m) On or before the Closing Date the Company shall have delivered
to PaineWebber with respect to each Property acquired since the Company's
initial public offering:
(i) a policy of title insurance (or a commitment to
issue such a policy) naming the Company or one of its Subsidiaries as
named insured and insuring (or committing to insure) that the Company or
one of its Subsidiaries owns fee title to or a condominium or leasehold
interest in the real property in an amount at least equal to the cost of
acquisition of such Property, which policy (or commitment) shall be
issued by Chicago Title Insurance Company or such other title insurance
company reasonably acceptable to PaineWebber (any such person or
persons, the "Title Company"), and contain only such exceptions to title
with respect to each Property as disclosed in the Offering Circular or
in the commitments to issue title insurance and underlying policies of
title insurance delivered to PaineWebber or its counsel prior to the
date hereof (the "Permitted Exceptions");
(ii) a survey of such Property in form reasonably
satisfactory to PaineWebber;
(iii) policies or certificates of insurance relating to such
Property evidencing coverages and in amounts customarily obtained by owners
of similar properties in similar locations;
(iv) copies of such affidavits, certificates and instruments
of indemnification which were required to induce the Title Company to issue
the policy (or commitment) contemplated in subparagraph (i) above other
than affidavits of owners addressing parties in possession or mechanics'
liens in standard form;
(v) an engineering (structural) report from an engineer or
engineers and in a form reasonably satisfactory to PaineWebber;
(vi) a copy of each Lease entered into or amended since the
Company's initial public offering (including all amendments and supplements
thereto);
(vii) a copy of each environmental report prepared by or for
the Company or any of its Subsidiaries or any of their affiliates since the
Company's initial public offering; and
(viii) in the event that no endorsement insuring zoning
compliance is provided in the title insurance policy, or in an update of an
existing title insurance policy to be obtained in connection with the
transactions contemplated hereby, insuring the interest of the Company or
the
17
Subsidiaries, as applicable, in each Property, a certificate signed by an
officer of the Company or an appropriate local official attaching a copy
of the certificate of occupancy for such Property, or other evidence
reasonably satisfactory to PaineWebber that the Property may be legally
occupied for its current use.
(n) Between the date hereof and the Closing Date, (i) each of the
Properties shall have been operated in the ordinary course of business and in
material compliance with all applicable laws and regulations; (ii) no material
Lease shall have been amended or terminated and no material waiver or consent
under any material Lease shall have been granted and the lessees thereunder
shall have complied with all their material obligations thereunder; and (iii)
all required payments under any existing mortgages shall have been made.
(o) Any certificate signed by an officer of the Company and delivered
to PaineWebber hereunder shall be deemed a representation and warranty by the
Company to PaineWebber as to the matters covered thereby.
(p) On or prior to the Closing Date, the Company shall have executed
and delivered the Registration Rights Agreement, substantially in the form
attached hereto as EXHIBIT A.
6. INDEMNIFICATION.
(a) The Company will indemnify and hold harmless PaineWebber, the
directors, officers, employees and agents of PaineWebber and each person, if
any, who controls PaineWebber within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act, from and against any and all losses,
claims, liabilities, expenses and damages (including, but not limited to, any
and all investigative, legal and other expenses reasonably incurred (in
accordance with subsection (c) below) in connection with, and any and all
amounts paid in settlement of, any action, suit or proceeding between any of
the indemnified parties and any indemnifying parties or between any
indemnified party and any third party, or otherwise, or any claim asserted),
as and when incurred, to which PaineWebber, or any such person, may become
subject under the 1933 Act, the 1934 Act or other Federal or state statutory
law or regulation, at common law or otherwise, insofar as such losses,
claims, liabilities, expenses or damages arise out of or are based on (i) any
untrue statement or alleged untrue statement of a material fact contained in
the Offering Circular or any amendment or supplement to the Offering
Circular, or in any application or other document executed by the Company
filed in any jurisdiction in order to qualify the Securities under the
securities laws thereof or filed with the Commission, (ii) the omission or
alleged omission to state in such document a material fact required to be
stated in it or necessary to make the statements in it not misleading or
(iii) any act or failure to act or any alleged act or failure to act by
PaineWebber in connection with, or relating in any manner to, the Securities
or the private placement contemplated hereby, and which is included as part
of or referred to in any loss, claim, liability, expense or damage arising
out of or based upon matters covered by clause (i) or (ii) above (provided
that the Company shall not be liable under this clause (iii) to the extent it
is finally judicially determined by a court of competent jurisdiction that
such loss, claim, liability, expense or damage resulted directly from any
such acts or failures to act undertaken or omitted to be taken by PaineWebber
through its gross negligence or willful misconduct); provided that the
Company will not be liable to the extent that such loss, claim, liability,
expense or damage arises from the
18
sale of the Securities in the offering to any person by PaineWebber and
results solely from an untrue statement of a material fact contained in, or
the omission of a material fact from, such Offering Circular, which untrue
statement or omission was completely corrected in the Offering Circular (as
then amended or supplemented) if the Company shall sustain the burden of
proving PaineWebber sold Securities to the person alleging such loss, claim,
liability, expense or damage without sending or giving, at or prior to the
written confirmation of such sale, a copy of the Offering Circular (as then
amended or supplemented) if the Company had previously furnished copies
thereof to PaineWebber within a reasonable amount of time (which in any event
shall be no less than 24 hours) prior to such sale or such confirmation, and
PaineWebber failed to deliver the corrected Offering Circular, if required by
law to have so delivered it and if delivered would have been a complete
defense against the person asserting such loss, claim, liability, expense or
damage. The Company acknowledges that the only information relating to
PaineWebber furnished in writing to the Company by PaineWebber specifically
for inclusion in the Offering Circular is the following sentence:
"PaineWebber intends to deposit the shares with the trustee of PaineWebber
Equity Trust REIT Series I (A Unit Investment Trust) (the "Trust"), a
registered unit investment trust under the Investment Company Act of 1940, as
amended, for which PaineWebber acts as sponsor and depositor, in exchange for
units in the Trust." This indemnity agreement will be in addition to any
liability that the Company might otherwise have.
(b) PaineWebber will indemnify and hold harmless the Company, each
person, if any, who controls the Company within the meaning of Section 15 of
the 1933 Act or Section 20 of the 1934 Act and each director of the Company
to the same extent as the foregoing indemnity from the Company to
PaineWebber, but only insofar as losses, claims, liabilities, expenses and
damages arise out of or are based on any untrue statement or omission or
alleged untrue statement or omission made in reliance on and in conformity
with information relating to PaineWebber furnished to the Company by
PaineWebber expressly for use in the Offering Circular. This indemnity will
be in addition to any liability that PaineWebber might otherwise have;
provided, however, that in no case shall PaineWebber be liable or responsible
for any amount in excess of the fee received by PaineWebber under this
Agreement.
(c) Any party that proposes to assert the right to be indemnified
under this Section 6 will, promptly after receipt of notice of commencement
of any action against such party in respect of which a claim is to be made
against an indemnifying party or parties under this Section 6, notify each
such indemnifying party of the commencement of such action, enclosing a copy
of all papers served, but the omission so to notify such indemnifying party
will not relieve it from any liability that it may have to any indemnified
party under the foregoing provisions of this Section 6 unless, and only to
the extent that, such omission results in the forfeiture of substantive
rights or defenses by the indemnifying party. If any such action is brought
against any indemnified party and it notifies the indemnifying party of its
commencement, the indemnifying party will be entitled to participate in and,
to the extent that it elects by delivering written notice to the indemnified
party promptly after receiving notice of the commencement of the action from
the indemnified party, jointly with any other indemnifying party similarly
notified, to assume the defense of the action, with counsel reasonably
satisfactory to the indemnified party, and after notice from the indemnifying
party to the indemnified party of its election to assume the defense, the
indemnifying party will not be liable to the indemnified party for any legal
fees or other expenses of counsel in defending such action except as provided
below and except for the reasonable costs of investigation subsequently
incurred by the indemnified party in connection with the defense. The
indemnified party will have the right to
19
employ its own counsel in any such action, but the fees, expenses and other
charges of such counsel will be at the expense of such indemnified party
unless (1) the employment of counsel by the indemnified party has been
authorized in writing by the indemnifying party, (2) the indemnified party
has reasonably concluded (based on advice of counsel) that there may be legal
defenses available to it or other indemnified parties that are different from
or in addition to those available to the indemnifying party, (3) a conflict
or potential conflict exists (based on advice of counsel to the indemnified
party) between the indemnified party and the indemnifying party (in which
case the indemnifying party will not have the right to direct the defense of
such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel to assume the defense of such action within
a reasonable time after receiving notice of the commencement of the action,
in each of which cases the reasonable fees, disbursements and other charges
of counsel selected by the indemnified party will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying party
or parties shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified party
or parties. All such fees, disbursements and other charges will be
reimbursed by the indemnifying party promptly as they are incurred. An
indemnifying party will not be liable for any settlement of any action or
claim effected without its written consent (which consent will not be
unreasonably withheld). No indemnifying party shall, without the prior
written consent of each indemnified party, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding relating to the matters contemplated by this Section 6 (whether or
not any indemnified party is a party thereto), unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising or that may arise out of such claim, action
or proceeding.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 6 is applicable in accordance with its terms but
for any reason is held to be unavailable from the Company on the one hand or
PaineWebber on the other, the Company on the one hand and PaineWebber on the
other will contribute to the total losses, claims, liabilities, expenses and
damages (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any
action, suit or proceeding or any claim asserted, but after deducting any
contribution received by the Company from persons other than PaineWebber,
such as persons who control the Company within the meaning of the 1933 Act
and directors of the Company, who also may be liable for contribution) to
which the Company on the one hand and PaineWebber on the other may be subject
in such proportion as shall be appropriate to reflect the relative benefits
received by each. The relative benefits received by the Company on the one
hand and PaineWebber on the other shall be deemed to be in the same
proportion as the total net proceeds from the private placement (before
deducting expenses) received by the Company bear to the total fees received
by PaineWebber under this Agreement, in each case as set forth in the
Offering Circular. If, but only if, the allocation provided by the foregoing
sentence is not permitted by applicable law, the allocation of contribution
shall be made in such proportion as is appropriate to reflect not only the
relative benefits referred to in the foregoing sentence but also the relative
fault of the Company, on the one hand, and PaineWebber, on the other, with
respect to the statements or omissions which resulted in such loss, claim,
liability, expense or damage, or action in respect thereof, as well as any
other relevant equitable considerations with respect to such private
placement. Such relative fault shall be determined by reference
20
to whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or PaineWebber, the intent of the parties and their
relative knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and PaineWebber agree that
it would not be just and equitable if contributions pursuant to this Section
6(d) were to be determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, liability, expense or damage, or action in respect
thereof, referred to above in this Section 6(d) shall be deemed to include,
for purpose of this Section 6(d), any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 6(d), PaineWebber shall not be required to contribute any amount in
excess of the fees received by it under this Agreement, and no person found
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the 1933 Act) will be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section
6(d), any person who controls a party to this Agreement within the meaning of
the 1933 Act will have the same rights to contribution as that party, subject
in each case to the provisions hereof. Any party entitled to contribution,
promptly after receipt of notice of commencement of any action against such
party in respect of which a claim for contribution may be made under this
Section 6(d), will notify any such party or parties from whom contribution
may be sought, but the omission so to notify will not relieve the party or
parties from whom contribution may be sought from any other obligation it or
they may have under this Section 6(d). No party will be liable for
contribution with respect to any action or claim settled without its written
consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in this
Section 6 and the representations and warranties of the Company contained in
this Agreement shall remain operative and in full force and effect regardless
of (i) any investigation made by or on behalf of PaineWebber, (ii) acceptance
of any of the Securities and payment therefor or (iii) any termination of
this Agreement.
7. TERMINATION.
The obligations of PaineWebber under this Agreement may be terminated at
any time on or prior to the Closing Date, by notice to the Company from
PaineWebber, without liability on the part of PaineWebber to the Company, if,
prior to delivery and payment for the Securities, in the sole judgment of
PaineWebber, (i) the Company shall have failed, refused or been unable, at or
prior to the Closing Date, to perform any agreement on its part to be
performed, (ii) any condition of PaineWebber's obligations specified in
Section 5 is not fulfilled when required, (iii) there has been, since the
respective dates as of which information is given in the Offering Circular,
any change which, singly or in the aggregate with other changes, is
materially adverse to the condition (financial or otherwise), business,
properties, net worth, results of operations or prospects of the Company or
any of its Subsidiaries, (iv) trading in any of the equity securities of the
Company shall have been suspended by the Commission, the NASD, by an exchange
that lists the Securities or by the National Association of Securities
Dealers Automated Quotation National Market System (the "Nasdaq NMS"), (v)
trading in securities generally on the New York Stock Exchange or the Nasdaq
NMS shall have been suspended or limited or minimum or maximum prices shall
have been generally established on such exchange or over the counter market,
or additional material
21
governmental restrictions, not in force on the date of this Agreement, shall
have been imposed upon trading in securities generally by such exchange or
over the counter market or by order of the Commission or any court or other
governmental authority, (vi) a general banking moratorium shall have been
declared by either Federal or New York State authorities or (vii) any
material adverse change in the financial or securities markets in the United
States or in political, financial or economic conditions in the United States
or any outbreak or material escalation of hostilities or declaration by the
United States of a national emergency or war or other calamity or crisis
shall have occurred the effect of any of which is such as to make it, in the
sole judgment of PaineWebber, impracticable or inadvisable to sell the
Securities on the terms and in the manner contemplated by the Offering
Circular.
8. MISCELLANEOUS
Notice given pursuant to any of the provisions of this Agreement shall
be in writing and, unless otherwise specified, shall be mailed or delivered
(a) if to the Company, at the office of the Company, 251 South Lake Avenue,
Suite 700, Pasadena, California 91101, Attention: Chief Executive Officer,
or (b) if to PaineWebber at the offices of PaineWebber Incorporated, 1285
Avenue of the Americas, New York, New York 10019, Attention: Corporate
Finance Department. Any such notice shall be effective one day after being
sent by next day mail service, five days after being sent by U.S. mail and
upon receipt when sent by facsimile. Any notice under Section 7 may be made
by telex or telephone, but if so made shall be subsequently confirmed in
writing.
This Agreement has been and is made solely for the benefit of
PaineWebber and the Company and of the controlling persons and directors
referred to in Section 6, and their respective successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. The term "successors and assigns" as used in this Agreement shall
not include a purchaser, as such purchaser, of Securities from PaineWebber.
All representations, warranties and agreements of the Company contained
herein or in certificates or other instruments delivered pursuant hereto,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of PaineWebber or any of its controlling
persons and shall survive delivery of and payment for the Securities
hereunder.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAWS
PRINCIPLES OF SUCH STATE.
This Agreement may be signed in two or more counterparts with the same
effect as if the signatures thereto and hereto were upon the same instrument.
In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
22
The Company and PaineWebber each hereby irrevocably waive any right they
may have to a trial by jury in respect of any claim based upon or arising out
of this Agreement or the transactions contemplated hereby.
This Agreement may not be amended or otherwise modified or any provision
hereof waived except by an instrument in writing signed by PaineWebber and
the Company.
9. COVENANTS AND REPRESENTATIONS OF PAINEWEBBER
(a) PaineWebber agrees that it will not, in its capacity as
sponsor in connection with the trust, exercise its discretion pursuant to the
Indenture (the "Indenture") between PaineWebber, as sponsor, and the trustee
of the Trust, to direct the trustee to redeem units of the Trust "in kind" by
distributing Securities owned by the Trust in lieu of cash to redeeming
unitholders tendering units in value in excess of $250,000, unless (i) the
Company has, pursuant to the terms of the Registration Rights Agreement,
caused to be filed with the Commission, a registration statement under Rule
415 of the 1933 Act and a related prospectus providing for registration of
the offer and sale by the Trust of the Securities, and such registration
statement shall have been declared effective by the Commission; or (ii) such
"in kind" distribution is made in compliance with an exemption from the
registration requirements of the 1933 Act.
(b) PaineWebber hereby:
(i) acknowledges that it has been advised that the
Securities have not been registered under the 1933 Act or under any state
securities laws and the Company will rely upon PaineWebber's representations
in this Section 9(b) to establish an exception from the registration
requirements of the 1933 Act and any applicable state securities laws.
PaineWebber understands and acknowledges that, as a result, except for the
sale of the Securities to the Trust it will not be permitted to sell,
transfer or assign any of the Securities acquired hereunder until such
Securities are registered or an exemption from the registration and
prospectus delivery requirements of the 1933 Act is available. PaineWebber
acknowledges that there is no assurance that such an exemption form
registration will ever be available or that the Securities will ever be able
to be sold by PaineWebber other than to the Trust;
(ii) represents and warrants that, it intends to deposit
the Securities with the trustee of the Trust in exchange for units in the
Trust and the Securities are not being purchased by PaineWebber with a view
to, or for resale in connection with, a public offering or distribution
thereof in any transaction with any person, firm or corporation that would be
in violation of the securities laws of the United States, and it has no
present intention of selling, granting participations in, or otherwise
distributing any of the Securities to any person, firm or corporation other
than the Trust. It does not have any contract, undertaking, agreement or
arrangement with any person, firm or corporation other than the Trust to
sell, transfer or grant participations to such person, firm or corporations
with respect to any Securities;
(iii) represents and warrants that PaineWebber was not
formed or capitalized for the purpose of investing in the Securities and is
an "accredited investor" as that term is defined in Regulation D under the
1933 Act; and that PaineWebber does not require the assistance of an
investment advisor or other purchaser representative to participate in the
transactions contemplated by this Agreement;
23
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of its investment in the Company;
and has the ability to bear the economic risks of its investment for an
indefinite period of time;
(iv) represents and warrants that it has had the
opportunity to discuss the Company's business, management and financial
affairs with the Company's management and to obtain all information which it
believes necessary to an informed decision to purchase the Securities;
(v) agrees that the Securities will not be sold or
otherwise disposed of by it other than (i) to the Trust, or (ii) in
compliance with the registration requirements of, or an exemption from such
registration under, the 1933 Act and any other applicable securities laws and
unless in the case of a sale other than to the Trust (A) it shall have
notified the Company of the proposed disposition and shall have furnished the
Company with a statement of the circumstances surrounding the proposed
disposition and (B) it shall have furnished the Company with an opinion of
counsel reasonably satisfactory in form and content to the Company to the
effect that (x) such disposition will not require registration of such
Securities under the 1933 Act or compliance with applicable state securities
laws or (y) that an exemption from the registration requirements of the 1933
Act is available and that all appropriate action necessary for compliance
therewith and with the applicable state securities laws have been taken or
(C) the Company shall have waived, expressly and in writing, its rights under
clauses (A) and (B) of this subsection;
(vi) consents that stop transfer instructions in respect
of the Securities may be issued to any transfer agent, registrar or other
agent at any time acting for the Company, provided that such stop transfer
instructions shall not apply to any transfer of the Securities to the Trust
or pursuant to an effective registration statement under the 1933 Act or an
exemption from the registration requirements of the 1933 Act;
(vii) agrees that the Securities may not be pledged,
hypothecated, sold or transferred, other than to the Trust, in the absence of
an effective registration statement covering the Securities under the 1933
Act or an exemption from the registration requirements of the 1933 Act and
consents that the certificate or certificates representing the Securities
will bear (i) a legend in substantially the form set forth in the Articles of
Amendment, (ii) the legends required by Section 2-211 of the Maryland General
Corporation Law, and (iii) a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
APPLICABLE SECURITIES ACT OF ANY STATE, BUT HAVE BEEN ISSUED IN
RELIANCE UPON EXEMPTION FROM REGISTRATION CONTAINED IN SUCH ACTS. THE
SECURITIES MAY NOT BE PLEDGED, HYPOTHECATED, SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER SUCH ACTS OR AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS
NOT REQUIRED."
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If the foregoing correctly sets forth the understanding between the
Company and PaineWebber, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement
between the Company and PaineWebber.
Very truly yours,
ALEXANDRIA REAL ESTATE EQUITIES, INC.
By: _________________________________
Name:
Title:
ACCEPTED as of the date first above
written
PAINEWEBBER INCORPORATED
By: _______________________________
Name:
Title: