EXECUTION
MIT - INVESTOR
EXCEPTED HOLDER AGREEMENT
This EXCEPTED HOLDER AGREEMENT is made and entered into as of September 24,
1997 by and between MERIDIAN INDUSTRIAL TRUST, INC., a Maryland corporation (the
"COMPANY"), and THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey
corporation (the "INVESTOR").
R E C I T A L S
A. The Company is qualified as a real estate investment trust ("REIT")
under the Internal Revenue Code of 1986, as amended (the "CODE").
B. To help the Company maintain its status as a REIT, the Company's
Amended and Restated Articles of Incorporation (the "ARTICLES") impose certain
limitations on the ownership of the Company's stock. (Capitalized terms used in
this Agreement that are not otherwise defined shall have the meanings given to
them in the Articles.) The Articles contain a general restriction prohibiting
any Person from owning more than a specified percentage (initially set at eight
and one half percent) of the lesser of the number or value of any class of
outstanding shares of the Company (the "OWNERSHIP LIMIT").
C. The Company's Board of Directors is permitted to establish an
"EXCEPTED HOLDER LIMIT" allowing ownership in excess of the Ownership Limit if
certain conditions are satisfied. This Agreement is intended to create an
Excepted Holder Limit for Investor.
A G R E E M E N T
1. REPRESENTATIONS AND COVENANTS OF INVESTOR
Beginning on the date hereof, and during any period that an Excepted Holder
Limit established pursuant to this Agreement (as subsequently adjusted) remains
in effect, Investor represents and agrees as follows:
1.1 (a) The Investor is a New Jersey Insurance Company that is treated as
a corporation for federal income tax purposes, and all shares of the Company
that the Investor owns (including the shares of the Company held by the Investor
on behalf of the Separate Accounts listed on EXHIBIT "C" attached hereto) will
be treated under the stock ownership rules of Section 856(h) of the Code as
owned by the Investor's policyholders (its "shareholders" for this purpose).
(b) No shareholder of the Investor will be considered under the stock
ownership rules of Section 856(h) of the Code to own more than eight and one
half percent (8.5%) of the lesser of the number or value of any outstanding
class of the shares of the Company (taking into account, for this purpose, only
those shares considered owned by such shareholder by virtue of its being a
shareholder of the Investor).
1.2 (a) Except as set forth on SCHEDULE 2, Investor, to the best
knowledge of Investor based upon the due diligence described below and in
reliance upon the accuracy of the information set forth in SCHEDULE 1, does not
actually own or Constructively Own an interest in any tenant of the Company (or
any entity owned or controlled by the Company) listed on SCHEDULE 1 attached
hereto that would cause the Company to Constructively Own more than a 9.9
percent interest (within the meaning of Section 856(d)(2)(B) of the Code) in
such tenant, without regard to the other interests in such tenant which the
Company may actually or Constructively Own. The due diligence referred to above
consisted of a review by Investor of the most recently received copies of all
financial reports received from (i) each partnership in which Investor and/or
its Affiliates directly holds an equity interest; and (ii) each corporation in
which Investor and/or its Affiliates owns a 10 percent or greater equity
interest. This representation is made only with respect to the date hereof and
does not constitute a continuing representation or covenant with respect to the
matters described in this Section 1.2.
(b) For purposes of this Agreement, "Constructive Ownership" shall
mean ownership of Equity Stock by a Person, whether the interest in the
shares of Equity Stock is held directly or indirectly (including by a
nominee), and shall include interests that would be treated as owned through
the application of Section 318(a) of the Code, as modified by Section
856(d)(5) of the Code. The terms "Constructive Owner","Constructively Owns"
and "Constructively Owned" shall have correlative meanings. For example, if
a corporation is the actual beneficial owner of Equity Stock, the shares will
be treated as Constructively Owned by that corporation (due to its direct
ownership of the shares), and the 10% or more stockholders of that
corporation will Constructively Own their respective proportionate interests
in those shares (due to their deemed ownership under Code Section
318(a)(2)(C) as modified by Code Section 856(d)(5)), and interests in the
same shares may also be treated as Constructively Owned by others, depending
upon the identity of, and relationships between, the stockholders and those
related to the stockholders.
1.3 Investor will not own, actually, Beneficially, or Constructively
shares of the Company's Equity Stock that would violate the Excepted Holder
Limit established for Investor pursuant to this Agreement.
1.4 Investor agrees that any violation or attempted violation of Section
1.3 of this Agreement or the provisions of the Board of Directors' resolution
implementing this Agreement (or other action contrary to the ownership
restrictions imposed under the Articles) will automatically subject the shares
that otherwise would result in the violation to the treatment described in
Sections 5.5 and 5.6 of the Articles (the shares will be immediately transferred
to a Trust, or if the transfer to
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the Trust would be ineffective, the purported Transfer will be void AB
INITIO).
1.5 Investor will not intentionally take any action which is known by the
officer of Investor taking such action to result in a breach of any
representation, warranty or covenant of Investor set forth in this Agreement,
or an Investor Ownership Event (as defined below).
1.6 In the event that (i) the representations or covenants set forth in
Section 1.2 hereof are breached in any respect or (ii) Investor owns, actually
or Constructively, an interest in a tenant of the Company (or a tenant of any
entity owned or controlled by the Company) which causes the Company (A) to own,
actually or Constructively, an interest in such tenant which is described in
Section 856(d)(2)(B) of the Code as a result of such ownership and income
derived from such tenant, (B) to fail to satisfy any of the gross income
requirements of Section 856(c) of the Code (an "INVESTOR OWNERSHIP EVENT"),
then:
(a) any party hereto who becomes aware of such breach or Investor
Ownership Event shall promptly notify the other party in writing of such breach
or Investor Ownership Event; and
(b) the Company shall take all reasonably available actions with
respect to its assets and sources of gross receipts in order to prevent the
incurrence of any material tax liability by the Company, to the extent that the
Board of Directors of the Company determines that such actions are in the best
interests of the Company and its shareholders; and
(c) in the event that, pursuant to the provisions set forth in
subsection (b), the Company is unable to resolve the circumstance giving rise to
the notice provided in subsection (a) within 60 days after the receipt of such
notice, then the Company and Investor shall promptly undertake good faith
negotiations to resolve any such circumstance in a manner that will not result
in any material tax liability to the Company or produce any economic loss for
Investor.
Notwithstanding any other provision of the Articles or of any other agreement
between Investor and the Company, the sole and exclusive remedies of the Company
with respect to the breach of any representations or covenants set forth in
Section 1.2 hereof or with respect to the occurrence of an Investor Ownership
Event shall be the remedies set forth in this Section 1.6 (and, in particular,
the Preferred Stock or common stock in the Company owned by Investor shall not
be subject to the Shares-in-Trust provisions of Section 5.5 of the Articles upon
the occurrence of such breach or Investor Ownership Event).
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2. ESTABLISHMENT OF AN EXCEPTED HOLDER LIMIT FOR INVESTOR
Based on the above representations and agreements, the Company, effective
as of the date of this Agreement, has established an Excepted Holder Limit for
Investor (including the Separate Accounts listed on EXHIBIT "C" attached
hereto), its successors and permitted assigns, by adopting a resolution of its
Board of Directors in the form attached to this Agreement as EXHIBIT "A".
3. APPLICABILITY OF CHARTER PROVISIONS
3.1 Investor and the Company agree that, in lieu of the provisions of
paragraphs 5.3.3(a) and 5.3.3(b) of the Articles, by which Investor, as an
Excepted Holder, would otherwise be bound, Investor will be bound by the
provisions set forth in Section 1.3 and Section 1.6 above as if they were set
forth in the Articles.
3.2 Investor and the Company agree that, in lieu of the provisions of
paragraph 5.4.2 of the Articles, by which Investor, as a Beneficial Owner or
Constructive Owner of Equity Stock, would otherwise be bound, for so long as
Investor actually owns or Constructively Owns at least 10 percent of the Equity
Stock of the Company and provided that the Company complies with paragraphs (a)
and (b) below Investor will provide the information set forth in paragraph (c)
below to the Company on an annual basis:
(a) No later than December 31 of each calendar year, the Company
will use commercially reasonable efforts to ascertain the equity ownership
of each of its tenants, excluding those tenants from whom the Company (or
any entity owned or controlled by the Company, in whole or in part) derives
or is expected to continue to derive a sufficiently small amount of revenue
such that, in the opinion of the management of the Company, rent from such
tenant would not adversely affect the Company's ability to qualify as a
REIT (after such exclusion, herein referred to as the "REMAINING TENANTS");
(b) No later than December 31 of each year, the Company will compile
a list of the Remaining Tenants whose equity ownership it has been unable
to ascertain (the "TENANT LIST") and will deliver the Tenant List to
Investor, together with a Certificate and Acknowledgment in the form
attached to this Agreement as EXHIBIT "B";
(c) No later than 30 days after receipt of the Tenant List, Investor
will cause the Certificate and Acknowledgment to be returned to the Company
properly completed.
4. MISCELLANEOUS
4.1 The Company represents and warrants that SCHEDULE 1 sets forth a true
and complete list of the Company's Remaining Tenants. The Company does not
actually or Constructively Own any ownership interest in any of the Remaining
Tenants as of the date hereof.
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4.2 All questions concerning the construction, validity and interpretation
of this Agreement shall be governed by and construed in accordance with the
domestic laws of the State of Maryland, without giving effect to any choice of
law or conflict of law provision (whether of the State of Maryland or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of Maryland.
4.3 This Agreement may be signed by the parties in separate counterparts,
each of which when so signed and delivered shall be an original, but all such
counterparts shall together constitute one and the same instrument.
4.4 This Agreement may not be assigned by the Investor unless the assignee
shall agree to make each of the representations and warranties and agreements of
an "Investor" set forth in Section 1 hereof, the Company is reasonably satisfied
that such representations and warranties are true and correct as of the date
made and the Company otherwise consents to such assignment, such consent not to
be unreasonably withheld or delayed.
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Each of the parties has caused this Agreement to be signed by its duly
authorized officers as of the date set forth in the introductory paragraph of
this Agreement.
The "Company" "Investor"
MERIDIAN INDUSTRIAL TRUST, INC., a THE PRUDENTIAL INSURANCE
Maryland corporation COMPANY OF AMERICA, a New Jersey
corporation
By: By:
------------------------------ ---------------------------------
Name: Name:
---------------------------- -------------------------------
its: Its:
----------------------------- --------------------------------
X-0
X-0
EXHIBIT "A"
MIT C PRUDENTIAL
EXCEPTED HOLDER LIMIT RESOLUTION
In accordance with Article 5 of the Company's Amended and Restated Articles of
Incorporation ("ARTICLES"), the Directors hereby determine that, effective upon
the REIT Ownership Date (capitalized terms used in this resolution that are not
otherwise defined shall have the meanings given to those terms in the Articles),
and subject to adjustment as set forth below:
1. An Excepted Holder Limit of thirty-seven percent (37%) of the number
of outstanding shares of Common Stock shall apply to The Prudential Insurance
Company of America, its successor and permitted assigns and any holder of all of
the Common Stock held thereby ("PRUDENTIAL"); PROVIDED, HOWEVER, that in the
event of a redemption, repurchase or cancellation of shares of Common Stock or
similar action on the part of the Company that results in the number of shares
of Common Stock then Beneficially or Constructively Owned by Prudential
representing a greater percentage of the outstanding shares of Common Stock,
such Ownership Limit shall be increased proportionately;
2. As to each Person that is deemed to Beneficially Own or Constructively
Own an interest in shares of the Company that are held by Prudential, that
Person's deemed indirect interest in the shares held by Prudential shall be
disregarded for purposes of applying the Ownership Limit to that Person,
provided, however, if such a Person also Beneficially or Constructively Owns an
interest in other shares of the Company, the interest held through Prudential
shall not be so disregarded; and
3. When Prudential sells or otherwise transfers ownership of shares of
the Company outside of Prudential, the Excepted Holder Limit then applicable to
Prudential shall be reduced by the interest that is sold or transferred, but the
limit applicable to Prudential shall not be reduced below the basic Ownership
Limit.
A-1
EXHIBIT B
MIT C PRUDENTIAL
CERTIFICATE AND ACKNOWLEDGMENT
[DATE]
The undersigned, being a duly elected and qualified __________ of
Prudential Insurance Company of America, a New Jersey insurance company
("PRUDENTIAL"), do hereby certify as follows:
(1) The undersigned has received from Meridian Industrial Trust,
Inc., a Maryland corporation, ("MIT") the Tenant List dated as of __________
(the "MOST RECENT TENANT LIST"), which has been delivered pursuant to Section
3.2(b) of that certain Excepted Holder Agreement dated __________, 1997 by and
between MIT and Prudential (the "EXCEPTED HOLDER AGREEMENT"; all capitalized
terms used herein and not defined herein shall have the same respective meanings
as are ascribed to such terms in the Excepted Holder Agreement).
(2) The undersigned has reviewed the Most Recent Tenant List in his
capacity as an officer of Prudential and has made such inquiries as the
undersigned has deemed reasonably necessary in connection with the
certifications made pursuant hereto.
(3) Attached hereto as ATTACHMENT 1 is a schedule listing each tenant
whose name appears in the Most Recent Tenant List and in which Prudential and/or
any of its affiliates owns a 10% or greater equity interest.
(4) Either of the following certifications is true and correct [**
STRIKE INAPPLICABLE PARAGRAPH ]:
(A) Neither Prudential nor any of its affiliates, individually
or in the aggregate, owns or Constructively Owns 10 percent or more of the
Equity Stock of MIT.
(B) I have reviewed (or have caused appropriate personnel of
Prudential to review under my supervision) investments in each entity named as a
tenant in the Most Recent Tenant List in which Prudential and/or its affiliates
owns an equity interest, and such review has not revealed (except as
specifically noted in ATTACHMENT 2 to this Certificate) any circumstances in
which Prudential, each partnership in which Prudential directly holds an equity
interest and each corporation in which Prudential owns a 10% or greater equity
interest would Constructively Own more than a 9.9 percent interest in any such
tenant.
[Signature on next page]
B-1
IN WITNESS WHEREOF, the undersigned has executed this Certificate and
Acknowledgment as of the date first written above.
By:
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Name:
Title:
X-0
XXXXXXXXXX 0
0-0
XXXXXXXXXX 2
2-1
EXHIBIT C
SEPARATE ACCOUNTS
1. Western Conference of Teamsters Pension Trust Fund.
2. The Prudential Variable Contract Real Property Partnership, the
partners of which are the Prudential Insurance Company of America
("Prudential"), on behalf of the Prudential Variable Contract Real
Property Account, Pruco Life Insurance Company (a separate account of
Prudential), on behalf of the Pruco Life Variable Contract Real
Property Account, and Pruco Life Insurance Company of New Jersey (a
separate account of Prudential), on behalf of the Pruco Life of New
Jersey Variable Contract Real Property Account.
3. Strategic Performance Fund-II, Inc.
4. The Chevron Separate Account.
5. Strategic Performance Fund I Separate Account.
C-1
SCHEDULE 1
List of Tenants of the Company and the ownership interest in each tenant
actually or Constructively Owned by the Company
See Attached
Sch. 1 - 1
SCHEDULE 2
List of Tenants of the Company in which the Investor owns or Constructively Owns
a substantial interest:
None.
Sch. 2-1
