-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RlJRNwyq5z4WKcKGr/kcCJb8PFBRjmVhlmktj/oZT/G42Tpvk/6JcHfobJtg7VtF A4lQPiz+X42dRhnckTNxQA== 0000950134-96-007008.txt : 19961224 0000950134-96-007008.hdr.sgml : 19961224 ACCESSION NUMBER: 0000950134-96-007008 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19961220 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN INDUSTRIAL PROPERTIES REIT INC CENTRAL INDEX KEY: 0000778437 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 756335572 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-43183 FILM NUMBER: 96684432 BUSINESS ADDRESS: STREET 1: 6220 N BELTLINE RD STREET 2: STE 205 CITY: IRVING STATE: TX ZIP: 75063 BUSINESS PHONE: 2145506053 MAIL ADDRESS: STREET 1: 6220 N BELTLINE ROAD STREET 2: SUITE 205 CITY: IRVING STATE: TX ZIP: 75063 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN INDUSTRIAL PROPERTIES REIT DATE OF NAME CHANGE: 19931203 FORMER COMPANY: FORMER CONFORMED NAME: TRAMMELL CROW REAL ESTATE INVESTORS DATE OF NAME CHANGE: 19931203 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: USAA REAL ESTATE CO CENTRAL INDEX KEY: 0000946483 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 742237999 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 8000 ROBERT F MCDERMOTT FREEWAY CITY: SAN ANTONIO STATE: TX ZIP: 78230 BUSINESS PHONE: 2104980626 MAIL ADDRESS: STREET 1: USAA REAL ESTATE CO STREET 2: 8000 ROBERT F MCDERMOTT FREEWAY CITY: SAN ANTONIO STATE: TX ZIP: 78230 SC 13D 1 SCHEDULE 13D 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 AMERICAN INDUSTRIAL PROPERTIES REIT (Name of Issuer) Shares of Beneficial Ownership, par value $0.10 per share (Title of Class of Securities) 02679103000 (CUSIP Number) Mr. T. Patrick Duncan USAA Real Estate Company 8000 Robert F. McDermott Freeway IH-10 West, Suite 600 San Antonio, Texas 78230-3884 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) December 19, 1996 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13G, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box: ___ Check the following box if a fee is being paid with the statement: X 2 Page 2 of 22 Pages SCHEDULE 13D CUSIP No. 026791103000 1. Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person USAA Real Estate Company ("Realco") 74-2237999 2. Check the Appropriate Box if a Member of a Group (a) __ (b) X 3. SEC Use Only 4. Source of Funds WC 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e): 6. Citizenship or Place of Organization Delaware 7. Sole Voting Power Number of Shares Beneficially 3,182,206 Shares of Beneficial Trust Owned by Each 8. Shared Voting Power Person With 0 3 Page 3 of 22 Pages 9. Sole Dispositive Power 3,182,206 Shares of Beneficial Interest 10. Shared Dispositive Power -0- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 3,182,206 Shares of Beneficial Interest owned directly by Realco 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares -- 13. Percent of Class Represented by Amount in Row (11) 31.8%* 14. Type of Reporting Person CO - -------- *Assumes 9,075,400 Shares of Beneficial Interest of American Industrial Properties REIT ("AIP") outstanding as of September 30, 1996, as represented by AIP in its quarterly report on Form 10-Q, and includes the 924,600 additional shares issued and sold by AIP to Realco on December 19, 1996. 4 Page 4 of 22 Pages SCHEDULE 13D CUSIP No. 026791103000 1. Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person USAA Capital Corporation ("USAA-CC") 2. Check the Appropriate Box if a Member of a Group (a) __ (b) X 3. SEC Use Only 4. Source of Funds Not applicable 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e): 6. Citizenship or Place of Organization Delaware 7. Sole Voting Power Number of Shares Beneficially 3,182,206 Shares of Beneficial Interest Owned by Each 8. Shared Voting Power Person With -0- 9. Sole Dispositive Power 5 Page 5 of 22 Pages 3,182,206 Shares of Beneficial Interest 10. Shared Dispositive Power -0- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 3,182,206 Shares of Beneficial Interest of AIP owned directly by Realco. USAA-CC currently owns directly all of the outstanding shares of capital stock of Realco. 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares -- 13. Percent of Class Represented by Amount in Row (11) 31.8%** 14. Type of Reporting Person CO - -------- ** Assumes 9,075,400 Shares of Beneficial Interest of AIP outstanding as of September 30, 1996, as represented by AIP in its quarterly report on Form 10-Q, and includes the 924,600 additional shares issued and sold by AIP to Realco on December 19, 1996. 6 Page 6 of 22 Pages SCHEDULE 13D CUSIP No. 026791103000 1. Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person United Services Automobile Association ("USAA") 2. Check the Appropriate Box if a Member of a Group (a) __ (b) X 3. SEC Use Only 4. Source of Funds Not applicable 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e): 6. Citizenship or Place of Organization Texas 7. Sole Voting Power Number of Shares Beneficially 3,182,206 Shares of Beneficial Interest Owned by Each 8. Shared Voting Power Person With -0- 9. Sole Dispositive Power 7 Page 7 of 22 Pages 3,182,206 Shares of Beneficial Interest 10. Shared Dispositive Power -0- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 3,182,206 Shares of Beneficial Interest of AIP owned directly by Realco. USAA currently owns, indirectly, all of the outstanding shares of capital stock of Realco. 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares -- 13. Percent of Class Represented by Amount in Row (11) 31.8%*** 14. Type of Reporting Person 00 - a reciprocal interinsurance exchange under the Texas Insurance Code - -------- *** Assumes 9,075,400 Shares of Beneficial Interest of AIP outstanding as of September 30, 1996, as represented by AIP in its quarterly report on Form 10-Q, includes the 924,600 additional shares issued and sold by AIP to Realco on December 19, 1996. 8 Page 8 of 22 Pages ITEM 1. SECURITY AND ISSUER This Statement on Schedule 13D relates to the beneficial ownership of Shares of Beneficial Interest, par value $0.10 per share ("Shares"), of American Industrial Properties REIT, a Texas real estate investment trust (the "Company" or "AIP"). The address of the Company's principal executive offices is 6220 North Beltline Road, Suite 205, Irving, Texas 75063-2656. ITEM 2. IDENTITY AND BACKGROUND (a) This Statement on Schedule 13D is being filed jointly by USAA Real Estate Company, a Delaware corporation ("Realco"), USAA Capital Corporation, a Delaware corporation ("USAA-CC"), and United Services Automobile Association, a reciprocal interinsurance exchange under the Texas Insurance Code ("USAA"). (b) Realco is a diversified investor in real estate operating companies and real estate, including commercial and industrial properties operating or located in Texas and in other parts of the United States. The address of the principal business and the principal office of Realco is 8000 Robert F. McDermott Freeway, IH-10 West, Suite 600, San Antonio, Texas 78230-3884. (c) Information concerning (i) each executive officer and director of Realco (ii) each controlling person of Realco (which consist solely of USAA-CC and USAA) and (iii) each executive officer and director of USAA-CC and USAA, which information is required to be disclosed in response to Item 2 and General Instruction C to Schedule 13D, is attached hereto as Appendix A. USAA currently owns all of the outstanding shares of capital stock of USAA-CC. USAA-CC currently owns directly all of the outstanding shares of capital stock of Realco. There are no other persons ultimately in control of Realco, USAA-CC or USAA. (d) The business addresses of each of USAA and USAA-CC is USAA Building, 9800 Fredericksburg, San Antonio, Texas 78288. (e) During the last five years, neither Realco, USAA-CC, nor USAA have, and to the best knowledge of Realco, USAA-CC and USAA, none of the execution officers or directors of such entities listed on Appendix A hereto have been, convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors). (f) During the last five years, neither Realco, USAA-CC, nor USAA have been, and to the best knowledge of such entities, none of the executive officers or directors of such entities listed on Appendix A hereto have been, a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding is or was subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. 9 Page 9 of 22 Pages ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION As consideration for 3,182,206 Shares, Realco paid an aggregate of $6,006,291.50 in cash and extinguished the principal amount of $2,744,755 on a Promissory Note payable by American Industrial Properties REIT, Inc. ("AIP Sub") to Realco. Realco used working capital funds in making these purchases. Each of the transactions described in Item 4 below are incorporated herein by reference. ITEM 4. PURPOSE OF TRANSACTIONS In connection with a Settlement Agreement dated as of November 25, 1996, filed with the United States District Court, N.D. Texas among AIP, Pure World, Inc. ("Pure World") and certain other persons (the "Settlement Agreement"), Realco entered into a Stock Purchase Agreement (the "Pure World Agreement"), dated as of November 25, 1996, with Pure World, pursuant to which Realco agreed to purchase from Pure World 907,000 Shares of Beneficial Interest of AIP for an aggregate purchase price of $2,494,250. The closing of the Pure World Agreement was conditioned on the final approval of the Settlement Agreement. The 907,000 Shares were acquired by Realco on December 20, 1996. A copy of the Pure World Agreement is included herein as Exhibit 10.1. Realco also entered into a Stock Purchase Agreement (the "Tratt Agreement"), dated as of November 25, 1996, with Jonathan Tratt, Stanley D.L. Horwitz, David Bradley, Keith Sexton and C.J. Scott (the "Tratt Group"), pursuant to which Realco agreed to purchase from the Tratt Group 352,506 Shares for an aggregate purchase price of $969,391.50. The closing of the Tratt Agreement was also conditioned on the final approval of the Settlement Agreement. The 352,506 Shares were acquired from the Tratt Group on December 20, 1996. A copy of the Tratt Agreement is included herein as Exhibit 10.2. As of December 13, 1996, Realco entered into a Share Purchase Agreement with AIP (the "AIP Agreement"), pursuant to which Realco agreed to purchase from AIP 924,000 Shares for an aggregate purchase price of $2,542,650. The closing of the AIP Agreement was conditioned on the final approval of the Settlement Agreement. The 924,000 Shares were issued by AIP and acquired by Realco on December 19, 1996. A copy of the AIP Agreement is included herein as Exhibit 10.3. As of December 19, 1996, Realco entered into a Share Purchase Agreement with AIP Sub, pursuant to which Realco agreed to purchase 998,100 Shares in exchange for the extinguishment of the principal amount of $2,744,755 on a Promissory Note payable by AIP Sub to Realco. 10 Page 10 of 22 Pages On the date of the filing of this Schedule 13D, Realco owned an aggregate of 3,182,206 Shares. In addition to the agreements described above, Realco entered into a letter agreement with AIP (the "Debt Repurchase Agreement"), pursuant to which AIP agreed to assist Realco in acquiring certain promissory notes of AIP (the "Notes") payable to The Manufacturers Life Insurance Company ("MLI"). If the Notes are acquired by Realco, Realco and AIP will amend the Notes (i) to reduce the aggregate principal balance of the Notes as set forth therein, (ii) to extend the maturity of the Notes to December 31, 2000, and (iii) to provide for the convertibility of the Notes, subject to shareholder approval, at Realco into Shares of AIP at a conversion price of $2.00 per Share if the conversion of the Notes occurs prior to December 31, 1997 and $2.25 if the conversion of such Notes occurs after such period but prior to December 31, 2000. Upon the conversion of the Notes into Shares, AIP will be required to enter into a registration rights agreement covering the resale of such Shares. In the event Realco does not purchase the Notes from MLI, Realco at its option may advance to AIP the funds necessary to repay the Notes, in which case AIP will be required to repay Realco such funds on such terms consistent with the modifications to the Notes set forth therein. A copy of the Debt Repurchase Agreement is included herein as Exhibit 10.5. The above-mentioned agreements have been or will be made for investment purposes. Other than the transactions described herein and contemplated by the agreements set forth as exhibits hereto, Realco, USAA-CC and USAA currently have no other plans or proposals which relate to or would result in the actions set forth in clauses (a) though (j) of Item 4 of Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) The Company reported in its quarterly report on Form 10-Q that it had issued and outstanding on September 30, 1996 an aggregate of 9,075,400 Shares. In connection with the AIP Agreement, AIP issued an additional 924,000 Shares. The number of Shares which are currently deemed to be beneficially owned directly by Realco and indirectly by USAA-CC and USAA is 3,182,206 shares, or approximately 31.8% of the outstanding class of such securities. Beneficial ownership of such Shares was acquired as described in Item 4. (b) The number of Shares as to which there is sole power to direct the vote, shared power to vote or to direct the vote, sole power to dispose or direct the disposition or shared power to dispose or direct the disposition for Realco, USAA-CC and USAA is set forth in the cover pages, and such information is incorporated herein by reference. To the knowledge of Realco, USAA-CC and USAA, none of the other persons listed on Appendix A in response to Item 2 beneficially own any Shares. Certain of those persons may purchase Shares in the future for their own account and not pursuant to any agreement, arrangement or understanding with Realco, USAA-CC or USAA with respect to the voting or disposition of any such Shares. Realco, USAA-CC and USAA disavow the existence of a group with any of such persons. (c) There have been no reportable transactions with respect to the Shares of AIP within the last 60 days by Realco, USAA-CC, USAA or any other person listed on Appendix A in 11 Page 11 of 22 Pages response to Item 2 except for the acquisition by Realco, USAA-CC and USAA of beneficial ownership of the Shares being reported on this Schedule 13D. (d) To the knowledge of Realco, USAA-CC and USAA, no other person is known to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Shares being reported on this Schedule 13D. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER The responses to Items 2, 3 and 4, and the Pure World Agreement, the Tratt Agreement, the AIP Agreement, the AIP Sub Agreement and the Debt Repurchase Agreement filed as Exhibits hereto are incorporated herein by reference. ACQUISITIONS AND DISPOSITIONS OF SHARES OF AIP Pursuant to the Pure World Agreement and the Tratt Agreement, during the period beginning from the date of such Agreements and continuing to and including the date that is the earlier of (a) 5 years after the date thereof, (b) such time as Realco no longer owns at least 2% of the capital stock of AIP, Pure World and the Tratt Group have agreed not to (i) acquire, offer to acquire, or agree to acquire, directly or indirectly, by purchase or otherwise, any securities or direct or indirect rights or options to acquire (through purchase, exchange, conversion or otherwise) any securities or properties of AIP, (ii) make, or in any way participate, directly or indirectly, in any "solicitation" of "proxies" (as such terms are used in the proxy rules of the Securities and Exchange Commission) to vote (including by the execution of actions by written consent) or seek to advise, encourage or influence any person or entity with respect to the voting of any securities of AIP, (iii) form, join or in any way participate in any "group" (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934) with respect to any securities of AIP, (iv) otherwise act, alone or in concert with others, to seek to control or influence the management, board of trust managers or policies of AIP, (v) initiate, propose or otherwise solicit stockholders for the approval of one or more stockholder proposals (as described in the Securities Exchange Act of 1934) seeking to acquire or affect control of AIP, or (vi) acquire any interest in any claims, mortgages, notes or any other legal or financial obligations of AIP. In connection with the AIP Agreement and the AIP Sub Agreement, Realco and AIP also entered into Registration Rights Agreements, pursuant to which Realco has certain rights to require AIP to register the Shares owned by Realco for resale under the Securities Act of 1933, as amended. Under the Registration Rights Agreements, Realco (and certain permitted transfers of 12 Page 12 of 22 Pages Realco) generally have the right to require AIP (i) to file a "shelf" registration statement with respect to Shares held by such party that elects to participate in such registration, which must be kept effective for a period of three years following its initial effective date, (ii) at any time until December 19, 2001, to file a registration statement registering the resale of all or a portion of the Shares then held by Realco, up to a maximum of three registration statements, and (iii) at any time until December 19, 2001, to include (subject to certain exceptions) in any registration statement filed by AIP (other than on Form S-4 or S-8) Shares then held by Realco. Copies of the Registration Rights Agreements are included herein as Exhibits 10.6 and 10.7, respectively. CHANGES IN THE PRESENT BOARD OF TRUST MANAGERS OF AIP Pursuant to the AIP Agreement, Realco has required AIP to increase the number of Trust Managers from three to five, and Realco is entitled to appoint two individuals designated by Realco to fill the vacancies caused by the increase in the number of Trust Managers. Effective December 19, 1996, AIP appointed two individuals, T. Patrick Duncan and Edward B. Kelley. at the request of Realco to fill such vacancies. In addition, pursuant to the AIP Agreement at the first annual meeting after the number of Trust Managers has been increased to five, Realco will be entitled to nominate two individuals for election as Trust Managers of Seller. Furthermore, pursuant to the AIP Agreement at any time during a specified period commencing on the Closing Date, Realco may, by notice in writing to AIP, require AIP to increase the number of Trust Managers from five to seven and to appoint two individuals designated by Realco to fill the vacancies caused by the increase in the number of Trust Managers. Pursuant to the AIP Agreement, during the time AIP has individuals designated or nominated as Trust Managers of AIP, the number of Trust Managers of AIP may not consist of more than 5 persons, including the persons designated or nominated by Realco; provided, whenever Realco has required AIP to increase the number of Trust Managers from five to seven, the number of Trust Managers of AIP may not consist of more than 7 persons, including the persons designated or nominated by Realco. In the event of the death, resignation or removal from office of an individual designated or nominated by Realco, Realco will be entitled to appoint an individuals designated by Realco as a replacement Trust Manager. Pursuant to the AIP Agreement as long as one or more persons designated or nominated by Realco serves as Trust Manager, AIP will be required to appoint at least one of such persons on each committee of AIP's Trust Managers, and each such committee may contain no more than three members. 13 Page 13 of 22 Pages ITEM 7. MATERIAL FILED AS EXHIBITS The following are filed herewith as Exhibits to this Schedule 13D: 10.1 Stock Purchase Agreement, dated as of November 25, 1996, by and among Pure World, Inc. and USAA Real Estate Company. 10.2 Stock Purchase Agreement, dated as of November 25, 1996, by and among Jonathan Tratt, Jonathan Tratt Purchase Money Plan, Stanley D.L. Horwitz, David Bradley, Keith Sexton and C. J. Scott. 10.3 Share Purchase Agreement, dated as of December 13, 1996, by and among USAA Real Estate Company and American Industrial Properties REIT. 10.4 Share Purchase Agreement, dated as of December 19, 1996, by and among USAA Real Estate Company, American Industrial Properties REIT, Inc. and American Industrial Properties REIT. 10.5 Letter Agreement dated December 18, 1996 between American Industrial Properties REIT and USAA Real Estate Company. 10.6 Registration Rights Agreement, dated as of December 19, 1996, by and among USAA Real Estate Company and American Industrial Properties REIT. 10.7 Registration Rights Agreement, dated as of December 20, 1996, by and among USAA Real Estate Company, American Industrial Properties REIT and American Industrial Properties REIT, Inc. 10.8 Agreement for Joint Filing on Behalf of Each Reporting Person. 14 Page 14 of 22 Pages SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: December 20, 1996 USAA REAL ESTATE COMPANY By: /s/ T. PATRICK DUNCAN --------------------------------------- Name: T. Patrick Duncan Title: Senior Vice President - Operations 15 Page 15 of 22 Pages SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: December 20, 1996 USAA CAPITAL CORPORATION Signature: /s/ MICHAEL D. WAGNER ---------------------------- Name: Michael D. Wagner Title: Vice President 16 Page 16 of 22 Pages SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: December 20, 1996 UNITED SERVICES AUTOMOBILE ASSOCIATION Signature: /s/ MICHAEL D. WAGNER ------------------------- Name: Michael D. Wagner Title: Vice President 17 Page 17 of 22 Pages APPENDIX A CERTAIN INFORMATION REGARDING DIRECTORS, EXECUTIVE OFFICERS AND CONTROLLING PERSONS OF USAA REAL ESTATE COMPANY Certain of the Directors and Executive Officers set forth below serve as Directors and Executive Officers in one or more of the following direct or indirect subsidiary companies of United Services Automobile Association ("USAA") as indicated below: (1) USAA; (2) USAA Casualty Insurance Company; (3) USAA General Indemnity Company; (4) USAA Property & Casualty Agency, Inc.; (5) USAA Insurance Agency, Inc.; (6) USAA Limited; (7) USAA Life Insurance Company; (8) USAA Life General Agency, Inc.; (9) USAA Alliance Services, Inc.; (10) USAA Capital Corporation; (11) USAA Funding Company; (12) USAA Property Holdings, Inc.; (13) HTO, Inc.; (14) USAA Buying Services, Inc.; (15) Hausman Road Water Supply Corporation; (16) USAA Capital Development, Inc.; (17) Institutional Realty Investors, Inc.; (18) La Cantera Development Company; (19) Fiesta Texas Showpark, Inc.; (20) La Cantera Hospitality, Inc.; (21) USAA Federal Savings Bank; (22) USAA Credit Corporation; (23) USAA Credit Card Center, Inc.; (24) USAA Relocation Services, Inc.; (25) USAA Investment Corporation; (26) USAA Investment Management Company; (27) USAA Transfer Agency Company; (28) USAA Traco Service GmbH; (29) USAA Investment Trust; (30) USAA Mutual Fund, Inc.; (31) USAA Tax Exempt Fund, Inc.; (32) USAA State Tax-Free Trust; (33) USAA Educational Foundation (The); (34) USAA Political Action Committee; (35) USAA Employee Benefit Association; (36) USAA Real Estate Company; (37) USAA Real Estate Equities, Inc.; (38) Alhambra Gables One, Inc.; (39) L. A. Wilshire One, Inc.; (40) La Paz, Inc. (41) Las Colinas Management Company; (42) Quorum Real Estate Services Corporation; (43) USAA Equity Advisors, Inc.; (44) USAA Health Services, Inc.; (45) USAA Investors I, Inc.; (46) USAA Investors II, Inc.; (47) USAA Properties Fund, Inc.; (48) USAA Properties II, Inc.; (49) USAA Properties III, Inc.; (50) USAA Properties IV, Inc.; (51) USAA Real Estate - Midwest, Inc. (52) USAA Real Estate Development Company; (53) USAA Real Estate Management Company, (54) USAA County Mutual Insurance Company; (55) USAA Financial Administration Company, (56) USAA Financial Planning Network, Inc., (57) Capital Financial Resources Company, (58) USAA Financial Services Corporation, (59) USAA Credit Card Bank (collectively, the Subsidiaries). Subsidiaries (1-35, 37, 54-59) have a business address of USAA Building, San Antonio, Texas 78288. Subsidiaries (36, 38-53) have a business address of 8000 Robert F. McDermott Freeway IH-10 West, Suite 600, San Antonio, Texas 78230-3884. 1. USAA REAL ESTATE COMPANY
Name and Position Business Address Principal Occupation ----------------- ---------------- -------------------- STEPHANIE A. COLEMAN, Director 9311 San Pedro, Suite 140 Managing Partner of Temporary San Antonio, Texas 78216 Associates
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Name and Position Business Address Principal Occupation ----------------- ---------------- -------------------- LUIS DE LA GARZA, Director P.O. Box 500 Vice President-Corporate Relations San Antonio, Texas 78292 Valero Energy Corporation BRIG. GEN. KENNETH R. FLEENOR, 14715 Hermes Owner, KA Properties, Inc. Director Selma, Texas 78154 Retired from Military COL. ALBERT J. KIRSLING, Director 665 Weatherly Retired from Military San Antonio, Texas 78216 BRIG. GEN. GEORGE K. SYKES, 7330 Ashton Place Retired from Military Director San Antonio, Texas 78229 EDWARD B. KELLEY, President, 8000 Robert F. McDermott Frwy. Serves as President and CEO of USAA CEO and Director IH-10 West, Suite 600 Real Estate Company and Subsidiaries San Antonio, Texas 78230-3884 (18-20 and 37-53); and as Director of USAA Real Estate Company and Subsidiaries (13, 15, 18-20 and 37-53); and as Chairman of the Board of Directors of Subsidiaries (37-53); and as Vice Chairman of Subsidiaries (13 and 15). T. PATRICK DUNCAN, Senior Vice 8000 Robert F. McDermott Frwy. Serves as Senior Vice President of USAA President and Director IH-10 West, Suite 600 Real Estate Company and Subsidiaries San Antonio, Texas 78230-3884 (37-53) and as Director of USAA Real Estate Company and Subsidiaries (37-53) RANDAL R. SEEWALD, Vice President, 8000 Robert F. McDermott Frwy. Serves as Vice President of USAA Real Assistant Vice President and Director IH-10 West, Suite 600 Estate Company and Subsidiaries (37-53) San Antonio, Texas 78230-3884 and Assistant Vice President of Subsidiaries (18-20) and Director of Subsidiaries (38-53) MARTHA J. BARROW, President, and 8000 Robert F. McDermott Frwy. Serves as President of Subsidiary (43) Vice President IH-10 West, Suite 600 and as Vice President Vice of USAA Real San Antonio, Texas 78230-3884 Estate Company and Subsidiaries (37-42 and 44-53) S. WAYNE PEACOCK, Vice President 8000 Robert F. McDermott Frwy. Serves as Vice President of USAA Real and Director IH-10 West, Suite 600 Estate Company and Subsidiaries (37-39, San Antonio, Texas 78230-3884 42, 43 and 45-53) and Director of Subsidiary (42) RANDELL E. CARR, JR., Asst. Vice 8000 Robert F. McDermott Frwy. Serves as Assistant Vice President of President IH-10 West, Suite 600 USAA Real Estate Company and San Antonio, Texas 78230-3884 Subsidiaries (42 and 53)
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Name and Position Business Address Principal Occupation ----------------- ---------------- -------------------- STEPHEN S. KING, Asst. Vice 8000 Robert F. McDermott Frwy. Serves as Assistant Vice President of President IH-10 West, Suite 600 USAA Real Estate Company and San Antonio, Texas 78230-3884 Subsidiaries (37, 39, 40, 45, 49 and 50) MAJOR GEN. CHRIS O. DIVICH, 9311 San Pedro, Suite 600 Serves as Senior Vice President of Director San Antonio, Texas 782167 Southwest Business Corporation DAVID A. ROSALES, Asst. Vice 8000 Robert F. McDermott Frwy. Serves as Assistant Vice President of President and Director IH-10 West, Suite 600 USAA Real Estate Company and San Antonio, Texas 78230-3884 Subsidiaries (37-43 and 45-53) SUSAN T. WALLACE, Asst. Vice 8000 Robert F. McDermott Frwy. Serves as Assistant Vice President of President IH-10 West, Suite 600 USAA Real Estate Company and San Antonio, Texas 78230-3884 Subsidiaries (37-39, 43 and 45-51) DAVID M. HOLMES, Asst. Vice 8000 Robert F. McDermott Frwy. Serves as Assistant Vice President of President IH-10 West, Suite 600 USAA Real Estate Company and San Antonio, Texas 78230-3884 Subsidiaries (38, 39, 43 and 45-51)
2. USAA CAPITAL CORPORATION
Name and Position Business Address Present Occupation ----------------- ---------------- ------------------ ROBERT G. DAVIS, President USAA Building Serves as President of USAA Capital Corporation; and San Antonio, Texas 78288 as Director of Subsidiaries (25-32, 53 and 56); and as Chairman of the Board of Subsidiaries (25-32 and 53); and as Vice Chairman of the Board of Subsidiary (56) M. STASER HOLCOMB, Director, Vice USAA Building Serves as Director of USAA Capital Corporation and Chairman, and Chairman San Antonio, Texas 78288 Subsidiaries (2, 3, 7, 11-13, 15-17, 21, 22-35, 54-59); and as Chairman of the Board of Directors of Subsidiaries (13, 15-17, 21, 23-32 and 56-59), and as CEO and President of Subsidiaries (11, 13, 16, 17, 33 and 56); and as Vice Chair of the Board of USAA Capital Corporation and Subsidiaries (33 and 11); and as President of Subsidiary (15)
20 Page 20 of 22 Pages ROBERT T. HERRES, USAA Building Serves as Chairman/President/ CEO/COO/Attorney-in- Chairman/President/CEO San Antonio, Texas 78288 Fact of Subsidiary (1) and as Director of USAA COO/Attorney-in-Fact and Director Capital Corporation and Subsidiaries (1-3, 6, 7, 11, 18, 19, 20, 33 and 54); and as Chairman of the Board of USAA Capital Corporation and Subsidiaries (7, 11, 18, 19, 20, 33 and 54); and as Chairman of Board and CEO of Subsidiaries (2 and 3); and as Managing Director of Subsidiary (6) BRADFORD W. RICH, Director, Senior USAA Building Serves as Director of USAA Capital Corporation and Vice President and Secretary San Antonio, Texas 78288 Subsidiaries (2, 3, 6, 7, 11-13, 16, 17, 25-28, 34 and 54); and as Chairman of the Officers of the Board of Directors of Subsidiary (34); and as Senior Vice President of USAA Capital Corporation and Subsidiaries (1, 11, 12, 16 and 17); and as Vice President of Subsidiaries (2, 3, 7 and 54); and as Treasurer of Subsidiary (15); and as Secretary of USAA Capital Corporation and Subsidiaries (1, 2, 3, 7, 11, 12 and 15-17 and 54). JOSUE ROBLES, JR., Sr. Vice USAA Building Serves as Sr. Vice President-CFO/Controller, FS of President-CFO/Controller, FS and San Antonio, Texas 78288 Subsidiary (1) and Director of USAA Capital Director Corporation and Subsidiaries (2, 3, 7, 9-12, 14, 16-20, 26, 27, 34, 35 and 54); and as Vice President-Treasurer of Subsidiaries (2, 3, 9, and 13); and as Sr. Vice President-Controller of USAA Capital Corporation and Subsidiaries (11, 12, 16, and 17); and as Vice Chair of Board, VP-Treasurer of Subsidiaries (35 and 54); and as Treasurer of Subsidiaries (33 & 34)
3. UNITED SERVICES AUTOMOBILE ASSOCIATION
Name and Position Business Address Present Occupation ----------------- ---------------- -------------------- ROBERT T. HERRES, Chairman/ USAA Building Serves as Chairman/President/CEO/COO/Attorney-in- President/ CEO/COO Attorney-in- San Antonio, Texas 78288 Fact of USAA and Director of Subsidiaries (2, 3, 6, 7, Fact and Director 10, 11, 18, 19, 20, 33 and 54); and as Chairman of Board of Subsidiaries (7, 10, 11, 18, 19, 20, 33 and 54); and as Chairman of Board and CEO of Subsidiaries (2 and 3) and as Managing Director of Subsidiary (6) JOHN D. BUCKELEW, Director USAA Building Serves as Director of USAA San Antonio, Texas 78288 DANIEL W. CHRISTMAN USAA Building Serves as Director of USAA San Antonio, Texas 78288
21 Page 21 of 22 Pages
Name and Position Business Address Present Occupation ----------------- ---------------- ------------------ DANIEL L. COOPER, Director USAA Building Serves as Director and Vice Chairman of the Board of San Antonio, Texas 78288 USAA STEPHEN B. CROKER, Director USAA Building Serves as Director of USAA San Antonio, Texas 78288 LESLIE G. DENEND USAA Building Serves as Director of USAA San Antonio, Texas 78288 FRED A. GORDEN, Director USAA Building Serves as Director of USAA San Antonio, Texas 78288 MARCELITE J. HARRIS, Director USAA Building Serves as Director of USAA San Antonio, Texas 78288 WILLIAM J. HYBL, Director USAA Building Serves as Director of USAA San Antonio, Texas 78288 RICHARD D. MILLIGAN, Director USAA Building Serves as Director of USAA and Subsidiaries (18, 19 San Antonio, Texas 78288 & 20) JOHN H. MOELLERING, Director USAA Building Serves as Director of USAA San Antonio, Texas 78288 KENT H. WILLIAMS, Director USAA Building Serves as a Director and 2nd Vice Chairman of the San Antonio, Texas 78288 Board of USAA MYRNA H. WILLIAMSON, Director USAA Building Serves as a Director of USAA San Antonio, Texas 78288 WILSON C. COONEY, Deputy USAA Building Serves as President-Property & Casualty Insurance, Attorney-in-Fact, President-Property San Antonio, Texas 78288 P & C of USAA and as Director of Subsidiaries (2-6 & Casualty Insurance, P & C and and 54); and as Vice Chair of Board & President of Director Subsidiaries (2, 3 and 54); and as Chairman of Board of Subsidiaries (4 & 5) BENJAMIN T. HACKER, Executive, USAA Building Serves as Executive Vice President - Chief Vice President - Chief San Antonio, Texas 78288 Administrative Officer of USAA; and as Director of Administrative Officer, AS Subsidiaries (2, 3, 5, 7, 14, 33, 34 and 54); and as Vice President and Secretary of Subsidiaries (5 and 54) JOHN R. COOK, Sr. Vice President - USAA Building Serves as Sr. Vice President-Chief Communications Chief Communications Officer, San Antonio, Texas 78288 Officer, CCO of USAA and as Director of Subsidiary CCO and Director (33)
22 Page 22 of 22 Pages
Name and Position Business Address Present Occupation ----------------- ---------------- ------------------ MICHAEL J. C. ROTH, Vice Chair, USAA Building Serves as Vice Chair, CEO, and President of CEO, President and Director San Antonio, Texas 78288 Subsidiaries (25-28) and as Director of Subsidiaries (7, 25-32 and 35) and as President of Subsidiary (29) and as Vice Chair & President of Subsidiaries (30-32) JOSUE ROBLES, JR., Sr. Vice USAA Building Serves as Sr. Vice President-CFO/Controller, FS of President-CFO/Controller, FS and San Antonio, Texas 78288 USAA and as Director of Subsidiaries (2, 3, 7, 9-12, Director 14, 16-20, 26, 27, 34, 35 and 54); and as Vice President-Treasurer of Subsidiaries (2, 3, 9, 13); and as Sr. Vice President-Controller of Subsidiaries (10-12, 16, 17); and as Vice Chair of Board, VP-Treasurer of Subsidiaries (35 and 54); and as Treasurer of Subsidiaries (33 & 34) ED ROSANE, Vice Chair of Board, USAA Building Serves as Vice Chair, CEO, President of Subsidiary (7) CEO, President and Director San Antonio, Texas 78288 and as Director of Subsidiary (7, 8, 11, and 35); and as Chairman of the Board and President of Subsidiary (8)
23 EXHIBIT INDEX EXHIBIT DESCRIPTION - ------- ----------- 10.1 Stock Purchase Agreement, dated as of November 25, 1996, by and among Pure World, Inc. and USAA Real Estate Company. 10.2 Stock Purchase Agreement, dated as of November 25, 1996, by and among USAA Real Estate Company, Jonathan Tratt, Jonathan Tratt Purchase Money Plan, Stanley D.L. Horwitz, David Bradley, Keith Sexton and C. J. Scott. 10.3 Share Purchase Agreement, dated as of December 13, 1996, by and among USAA Real Estate Company and American Industrial Properties REIT. 10.4 Share Purchase Agreement, dated as of December 19, 1996, by and among USAA Real Estate Company, American Industrial Properties REIT, Inc. and American Industrial Properties REIT. 10.5 Letter Agreement dated December 18, 1996 between American Industrial Properties REIT and USAA Real Estate Company. 10.6 Registration Rights Agreement, dated as of December 19, 1996, by and among USAA Real Estate Company and American Industrial Properties REIT. 10.7 Registration Rights Agreement, dated as of December 20, 1996, by and among USAA Real Estate Company, American Industrial Properties REIT and American Industrial Properties REIT, Inc. 10.8 Agreement for Joint Filing on Behalf of Each Reporting Person. EX-10.1 2 STOCK PURCHASE AGREEMENT DATED 11/25/96 1 Exhibit 10.1 STOCK PURCHASE AGREEMENT This Stock Purchase Agreement, dated as of November 25, 1996 (the "Agreement"), is by and among the party or parties identified on Exhibit A hereto (each a "Seller"), and USAA Real Estate Company, a Delaware corporation ("Purchaser"). RECITALS: WHEREAS, Seller is the beneficial and record owner of the issued and outstanding Shares of Beneficial Interest, par value $0.10 per share (the "Shares"), of American Industrial Properties REIT, a Texas real estate investment trust (the "Company"), identified on Exhibit A hereto; and WHEREAS, after arms'-length negotiations between Seller and Purchaser, or their respective representatives, in which the Company did not participate, Seller desires to sell to Purchaser and Purchaser desires to receive from Seller the Shares for the consideration and upon the terms and conditions set forth herein. A G R E E M E N T: NOW, THEREFORE, in consideration of the premises and covenants contained herein, Seller and Purchaser agree as follows: 1. Purchase and Sale of Shares. 1.1 Purchase and Sale. Upon the terms and subject to the conditions contained in this Agreement, Seller shall sell, transfer, assign and deliver to Purchaser the Shares at the Closing, and Purchaser shall pay and deliver to Seller the purchase price referred to below in Section 1.2. The Closing shall be held at the offices of Andrews & Kurth L.L.P., 4200 Texas Commerce Tower, Houston, Texas 77002 at 10:00 a.m., local time, on the third business day following satisfaction of the conditions to Purchaser's obligations set forth in Section 5.1. 1.2 Purchase Price. The consideration to be delivered to Seller as payment for the Shares shall be $2.75 per Share (the "Purchase Price"). 1.3 Delivery of Shares. Seller agrees to deliver to Purchaser at the Closing the certificate or certificates representing the Shares together with the duly executed stock power attached hereto as Exhibit B. 1.4 Payment of Purchase Price. Purchaser shall pay the Purchase Price for the Shares at the Closing to Seller by wire transfer of immediately available funds to an account designated by Seller. 1 2 1.5 Closing. The closing of the purchase and sale of the Shares will take place at 10:00 a.m. at the offices of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., in Dallas, Texas, contemporaneously or prior to the closing referred to in the Settlement Agreement by and among Charles W. Wolcott and William H. Bricker on the one hand and Pure World, Inc., Paul O. Koether and Robert Strougo on the other hand (the "Closing"). 2. Representations and Warranties of Seller. Seller represents and warrants to and agrees with Purchaser as follows: 2.1 Authorization of Transaction. Seller has full right, power and authority (i) to execute and deliver this Agreement, (ii) to sell, assign, transfer and deliver the Shares to be sold by Seller hereunder, and (iii) to perform its obligations hereunder. Seller has taken all corporate action, and has obtained all consents, approvals, authorizations and orders, required for it to execute, deliver and perform this Agreement. This Agreement constitutes the valid and legally binding obligation of Seller, enforceable in accordance with its terms. 2.2 Noncontravention. The execution and delivery of this Agreement, the sale of the Shares to be sold by Seller hereunder and the consummation of the transactions contemplated hereby, will not (i) violate any statute, regulation, injunction, judgment, order, decree, ruling or other restriction of any government, governmental agency or court having jurisdiction over Seller, (ii) conflict with, result in a breach or violation of any of the terms or provisions of or constitute a default under any agreement, contract, lease, license, instrument or other arrangement to which Seller is a party or by which Seller or any of its assets is bound, or (iii) result in a violation of the provisions of the Certificate of Incorporation or Bylaws of Seller. Seller is not a party to any shareholder, voting trust or similar agreement relating to the Shares or any agreement which may affect the transfer of the Shares. Except for this Agreement, there is no option, warrant, call or other right or other agreement, arrangement or commitment obligating Seller to transfer or sell the Shares. 2.3 Ownership. Seller holds of record and beneficially owns (as such term is defined under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, "beneficially owns" or "beneficial ownership") the Shares, free and clear of any restrictions on transfer, security interests, options, warrants, purchase rights, equities, claims, liens, encumbrances, pledges and demands. Seller does not beneficially own any other securities of the Company or any rights or options to acquire such beneficial ownership, and none of the Shares were acquired after November 8, 1996. 2.4 Transfer of Title. Upon the delivery of the Shares and payment therefor pursuant hereto, good and marketable title to such Shares, free and clear of all adverse claims, liens, encumbrances, equities or other claims, will pass to Purchaser. 2.5 Professional and Consulting Fees. Neither the Company (except in connection with the Settlement) nor Purchaser will directly or indirectly incur any liability or expense as a result of undertakings or agreements of Seller for accounting, consulting or legal fees, 2 3 brokerage or finder's fees or agent's commissions or other similar forms of compensation in connection with this Agreement or any agreement or transaction contemplated hereby or thereby. 2.6 Litigation. As of the date hereof, except for a lawsuit styled American Industrial Properties REIT v. Pure World, Inc., et. al., No. 3:96-CV-0068-H, in the United States District Court for the Northern District of Texas (the "Lawsuit"), there are no actions, suits, arbitrations or proceedings pending or, to the best of Seller's knowledge, threatened, before any court or governmental or regulatory authority or body to which Seller is or will be a party challenging or affecting Seller's right or ability to execute or deliver this Agreement or to consummate the sale of the Shares as contemplated by this Agreement. 2.7 Acknowledgment. Seller acknowledges that (i) the foregoing representations and warranties shall survive the Closing and (ii) Purchaser is making no representations or warranties other than those expressly set forth in Section 3. 3. Representations and Warranties of Purchaser. Purchaser represents and warrants to Seller as follows: 3.1 Authorization of Transaction. Purchaser has full right, power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of Purchaser, enforceable in accordance with its terms. 3.2 Noncontravention. The execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby, will not (i) violate any statute, regulation, injunction, judgment, order, decree, ruling or other restriction of any government, governmental agency or court having jurisdiction over Purchaser, (ii) conflict with, result in a breach or violation of any of the terms or provisions of, constitute a default under any agreement, contract, lease, license, instrument, or other arrangement to which Purchaser is a party or by which Purchaser or any of its assets is bound, or (iii) result in a violation of the provisions of the organizational documents of Purchaser. 3.3 Sophisticated Purchaser. Purchaser is a sophisticated investor and has had the opportunity to make such investigation as it deems necessary to purchase the Shares. Purchaser acknowledges that Seller is making no representations or warranties other than those expressly set forth in Section 2. 4. Covenants of Seller. 4.1 Standstill Agreement. During the period beginning from the date hereof and continuing to and including the date that is the earlier of (a) 5 years after the date hereof, (b) such time as Purchaser no longer owns at least 2% of the capital stock of the Company or (c) the date on which either Purchaser or Seller delivers written notice to the other that the stock purchase 3 4 contemplated by this Agreement will not be consummated because of the non-occurrence of a condition precedent to the obligations of the party giving notice, Seller agrees that Seller and affiliates of Seller will not, and Seller will not cause any other person or entity to, (i) acquire, offer to acquire, or agree to acquire, directly or indirectly, by purchase or otherwise, any securities or direct or indirect rights or options to acquire (through purchase, exchange, conversion or otherwise) any securities or properties of the Company, (ii) make, or in any way participate, directly or indirectly, in any "solicitation" of "proxies" (as such terms are used in the proxy rules of the Securities and Exchange Commission) to vote (including by the execution of actions by written consent) or seek to advise, encourage or influence any person or entity with respect to the voting of any securities of the Company, (iii) form, join or in any way participate in any "group" (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934) with respect to any securities of the Company, (iv) otherwise act, alone or in concert with others, to seek to control or influence the management, board of trust managers or policies of the Company, (v) initiate, propose or otherwise solicit stockholders for the approval of one or more stockholder proposals (as described in the Securities Exchange Act of 1934) seeking to acquire or affect control of the Company, or (vi) acquire any interest in any claims, mortgages, notes or any other legal or financial obligations of the Company. Seller agrees that the Company, as a third party beneficiary, shall be entitled to specific enforcement of, and injunctive relief to prevent any violation of, Section 4.1 hereof, in addition to any other remedy or relief available at law or in equity. 5. Conditions to Obligations of Purchaser. The obligations of Purchaser to purchase the Shares at the Closing shall be subject to the satisfaction of the following conditions unless waived by Purchaser: 5.1 Settlement of Litigation. Any and all claims and litigation currently pending or subsequently filed prior to the Closing, either in their own name or in a derivative action, including without limitation the Lawsuit, among either (i) the Company and the Seller or (ii) the Company and any other beneficial owner of shares of capital stock of the Company, shall have been settled and a binding order of the court or such other governmental regulatory body or agency shall have been entered by December 31, 1996, so that no such claims shall be pending as of the Closing. 5.2 Compliance by Seller. Purchaser shall be satisfied as to (i) the accuracy of the representations and warranties of Seller at and as of the Closing and (ii) the performance by Seller of all its obligations hereunder to be performed at or prior to the Closing. 6. Conditions to Obligations of Seller. The obligations of Seller to sell the Shares at the Closing shall be subject to the satisfaction of the following condition unless waived by Seller: 6.1 Settlement of Litigation. Any and all claims and litigation between the Company and Seller, including without limitation the Lawsuit, shall have been settled and a binding order of the court or such other governmental regulatory body or agency shall have been entered by December 31, 1996, so that no such claims shall be pending as of the Closing. 4 5 7. Indemnification. 7.1 Indemnification by Seller. Seller shall indemnify and hold harmless Purchaser and its successors and assigns from and against any losses, damages or expenses (including reasonable attorney's fees and expenses, such as expert and accounting fees, and interest accrued on all such indemnified amounts, computed at ten percent per annum) which are caused by or arise out of (a) any breach or default in the performance by Seller of any covenant or agreement of Seller contained in this Agreement, (b) any breach of warranty by Seller or inaccurate or erroneous representation made by such Seller herein or in any other instrument delivered by or on behalf of such Seller pursuant hereto or (c) any and all actions, suits, proceedings, claims, demands or judgments incident to or alleged to be incident to any of the foregoing. 7.2 Indemnification by Purchaser. Purchaser shall indemnify and hold harmless the Seller and its successors and assigns from and against any losses, damages or expenses (including reasonable attorney's fees and expenses, such as expert and accounting fees, and interest accrued on all such indemnified amounts, computed at ten percent per annum) caused by or arising out of (a) any breach or default in the performance by Purchaser of any covenant or agreement of Purchaser contained in this Agreement, (b) any breach of warranty by Purchaser or inaccurate or erroneous representation made by Purchaser herein or in any other instrument delivered by or on behalf of Purchaser pursuant hereto or (c) any and all actions, suits, proceedings, claims, demands or judgments incident to or alleged to be incident to any of the foregoing. 7.3 Procedure. In the event that, from and after the Closing, a third party asserts any claim against Purchaser or Seller, as the case may be, with respect to any matter which is covered by the indemnities contained in this Agreement, the party against whom the claim is asserted (the "Indemnitee"), shall give prompt written notice to the other party (the "Indemnitor"), and the Indemnitor shall have the right, at its election, to take over the defense or settlement of such claim at its own expense by giving prompt written notice to the Indemnitee; provided, however, that (a) the Indemnitee shall at all times have the right, at its option and expense, to participate fully therein and (b) if the Indemnitor does not give such notice and does not proceed diligently to defend the claim within 30 days after receipt of such notice of the claim, the Indemnitee shall have the right, but not the obligation, to undertake the defense of any such claim for the account of and at the risk of the Indemnitor and the Indemnitor shall be bound by any defense or settlement that the Indemnitee, may make as to such claim. The parties shall cooperate in defending any such third party's claim, and the defending party shall have reasonable access to the books and records and personnel in the possession or control of the other party that are pertinent to the defense. The parties agree that the Indemnitee may join the Indemnitor in any action, claim or proceeding brought by a third party, as to which any right of indemnity granted to the Indemnitee pursuant to this Agreement would or might apply, for the purpose of enforcing such right of indemnity. 5 6 8. Miscellaneous. 8.1 Notices. All notices or other communications given or made hereunder shall be in writing and shall be deemed to be duly given when received if delivered in person or by telex, facsimile, telegram or cable or mailed by registered or certified mail, return receipt requested, postage prepaid to any party at the address and to the addressee for such party set forth on the signature page of this Agreement or such other address or addressee as the party to whom notice is to be given furnishes in writing to the other party in the manner set forth above. 8.2 Entire Agreement. This Agreement, including the Exhibits hereto, constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, oral or written, between the parties hereto with respect to such transactions. 8.3 Governing Law. This Agreement shall be construed in accordance with and governed by the internal laws (and not the law of conflicts) of the State of Texas applicable to contracts made and performed in the State of Texas. 8.4 Headings. The section, paragraph and other headings contained in this Agreement are for reference purposes only and shall not be deemed to be a part of this Agreement or to affect the meaning or interpretation of this Agreement. 8.5 Assignment. Neither this Agreement nor any interest herein or right or obligation hereunder may be assigned by Purchaser or Seller in any manner, by operation of law or otherwise, without the prior written consent of the other party hereto except that Purchaser may assign this Agreement without Seller's consent to any person (except the Company) which is wholly owned or controlled, directly or indirectly, by Purchaser, if that person agrees in writing to be bound by all of Purchaser's obligations hereunder; provided, however, that no assignment of any kind shall release Purchaser from any liabilities or obligations hereunder. 8.6 Successors Bound. Subject to the provisions of Section 8.5, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 8.7 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or the application thereof to any person or under any circumstances, shall be invalid or unenforceable to any extent under applicable law, and the extent of such invalidity or unenforceability does not destroy the basis for the bargain between the parties as expressed herein, then such provision shall be deemed severed from this Agreement with respect to such person or such circumstance, without invalidating the remainder of this Agreement or the application of such provision to other persons or circumstances, and a new provision shall be automatically substituted 6 7 in lieu of the provision so severed which new provision shall be as similar in terms to the invalid or unenforceable provision as may be possible. 8.8 Remedies. Seller acknowledges that the Company and Purchaser would not have an adequate remedy at law for money damages in the event that Section 4.1 were not performed in accordance with its terms and therefore agree that the Company, as a third party beneficiary, and Purchaser shall be entitled to specific enforcement of, and injunctive relief to prevent any violation of, Section 4.1 hereof, in addition to any other remedy or relief available at law or in equity. 8.9 Expenses. Seller and Buyer shall each pay their own expenses (including, without limitation, counsel and accounting fees and expenses) incident to the preparation and carrying out of this Agreement and the sale of the Shares contemplated hereby. 8.10 Amendment. This Agreement may be amended only by an instrument in writing executed by all the parties hereto. 8.11 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute the same instrument. 7 8 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be signed as of the date first above written. PURCHASER USAA Real Estate Company By:___________________________________________ Name: T. Patrick Duncan Title: Senior Vice President - Operations Address: 8000 Robert F. McDermott Freeway IH-10 West, Suite 600 San Antonio, Texas 78230 Fax: (210) 498-6214 8 9 SELLER JONATHAN TRATT _______________________________________ Jonathan Tratt Address: c/o Industrial Brokerage, Inc. 2425 E. Camelback, Suite 950 Phoenix, AZ 85016 Fax: (602) 381-2592 JONATHAN TRATT MONEY PURCHASE PLAN _______________________________________ Jonathan Tratt, Trustee Address: c/o Industrial Brokerage, Inc. 2425 E. Camelback, Suite 950 Phoenix, AZ 85016 Fax: (602) 381-2592 STANLEY D. L. HORWITZ _______________________________________ Stanley D. L. Horwitz Address: c/o Industrial Brokerage, Inc. 2425 E. Camelback, Suite 950 Phoenix, AZ 85016 Fax: (602) 381-2592 9 10 DAVID BRADLEY _______________________________________ David Bradley Address: c/o Industrial Brokerage, Inc. 2425 E. Camelback, Suite 950 Phoenix, AZ 85016 Fax: (602) 381-2592 KEITH SEXTON _______________________________________ Keith Sexton Address: c/o Industrial Brokerage, Inc. 2425 E. Camelback, Suite 950 Phoenix, AZ 85016 Fax: (602) 381-2592 C.J. SCOTT _______________________________________ C.J. Scott Address: c/o Industrial Brokerage, Inc. 2425 E. Camelback, Suite 950 Phoenix, AZ 85016 Fax: (602) 381-2592 10 11 EXHIBIT A SHARE OWNERSHIP
Record Holder No. Shares Certificate No. - ------------- ---------- --------------- Jonathan Tratt ....................... 15,000 Jonathan Tratt Money Purchase Plan .... 35,000 Stanley D. L. Horwitz.................. 247,506 David Bradley.......................... 10,000 Keith Sexton........................... 35,000 C. J. Scott ........................... 10,000 ------- Total..................... 352,506 =======
12 EXHIBIT A STOCK POWER FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto ____________________, the Shares of Beneficial Interest, par value $0.10 per share, of American Industrial Properties REIT (the "Company") represented by Certificate No. ___ registered on the books of said Company, and does hereby irrevocably constitute and appoint ________________________ as attorney to transfer the foregoing on the books of said Company, with full power of substitution in the premises, hereby ratifying and confirming all that said attorney shall lawfully do by virtue hereof. Dated: _________________, 1996. __________________________________* By:________________________________ Name: Title: Signature Guaranteed By: _______________________________ [STAMP] Print Name of Guarantor By:_________________________________ Name:_______________________________ Title:______________________________ * The signature to this assignment must correspond with the name as written on the face of the certificate in every particular without alteration or enlargement or any change whatever. EX-10.2 3 STOCK PURCHASE AGREEMENT DATED 11/25/96 1 EXHIBIT 10.2 STOCK PURCHASE AGREEMENT This Stock Purchase Agreement, dated as of November 25, 1996 (the "Agreement"), is by and among Pure World, Inc., a Delaware corporation ("Seller") and USAA Real Estate Company, a Delaware corporation ("Purchaser"). RECITALS: WHEREAS, Seller is the beneficial and record owner of 907,000 issued and outstanding Shares of Beneficial Interest, par value $0.10 per share (the "Shares"), of American Industrial Properties REIT, a Texas real estate investment trust (the "Company"); and WHEREAS, Seller and the Company have been engaged in proxy contests, other disputes, and a lawsuit styled American Industrial Properties REIT v. Pure World, Inc., et. al., No. 3:96-CV- 0068-H, in the United States District Court for the Northern District of Texas (the "Lawsuit"); and WHEREAS, Seller and the Company have reached an agreement to resolve their disputes and the Lawsuit (the "Settlement"), and the Company has required as a condition to the Settlement that Seller sell its Shares to Purchaser for such consideration and on other terms and conditions as to which Seller and Purchaser may agree; and WHEREAS, after arms'-length negotiations between Seller and Purchaser, or their respective representatives, in which the Company did not participate, Seller desires to sell to Purchaser and Purchaser desires to receive from Seller the Shares for the consideration and upon the terms and conditions set forth herein. A G R E E M E N T: NOW, THEREFORE, in consideration of the premises and covenants contained herein, Seller and Purchaser agree as follows: 1. Purchase and Sale of Shares. 1.1 Purchase and Sale. Upon the terms and subject to the conditions contained in this Agreement, Seller shall sell, transfer, assign and deliver to Purchaser the Shares at the Closing, and Purchaser shall pay and deliver to Seller the purchase price referred to below in Section 1.2. The Closing shall be held at the offices of Andrews & Kurth L.L.P., 4200 Texas Commerce Tower, Houston, Texas 77002 at 10:00 a.m., local time, on the third business day following satisfaction of the conditions to Purchaser's obligations set forth in Section 5.1. 1.2 Purchase Price. The consideration to be delivered to Seller as payment for the Shares shall be $2.75 per Share (the "Purchase Price"). 2 1.3 Delivery of Shares. Seller agrees to deliver to Purchaser at the Closing the certificate or certificates representing the Shares together with the duly executed stock power attached hereto as Exhibit A. 1.4 Payment of Purchase Price. Purchaser shall pay the Purchase Price for the Shares at the Closing to Seller by wire transfer of immediately available funds to an account designated by Seller. 2. Representations and Warranties of Seller. Seller represents and warrants to and agrees with Purchaser as follows: 2.1 Authorization of Transaction. Seller has full right, power and authority (i) to execute and deliver this Agreement, (ii) to sell, assign, transfer and deliver the Shares to be sold by Seller hereunder, and (iii) to perform its obligations hereunder. Seller has taken all corporate action, and has obtained all consents, approvals, authorizations and orders, required for it to execute, deliver and perform this Agreement. This Agreement constitutes the valid and legally binding obligation of Seller, enforceable in accordance with its terms. 2.2 Noncontravention. The execution and delivery of this Agreement, the sale of the Shares to be sold by Seller hereunder and the consummation of the transactions contemplated hereby, will not (i) violate any statute, regulation, injunction, judgment, order, decree, ruling or other restriction of any government, governmental agency or court having jurisdiction over Seller, (ii) conflict with, result in a breach or violation of any of the terms or provisions of or constitute a default under any agreement, contract, lease, license, instrument or other arrangement to which Seller is a party or by which Seller or any of its assets is bound, or (iii) result in a violation of the provisions of the Certificate of Incorporation or Bylaws of Seller. Seller is not a party to any shareholder, voting trust or similar agreement relating to the Shares or any agreement which may affect the transfer of the Shares. Except for this Agreement, there is no option, warrant, call or other right or other agreement, arrangement or commitment obligating Seller to transfer or sell the Shares. 2.3 Ownership. Seller holds of record and beneficially owns (as such term is defined under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, "beneficially owns" or "beneficial ownership") the Shares, free and clear of any restrictions on transfer, security interests, options, warrants, purchase rights, equities, claims, liens, encumbrances, pledges and demands. Seller does not beneficially own any other securities of the Company or any rights or options to acquire such beneficial ownership, and none of the Shares were acquired after November 8, 1996. 2.4 Transfer of Title. Upon the delivery of the Shares and payment therefor pursuant hereto, good and marketable title to such Shares, free and clear of all adverse claims, liens, encumbrances, equities or other claims, will pass to Purchaser. 2 3 2.5 Professional and Consulting Fees. Neither the Company (except in connection with the Settlement) nor Purchaser will directly or indirectly incur any liability or expense as a result of undertakings or agreements of Seller for accounting, consulting or legal fees, brokerage or finder's fees or agent's commissions or other similar forms of compensation in connection with this Agreement or any agreement or transaction contemplated hereby or thereby. 2.6 Litigation. As of the date hereof, except for the Lawsuit there are no actions, suits, arbitrations or proceedings pending or, to the best of Seller's knowledge, threatened, before any court or governmental or regulatory authority or body to which Seller is or will be a party challenging or affecting Seller's right or ability to execute or deliver this Agreement or to consummate the sale of the Shares as contemplated by this Agreement. 2.7 Acknowledgment. Seller acknowledges that (i) the foregoing representations and warranties shall survive the Closing and (ii) Purchaser is making no representations or warranties other than those expressly set forth in Section 3. 3. Representations and Warranties of Purchaser. Purchaser represents and warrants to Seller as follows: 3.1 Authorization of Transaction. Purchaser has full right, power and authority to execute and deliver this Agreement and to perform its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of Purchaser, enforceable in accordance with its terms. 3.2 Noncontravention. The execution and delivery of this Agreement, and the consummation of the transactions contemplated hereby, will not (i) violate any statute, regulation, injunction, judgment, order, decree, ruling or other restriction of any government, governmental agency or court having jurisdiction over Purchaser, (ii) conflict with, result in a breach or violation of any of the terms or provisions of, constitute a default under any agreement, contract, lease, license, instrument, or other arrangement to which Purchaser is a party or by which Purchaser or any of its assets is bound, or (iii) result in a violation of the provisions of the organizational documents of Purchaser. 3.3 Sophisticated Purchaser. Purchaser is a sophisticated investor and has had the opportunity to make such investigation as it deems necessary to purchase the Shares. Purchaser acknowledges that Seller is making no representations or warranties other than those expressly set forth in Section 2. 4. Covenants of Seller. 4.1 Standstill Agreement. During the period beginning from the date hereof and continuing to and including the date that is the earlier of (a) 5 years after the date hereof, (b) such 3 4 time as Purchaser no longer owns at least 2% of the capital stock of the Company or (c) the date on which either Purchaser or Seller delivers written notice to the other that the stock purchase contemplated by this Agreement will not be consummated because of the non-occurrence of a condition precedent to the obligations of the party giving notice, Seller agrees that neither Seller nor any affiliate of Seller or nor any entity owned or controlled by them or under common ownership or control with any of them will (i) acquire, offer to acquire, or agree to acquire, directly or indirectly, by purchase or otherwise, any securities or direct or indirect rights or options to acquire (through purchase, exchange, conversion or otherwise) any securities or properties of the Company, (ii) make, or in any way participate, directly or indirectly, in any "solicitation" of "proxies" (as such terms are used in the proxy rules of the Securities and Exchange Commission) to vote (including by the execution of actions by written consent) or seek to advise, encourage or influence any person or entity with respect to the voting of any securities of the Company, (iii) form, join or in any way participate in any "group" (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934) with respect to any securities of the Company, (iv) otherwise act, alone or in concert with others, to seek to control or influence the management, board of trust managers or policies of the Company, (v) initiate, propose or otherwise solicit stockholders for the approval of one or more stockholder proposals (as described in the Securities Exchange Act of 1934) seeking to acquire or affect control of the Company, or (vi) acquire any interest in any claims, mortgages, notes or any other legal or financial obligations of the Company. 5. Conditions to Obligations of Purchaser. The obligations of Purchaser to purchase the Shares at the Closing shall be subject to the satisfaction of the following conditions unless waived by Purchaser: 5.1 Settlement of Litigation. Any and all claims and litigation currently pending or subsequently filed prior to the Closing, either in their own name or in a derivative action, including without limitation the Lawsuit, among either (i) the Company and the Seller or (ii) the Company and any other beneficial owner of shares of capital stock of the Company, shall have been settled and a binding order of the court or such other governmental regulatory body or agency shall have been entered by December 31, 1996, so that no such claims shall be pending as of the Closing. 5.2 Compliance by Seller. Purchaser shall be satisfied as to (i) the accuracy of the representations and warranties of Seller at and as of the Closing and (ii) the performance by Seller of all its obligations hereunder to be performed at or prior to the Closing. 6. Conditions to Obligations of Seller. The obligations of Seller to sell the Shares at the Closing shall be subject to the satisfaction of the following condition unless waived by Seller: 6.1 Settlement of Litigation. Any and all claims and litigation between the Company and Seller, including without limitation the Lawsuit, shall have been settled and a binding order of the court or such other governmental regulatory body or agency shall have been entered by December 31, 1996, so that no such claims shall be pending as of the Closing. 4 5 7. Indemnification. 7.1 Indemnification by Seller. Seller shall indemnify and hold harmless Purchaser and its successors and assigns from and against any losses, damages or expenses (including reasonable attorney's fees and expenses, such as expert and accounting fees, and interest accrued on all such indemnified amounts, computed at ten percent per annum) which are caused by or arise out of (a) any breach or default in the performance by Seller of any covenant or agreement of Seller contained in this Agreement, (b) any breach of warranty by Seller or inaccurate or erroneous representation made by such Seller herein or in any other instrument delivered by or on behalf of such Seller pursuant hereto or (c) any and all actions, suits, proceedings, claims, demands or judgments incident to or alleged to be incident to any of the foregoing. 7.2 Indemnification by Purchaser. Purchaser shall indemnify and hold harmless the Seller and its successors and assigns from and against any losses, damages or expenses (including reasonable attorney's fees and expenses, such as expert and accounting fees, and interest accrued on all such indemnified amounts, computed at ten percent per annum) caused by or arising out of (a) any breach or default in the performance by Purchaser of any covenant or agreement of Purchaser contained in this Agreement, (b) any breach of warranty by Purchaser or inaccurate or erroneous representation made by Purchaser herein or in any other instrument delivered by or on behalf of Purchaser pursuant hereto or (c) any and all actions, suits, proceedings, claims, demands or judgments incident to or alleged to be incident to any of the foregoing. 7.3 Procedure. In the event that, from and after the Closing, a third party asserts any claim against Purchaser or Seller, as the case may be, with respect to any matter which is covered by the indemnities contained in this Agreement, the party against whom the claim is asserted (the "Indemnitee"), shall give prompt written notice to the other party (the "Indemnitor"), and the Indemnitor shall have the right, at its election, to take over the defense or settlement of such claim at its own expense by giving prompt written notice to the Indemnitee; provided, however, that (a) the Indemnitee shall at all times have the right, at its option and expense, to participate fully therein and (b) if the Indemnitor does not give such notice and does not proceed diligently to defend the claim within 30 days after receipt of such notice of the claim, the Indemnitee shall have the right, but not the obligation, to undertake the defense of any such claim for the account of and at the risk of the Indemnitor and the Indemnitor shall be bound by any defense or settlement that the Indemnitee, may make as to such claim. The parties shall cooperate in defending any such third party's claim, and the defending party shall have reasonable access to the books and records and personnel in the possession or control of the other party that are pertinent to the defense. The parties agree that the Indemnitee may join the Indemnitor in any action, claim or proceeding brought by a third party, as to which any right of indemnity granted to the Indemnitee pursuant to this Agreement would or might apply, for the purpose of enforcing such right of indemnity. 5 6 8. Miscellaneous. 8.1 Notices. All notices or other communications given or made hereunder shall be in writing and shall be deemed to be duly given when received if delivered in person or by telex, facsimile, telegram or cable or mailed by registered or certified mail, return receipt requested, postage prepaid to any party at the address and to the addressee for such party set forth on the signature page of this Agreement or such other address or addressee as the party to whom notice is to be given furnishes in writing to the other party in the manner set forth above. 8.2 Entire Agreement. This Agreement, including the Exhibits hereto, constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings, oral or written, between the parties hereto with respect to such transactions. 8.3 Governing Law. This Agreement shall be construed in accordance with and governed by the internal laws (and not the law of conflicts) of the State of Texas applicable to contracts made and performed in the State of Texas. 8.4 Headings. The section, paragraph and other headings contained in this Agreement are for reference purposes only and shall not be deemed to be a part of this Agreement or to affect the meaning or interpretation of this Agreement. 8.5 Assignment. Neither this Agreement nor any interest herein or right or obligation hereunder may be assigned by Purchaser or Seller in any manner, by operation of law or otherwise, without the prior written consent of the other party hereto except that Purchaser may assign this Agreement without Seller's consent to any person (except the Company) which is wholly owned or controlled, directly or indirectly, by Purchaser, if that person agrees in writing to be bound by all of Purchaser's obligations hereunder; provided, however, that no assignment of any kind shall release Purchaser from any liabilities or obligations hereunder. 8.6 Successors Bound. Subject to the provisions of Section 8.5, this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 8.7 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or the application thereof to any person or under any circumstances, shall be invalid or unenforceable to any extent under applicable law, and the extent of such invalidity or unenforceability does not destroy the basis for the bargain between the parties as expressed herein, then such provision shall be deemed severed from this Agreement with respect to such person or such circumstance, without invalidating the remainder of this Agreement or the application of such provision to other persons or circumstances, and a new provision shall be automatically substituted 6 7 in lieu of the provision so severed which new provision shall be as similar in terms to the invalid or unenforceable provision as may be possible. 8.8 Remedies. Seller acknowledges that Purchaser would not have an adequate remedy at law for money damages in the event that Section 4.1 were not performed in accordance with its terms and therefore agree that Purchaser shall be entitled to specific enforcement of, and injunctive relief to prevent any violation of, Section 4.1 hereof, in addition to any other remedy or relief available at law or in equity. 8.9 Expenses. Seller and Buyer shall each pay their own expenses (including, without limitation, counsel and accounting fees and expenses) incident to the preparation and carrying out of this Agreement and the sale of the Shares contemplated hereby. 8.10 Amendment. This Agreement may be amended only by an instrument in writing executed by all the parties hereto. 8.11 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute the same instrument. 7 8 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be signed as of the date first above written. PURCHASER SELLER USAA Real Estate Company Pure World, Inc. By:________________________________ By:_____________________________ Name: T. Patrick Duncan Name: Paul O. Koether Title: Senior Vice President - Operations Title: Chairman Address: 8000 Robert F. McDermott Freeway Address: P.O. Box 97, IH-10 West, Suite 600 Far Hills, NJ 07931 San Antonio, Texas 78230 Fax: (210) 498-6214 Fax: (908) 766-4160 8 9 EXHIBIT A STOCK POWER FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto ____________________, the Shares of Beneficial Interest, par value $0.10 per share, of American Industrial Properties REIT (the "Company") represented by Certificate No. ___ registered on the books of said Company, and does hereby irrevocably constitute and appoint ________________________ as attorney to transfer the foregoing on the books of said Company, with full power of substitution in the premises, hereby ratifying and confirming all that said attorney shall lawfully do by virtue hereof. Dated: _________________, 1996. __________________________________* Witness: By:________________________________ ________________________________ Name: Title: * The signature to this assignment must correspond with the name as written on the face of the certificate in every particular without alteration or enlargement or any change whatever. 9 EX-10.3 4 SHARE PURCHASE AGREEMENT DATED 12/13/96 1 EXHIBIT 10.3 SHARE PURCHASE AGREEMENT dated as of December 13, 1996 Between AMERICAN INDUSTRIAL PROPERTIES REIT and USAA REAL ESTATE COMPANY 2 TABLE OF CONTENTS SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION.............................-1- 1.1 Definitions......................................................-1- 1.2 Rules of Construction............................................-8- SECTION 2. PURCHASE AND SALE...............................................-8- 2.1 Purchase and Sale of the Shares..................................-8- 2.2 Purchase Price; Payment.........................................-8- 2.3 The Closing......................................................-8- SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER.........................-9- 3.1 Organization and Related Matters.................................-9- 3.2 Capital Stock; Title to Shares...................................-9- 3.3 Financial Statements............................................-10- 3.4 SEC Reports.....................................................-11- 3.5 Authorization; No Conflicts.....................................-12- 3.6 Legal Proceedings...............................................-12- 3.7 Compliance with Law and Permits.................................-13- 3.8 Dividends and Other Distributions...............................-13- 3.9 Certain Interests...............................................-13- 3.10 No Brokers or Finders...........................................-14- 3.11 Employee Benefit Plans..........................................-14- 3.12 Labor Matters...................................................-15- 3.13 Properties......................................................-15- 3.14 Tax Matters.....................................................-17- 3.15 Material Contracts..............................................-19- 3.16 Insurance.......................................................-20- 3.17 Environmental Matters...........................................-20- 3.18 Trust Records; Accounting Records...............................-21- 3.19 New York Stock Exchange Listing.................................-21- 3.20 Disclosure of Facts.............................................-21- SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER.........................-21- 4.1 Organization and Related Matters................................-21- 4.2 Authorization...................................................-21- 4.3 No Conflicts....................................................-22- 4.4 No Brokers or Finders...........................................-22- 4.5 Legal Proceedings...............................................-22- 4.6 Investment Representation.......................................-22- 4.7 Legends; Stop-Transfer Orders...................................-22- 4.8 Status for REIT Ownership and Income Tests......................-23- -i- 3 SECTION 5. COVENANTS WITH RESPECT TO CONDUCT OF SELLER PRIOR TO CLOSING...............................................................-23- 5.1 Access..........................................................-23- 5.2 Material Adverse Changes; SEC Filings; Reports; Financial Statements......................................................-23- 5.3 Conduct of Business.............................................-24- 5.4 Prohibition of Solicitation.....................................-26- 5.5 Notification of Certain Matters.................................-27- 5.6 Permits and Approvals...........................................-27- SECTION 6. ADDITIONAL CONTINUING COVENANTS AND AGREEMENTS..................-28- 6.1 Use of Proceeds.................................................-28- 6.2 Appointment of Trust Managers...................................-28- 6.3 Environmental Matters...........................................-29- 6.4 Status for REIT Ownership and Income Tests......................-29- 6.5 Prohibited Transactions.........................................-29- 6.6 Seller/Buyer Registration Rights Agreement......................-29- 6.7 REIT Qualification..............................................-29- 6.8 Services by Buyer...............................................-29- SECTION 7. GENERAL CONDITIONS OF PURCHASE..................................-30- 7.1 No Orders.......................................................-30- 7.2 Approvals.......................................................-30- 7.3 Absence of Litigation...........................................-30- 7.4 New York Stock Exchange.........................................-30- SECTION 8. CONDITIONS TO OBLIGATIONS OF BUYER..............................-30- 8.1 Settlement Agreement............................................-30- 8.2 Accuracy of Seller's Representations and Warranties.............-30- 8.3 Performance by Seller...........................................-30- 8.4 No Material Adverse Change......................................-31- 8.5 Certification by Seller.........................................-31- 8.6 Opinion of Seller's Counsel.....................................-31- 8.7 No Other Business Combination Transaction.......................-31- SECTION 9. CONDITIONS TO OBLIGATIONS OF SELLER.............................-31- 9.1 Settlement Agreement............................................-31- 9.2 Accuracy of Buyer's Representations and Warranties..............-32- 9.3 Buyer's Performance.............................................-32- 9.4 Certification by Buyer..........................................-32- 9.5 Opinion of Buyer's Counsel......................................-32- SECTION 10. TERMINATION OF OBLIGATIONS; SURVIVAL...........................-32- 10.1 Termination of Agreement........................................-32- -ii- 4 10.2 Effect of Termination...........................................-33- 10.3 Survival of Representations and Warranties......................-33- SECTION 11. INDEMNIFICATION...............................................-33- 11.1 Obligations of Seller...........................................-33- 11.2 Obligations of Buyer............................................-34- 11.3 Procedure.......................................................-34- 11.4 Survival........................................................-35- 11.5 Notice by Seller................................................-35- SECTION 12. GENERAL.......................................................-35- 12.1 Amendments; Waivers.............................................-35- 12.2 Schedules; Exhibits; Integration................................-35- 12.3 Best Efforts; Further Assurances................................-36- 12.4 Governing Law...................................................-36- 12.5 No Assignment...................................................-36- 12.6 Headings........................................................-36- 12.7 Counterparts....................................................-36- 12.8 Publicity and Reports...........................................-36- 12.9 Confidentiality.................................................-36- 12.10 Parties in Interest.............................................-37- 12.11 Notices.........................................................-37- 12.12 Expenses........................................................-38- 12.13 Remedies; Waiver................................................-38- 12.14 Representation By Counsel; Interpretation.......................-38- 12.15 Severability....................................................-38- -iii- 5 EXHIBITS EXHIBIT A Settlement Agreement EXHIBIT B Registration Rights Agreement SCHEDULES SCHEDULE 3.1 Jurisdictions; Officers and Trust Managers SCHEDULE 3.2 Capital Stock; Title to Shares SCHEDULE 3.3 Additional Liabilities or Contingencies SCHEDULE 3.5 Permits and Approvals SCHEDULE 3.6 Litigation SCHEDULE 3.7 Compliance with Law and Permits SCHEDULE 3.8 Dividends and Other Distributions SCHEDULE 3.9 Certain Interests SCHEDULE 3.11 Seller Benefit Plans SCHEDULE 3.13 Properties and Encumbrances SCHEDULE 3.14 Taxes SCHEDULE 3.15 Material Contracts SCHEDULE 3.16 Insurance SCHEDULE 3.17 Environmental Compliance SCHEDULE 3.18 Trust Records SCHEDULE 5.3 Conduct of Business SCHEDULE 8.6 List of Opinions of Seller's Counsel SCHEDULE 9.5 List of Opinions of Buyer's Counsel -iv- 6 SHARE PURCHASE AGREEMENT THIS SHARE PURCHASE AGREEMENT (this "AGREEMENT") is made and entered into as of December 13, 1996, by and between AMERICAN INDUSTRIAL PROPERTIES REIT, a Texas real estate investment trust ("SELLER"), and USAA REAL ESTATE COMPANY, a Delaware corporation ("BUYER"). R E C I T A L S A. Seller qualifies and operates as a real estate investment trust for federal income tax purposes. B. Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, a certain number of Seller's Common Shares (as defined herein) upon the terms and subject to the conditions set forth in this Agreement. C. The proceeds from the sale of Seller's Common Shares are to be used for the purposes set forth in this Agreement. A G R E E M E N T NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION 1.1 DEFINITIONS. The capitalized terms used in this Agreement, the Exhibits and the Schedules attached hereto shall have the meanings set forth below: "ACTION" means any action, complaint, investigation, Suit or other proceeding, whether civil or criminal, in law or in equity, or before any mediator, arbitrator or Governmental Entity. "AFFILIATE" means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, a specified Person. "AGREEMENT" means this Share Purchase Agreement, by and between Seller and Buyer, as amended from time to time pursuant to the terms of this Agreement, together with all Exhibits and all Schedules attached hereto. "ALTERNATIVE PROPOSAL" has the meaning set forth in Section 5.4(a) of this Agreement. -1- 7 "APPROVAL" means any approval, authorization, consent, qualification or registration, or any waiver of the foregoing, or any notice, statement or other communication required to be filed with or delivered to any Governmental Entity or any other Person. "ASSOCIATE" of a Person means (i) a corporation or organization (other than Seller or a party to this Agreement) of which such Person is an officer or partner or is, directly or indirectly, the beneficial owner of 10% or more of any class of equity securities; (ii) any trust or other estate in which such Person has a substantial beneficial interest or as to which such Person serves as trustee or in a similar capacity; and (iii) any relative or spouse of such Person who has the same residence as such Person. "AUDITED FINANCIAL STATEMENTS" has the meaning set forth in Section 3.3(a) of this Agreement. "AUDITORS" means Ernst & Young, LLP, independent public accountants to Seller. "BUYER" means USAA Real Estate Company, a Delaware corporation, or permitted assigns. "BUYER INDEMNIFIED PARTIES" has the meaning set forth in Section 11.1 of this Agreement. "CAPITAL STOCK" means any capital stock, beneficial interest or other equity interest, or any securities convertible into or exchangeable or exercisable for capital stock, beneficial interests or other equity interests, or any other rights, warrants or options to acquire any of the foregoing securities. "CHARTER DOCUMENTS" means Seller's Second Amended and Restated Declaration of Trust and Fourth Amended and Restated Bylaws as in effect as of the date of this Agreement. "CLOSING" has the meaning set forth in Section 2.3(a) of this Agreement. "CLOSING AGREEMENT" shall mean a written and legally binding agreement with a taxing authority relating to Taxes. "CLOSING DATE" means the date specified in Section 2.3(a) of this Agreement. "CODE" means the Internal Revenue Code of 1986, as amended and, as applicable, the regulations promulgated thereunder. -2- 8 "COMMON SHARES" means common shares of beneficial interest, par value $.10 per share, of Seller. "CONFIDENTIALITY AGREEMENT" has the meaning set forth in Section 5.4(b) of this Agreement. "CONTRACT" means any agreement, arrangement, bond, commitment, franchise, indemnity, indenture, instrument, lease, license or understanding, whether or not in writing. "ENCUMBRANCE" means any claim, charge, easement, encumbrance, lease, covenant, security interest, lien, option, pledge, rights of others, preferential right, right of first refusal or restriction (whether on voting, sale, transfer, disposition or otherwise), whether imposed by agreement, understanding, law, equity or otherwise, except that "Encumbrance" does not include any such item that (i) is reflected in the Audited Financial Statements or (ii) constitutes a statutory lien arising in the ordinary course of business. "ENVIRONMENTAL CLAIMS" means any of the following to the extent they relate to, or arise out of, directly or indirectly, Environmental Noncompliance with respect to the Properties or actual or alleged Environmental Conditions or any Notification which may lead to: (i) claims, demands, suits, causes of action for personal injury, death or property damage; (ii) claims for actual or threatened damages to natural resources; (iii) claims for the recovery of response costs, or administrative or judicial orders directing the performance of investigations, response or remedial actions under any Environmental Law; (iv) a requirement to implement "corrective action" pursuant to any restitution, contribution or equitable indemnity to third parties or any Governmental Entity; (v) fines, penalties, liens against the Properties; (vi) claims for injunctive relief or other orders or notices of violation from any Governmental Entity; or (vii) with regard to any present or former employees, tenants or guests, exposure to or injury from Environmental Conditions. "ENVIRONMENTAL CONDITIONS" means conditions of the environment, including the ocean, natural resources (including flora and fauna), soil, surface water, ground water, any actual or potential drinking or water supply, subsurface strata, or air, including ambient air, relating to or arising out of the use, handling, storage, treatment, recycling, generation, transportation, release, spilling, leaking, pumping, pouring, emptying, discharging, injecting, escaping, leaching, disposal, dumping or threatened release of Hazardous Materials from, in, on, or onto the Properties. "ENVIRONMENTAL NONCOMPLIANCE" means any of the following to the extent they are applicable to the Properties or alleged to be applicable to the Properties or to Seller, Subsidiaries or a Seller Partnership: (i) the Release of any Hazardous Material into the environment, any storm drain, sewer, septic system or publicly-owned treatment works, in violation of any effluent or emission limitations, standards or other criteria or guidelines established by any Environmental Law; (ii) any noncompliance of physical structure, equipment, process or premises with the requirements of building or fire codes, zoning or land use regulations or ordinances or conditional use permits; (iii) any noncompliance with federal, state or local requirements governing occupational safety and health; -3- 9 (iv) any operations, procedures and designs at or on the Properties which do not conform to the statutory or regulatory requirements of any Law (including land use regulations and ordinances) intended to protect public health, welfare and the environment; (v) the failure to have obtained permits, licenses, variances or other governmental authorizations necessary for the legal use and/or operation of any equipment, process or any activity at the Properties; or (vi) the operation and/or use of any process or equipment in violation of any permit condition, schedule of compliance, administrative or court order. "ENVIRONMENTAL PERMITS" has the meaning set forth in Section 3.17(a) of this Agreement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "EVEREN" means EVEREN Securities, Inc. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "GAAP" means generally accepted accounting principles as in effect from time to time. "GOVERNMENTAL ENTITY" means any agency, bureau, commission, court, department, official, political subdivision, tribunal or other instrumentality of any government, whether federal, state or local, domestic or foreign. "HAZARDOUS MATERIALS" means any substance, matter, material, waste, solid, liquid, gas, or pollutant, the generation, storage, disposal, handling, recycling, Release (or threatened Release) or treatment of which is regulated, prohibited, or limited under: (1) the Resource Conservation and Recovery Act, as amended by the Hazardous and Solid Waste Amendments of 1984, as now or hereafter amended ("RCRA") (42 U.S.C. Sections 6901 et seq.); (ii) the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act of 1986, as now or hereafter amended ("CERCLA") (42 U.S.C. Sections 9601 et seq.); (iii) the Clean Water Act, as now or hereafter amended ("CWA") (33 U.S.C. Sections 1251 et seq.); (iv) the Toxic Substances Control Act, as now or hereafter amended ("TSCA") (15 U.S.C. Sections 2601 et seq.); (v) the Clean Air Act, as now or hereafter amended ("CAA") (42 U.S.C. Sections 7401 et seq.) (RCRA, CERCLA, CWA, TSCA and CAA are collectively referred to herein as the "FEDERAL ENVIRONMENTAL LAWS"); (vi) any local, state or foreign law, statute, regulation, or ordinance analogous to any of the Federal Environmental Laws; or (vii) any other federal, state, local, or foreign law (including any common law), statute, regulation, or ordinance regulating, prohibiting, or otherwise restricting the placement, Release, threatened Release, generation, treatment, or disposal upon or into any environmental media of any substance, pollutant, or waste which is now or hereafter classified or considered to be hazardous or toxic to human health or the environment. All of the laws, statutes, regulations and ordinances referred to in subsections (vi) and (vii) above, together with the Federal Environmental Laws, are collectively referred to herein as -4- 10 "ENVIRONMENTAL LAWS." The term "HAZARDOUS MATERIALS" shall also include: (a) gasoline, diesel fuel, fuel oil, motor oil, waste oil, and any other petroleum hydrocarbons, including any additives or other by-products associated therewith; (b) "friable" asbestos (as the term "friable" is defined under 40 C.F.R. Section 61.141) and friable asbestos-containing materials in any form; (c) polychlorinated biphenyls; or (d) any substance the presence of which on the Properties, (x) requires reporting or remediation under any Environmental Law, (y) causes or threatens to cause a nuisance on the Properties or poses or threatens to pose a hazard to the health or safety of persons on the Properties, or (z) which, if it emanated or migrated from the Properties, could constitute a trespass, nuisance or health or safety hazard to persons on adjacent property. "INDEMNIFIABLE CLAIM" means any Loss for or against which any Person is entitled to indemnification under this Agreement; "INDEMNIFIED PARTY" means the party entitled to indemnity hereunder and their successors, assigns, and heirs; and "INDEMNIFYING PARTY" means the Person obligated to provide indemnification hereunder and its successors and assigns. "INITIAL REIT YEAR" has the meaning set forth in Section 3.14(c) of this Agreement. "LAW" means any constitutional provision, statute or other law, rule, regulation or interpretation of any thereof and any Order of any Governmental Entity (including Environmental Laws, including, without limitation, the Americans with Disabilities Act). "LOSS" means any claim, amount paid in settlement, cost, damage (including, without limitation, consequential damage), disbursement, expense (including legal fees and expenses), liability, loss, deficiency, diminution in value or obligation. "MATERIAL CONTRACT" means any Contract to which Seller, any Subsidiary or any Seller Partnership is a party or by which any such Person or any of their respective Properties are bound that currently is in effect and (a) after December 31, 1995 obligates Seller, any Subsidiary or any Seller Partnership to pay an amount equal to $100,000 or more, (b) is one of the group of Tenant Leases that is anticipated by Seller to produce 66 2/3% of Seller's gross income during the fiscal year ending December 31, 1997, such group of Tenant Leases calculated beginning with the Tenant Lease that is anticipated to produce the most gross income during such period and thereafter in descending order of magnitude of gross income anticipated to be earned during such period under each other Tenant Lease until such percentage of gross income is reached, (c) is a Tenant Lease involving the lease of space in excess of 10,000 square feet for any Property, (d) other than any Tenant Lease, has an unexpired term as of December 31, 1995 in excess of five (5) years, (e) other than any Tenant Lease, contains a covenant not to compete or otherwise significantly restricts business activities of Seller, any Subsidiary or any Seller Partnership, (f) provides for the extension of credit by Seller, any Subsidiary or any Seller Partnership or a line of credit to Seller, any Subsidiary or any Seller Partnership in excess of $50,000, (g) provides for a guaranty or indemnity by Seller, any Subsidiary or any Seller Partnership, (h) grants a power of attorney, agency or similar authority to another Person, (i) contains an option to purchase or a right of first refusal relating to any of the Properties, (j) relates to the sale or issuance of any equity securities of Seller or securities exercisable for or convertible into any equity -5- 11 securities of Seller, or (k) any other Contract that is not within the general descriptions of clauses (a) through (j) (i.e., is not a Tenant Lease or within any of the other general categories listed above) but is material to the business, financial condition, assets, results of operations or prospects of Seller, Subsidiaries or Seller Partnerships. "NOTIFICATION" means any summons, citation, directive, order, claim, litigation, pleading, investigation, proceeding, judgment, letter or any other written or oral communication from any Governmental Entity, any entity or any individual, concerning any intentional or unintentional act or omission which has resulted in or which may result in any Environmental Noncompliance or Environmental Claim. "ORDER" means any decree, injunction, judgment, order, ruling, assessment or writ. "PERMIT" means any license, permit, franchise, certificate of authority or order, or any waiver of the foregoing, required to be issued by any Governmental Entity. "PERSON" means an association, a corporation, an individual, a partnership, a joint venture, a limited liability company, a trust or any other entity or organization, including a Governmental Entity. "PROPERTIES" means the real property owned or leased by Seller, Subsidiaries and Seller Partnerships listed on Schedule 3.13 hereto. "PURCHASE PRICE" has the meaning set forth in Section 2.2 of this Agreement. "PURE WORLD LITIGATION" means that case pending in the United States District Court for the Northern District of Texas Dallas Division, Civil No. 3:96-CV-0068-H, involving Seller, Pure World, Inc., Robert Strougo, et. al. "REGISTRATION RIGHTS AGREEMENT" means the registration rights agreement between Buyer and Seller to be executed contemporaneously with the Closing. "REIT" has the meaning set forth in Section 3.14(b) of this Agreement. "RELEASE" means releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, ejecting, escaping, leaching, disposing, seeping, infiltrating, draining or dumping of any Hazardous Material. This term shall be interpreted to include both the present and past tense, as appropriate. "SCHEDULE" means any schedule attached to this Agreement. "SEC" means the Securities and Exchange Commission or any successor entity. -6- 12 "SEC FILINGS" has the meaning set forth in Section 3.4 of this Agreement. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SELLER" means American Industrial Properties REIT, a Texas real estate investment trust. "SELLER BENEFIT PLANS" has the meaning set forth in Section 3.11 of this Agreement. "SELLER INDEMNIFIED PARTIES" has the meaning set forth in Section 11.2 of this Agreement. "SELLER PARTNERSHIPS" has the meaning set forth in Section 3.1 of this Agreement. "SELLER PERMITS" has the meaning set forth in Section 3.7(b) of this Agreement. "SETTLEMENT AGREEMENT" shall mean the settlement agreement by and among Seller, Charles W. Wolcott and William H. Bricker on the one hand and Pure World, Inc., Paul O. Koether and Robert Strougo on the other hand attached hereto as Exhibit A. "SHARES" has the meaning set forth in Section 2.1 of this Agreement. "SUBSIDIARIES" has the meaning set forth in Section 3.1 of this Agreement. "TAXES" has the meaning set forth in Section 3.14(a) of this Agreement. "TAX RETURN" has the meaning set forth in Section 3.14(b) of this Agreement. "TENANT LEASES" has the meaning set forth in Section 3.13(b) of this Agreement. "TRUST MANAGERS" means the Trust Managers of Seller. "UNAUDITED FINANCIAL STATEMENTS" has the meaning set forth in Section 3.3(b) of this Agreement. "USAA GROUP" means United Services Automobile Association, a reciprocal interinsurance exchange under the Texas Insurance Code ("USAA"), and, as designated by USAA from time to time, any entity in which USAA directly or indirectly owns 100% of the issued and outstanding equity securities. -7- 13 1.2 RULES OF CONSTRUCTION. This Agreement shall be construed in accordance with the following rules of construction: (a) the terms defined in this Agreement include the plural as well as the singular; (b) all accounting terms not otherwise defined herein have the meanings given such terms under GAAP; (c) all references in the Agreement to designated "Sections " and other subdivisions are to the designated Sections and other subdivisions of the body of this Agreement; (d) pronouns of either gender or neuter shall include, as appropriate, the other pronoun forms; (e) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Section or other subdivision; (f) the words "includes" and "including" are not limiting; and (g) knowledge of any Subsidiary or any Seller Partnership shall be deemed to be knowledge of Seller. SECTION 2. PURCHASE AND SALE 2.1 PURCHASE AND SALE OF THE SHARES. Subject to the terms and conditions set forth herein, on the Closing Date, Seller shall issue to Buyer, and Buyer shall purchase from Seller, an aggregate of 924,600 Common Shares (the "SHARES"). 2.2 PURCHASE PRICE; PAYMENT. The cash purchase price for each Common Share shall be $2.75 per Common Share, and the aggregate cash purchase price for the Shares (the "PURCHASE PRICE") shall be Two Million Five Hundred Forty-Two Thousand Six Hundred Fifty Dollars ($2,542,650), payable on the Closing Date by wire transfer of immediately available funds to an account designated by Seller. 2.3 THE CLOSING. (a) The closing of the purchase and sale of the Shares (the "CLOSING") will take place at 10:00 a.m. at the offices of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., counsel to Seller, on the same day or within one (1) business day of final approval of the settlement of the Pure World Litigation by the court overseeing such settlement (the "CLOSING DATE"). (b) At the Closing, Seller shall deliver to Buyer the certificate or certificates evidencing the Shares. In addition, all other actions shall be taken and all other documents shall be delivered -8- 14 which are necessary to consummate the purchase and sale of the Shares, other than such actions and documents as are to be taken or delivered at another date, as specifically provided in this Agreement. (c) At the Closing, Buyer shall pay and deliver to Seller the Purchase Price in the manner set forth in Section 2.2 above. SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER Seller represents and warrants to, and agrees with, Buyer as follows: 3.1 ORGANIZATION AND RELATED MATTERS. Seller is duly organized, validly existing and in good standing under the laws of the State of Texas. Seller has all necessary power and authority to execute, deliver and perform this Agreement. Schedule 3.1 lists all Subsidiaries (the "SUBSIDIARIES") and all Seller Partnerships (the "SELLER PARTNERSHIPS") of Seller and correctly sets forth Seller's ownership interest therein, the jurisdiction in which each Subsidiary and each Seller Partnership is organized and each jurisdiction in which Seller, each Subsidiary and each Seller Partnership is and is required to be qualified or licensed to do business as a foreign Person. Each Subsidiary and each Seller Partnership is duly organized, validly existing and, with respect to each Subsidiary, in good standing under the laws of the jurisdiction of its incorporation or organization. Seller, Subsidiaries and Seller Partnerships have all necessary power (whether corporate, partnership or other power, as applicable) and authority to own their respective properties and assets and to carry on their respective businesses as now conducted. Seller, Subsidiaries and Seller Partnerships are duly qualified or licensed to do business as foreign Persons in good standing in all jurisdictions in which the character or the location of the assets owned or leased by any of them or the nature of the business conducted by any of them requires licensing or qualification, except where the failure to be so qualified or licensed is not and will not be material to their respective businesses, financial condition, assets, results of operations or prospects. Schedule 3.1 correctly lists the current Trust Managers, directors, general partners and executive officers of Seller, Subsidiaries and Seller Partnerships. True, correct and complete copies of the Charter Documents and the charter or organizational documents of Subsidiaries and Seller Partnerships (including the declaration of trust, articles or certificate of incorporation, bylaws and partnership agreements, as applicable) as in effect on the date hereof have been delivered to Buyer. Seller is registered and is a reporting company under the Exchange Act. Neither any Subsidiary nor any Seller Partnership is registered or is a reporting company under the Exchange Act. Except as listed on Schedule 3.1, Seller does not directly or indirectly own or control any equity interest in any Person. 3.2 CAPITAL STOCK; TITLE TO SHARES. The authorized Capital Stock of Seller consists of 10,000,000 Common Shares of which 9,075,400 Common Shares are issued and outstanding. Seller owns all of the outstanding Capital Stock of Subsidiaries free and clear of any Encumbrances, equities and claims except as specified in Schedule 3.2. Seller owns the equity interest in each Seller Partnership free and clear of any Encumbrances, equities and claims except as specified in Schedule 3.2. No Common Shares or Capital Stock of any Subsidiary are held in treasury. Except as set forth in Schedule 3.2 or as contemplated in this Agreement, there are no outstanding Contracts or other -9- 15 rights to subscribe for or purchase, or Contracts or other obligations to issue or grant any rights to acquire, any Common Shares, any Capital Stock of any Subsidiary or any Seller Partnership or to restructure or recapitalize Seller, any Subsidiary or any Seller Partnership. Except as set forth in Schedule 3.2, there are no outstanding Contracts of Seller, any Subsidiary or any Seller Partnership to repurchase, redeem or otherwise acquire any of their respective Common Shares or Capital Stock, as applicable. No bonds, debentures, notes or other indebtedness having general voting rights (or convertible into securities having general voting rights) of Seller, any Subsidiary or any Seller Partnership are issued or outstanding. There are no voting trusts or other agreements or understandings to which Seller, any Subsidiary or any Seller Partnership is a party or is bound, or to the knowledge of Seller, to which any other Person is a party or is bound, with respect to the voting of the Common Shares or the Capital Stock of any Subsidiary or any Seller Partnership. All issued and outstanding Common Shares and Capital Stock of all Subsidiaries and Seller Partnerships were duly authorized and validly issued at the time of issuance and are fully paid and nonassessable. There are no preemptive rights in respect of any Common Shares or Capital Stock of any Subsidiary or any Seller Partnership. Upon the issuance of the Shares to Buyer at the Closing, the Shares will have been validly issued and be validly outstanding, fully paid and nonassessable, and the issuance of such Shares is not and will not be subject to preemptive rights of any other shareholder of Seller. Buyer shall receive good and marketable title to the Shares, free and clear of all Encumbrances, except for restrictions on the transferability of the Shares set forth in the Charter Documents or generally imposed on securities under federal and state securities laws. Such Shares will rank equally with all other Common Shares of Seller with respect to priority in payment of dividends and the distribution of assets upon any liquidation of Seller, and there are no shares of any class of Capital Stock of Seller having any priority in respect thereof. 3.3 FINANCIAL STATEMENTS. (a) AUDITED FINANCIAL STATEMENTS. Seller has delivered to Buyer the consolidated balance sheets of Seller (which reflect the financial position of all Subsidiaries and Seller Partnerships), as of December 31, 1993, 1994 and 1995, and the respective related consolidated statements of operations, cash flows and stockholders' equity for the periods then ended (collectively, the "AUDITED FINANCIAL STATEMENTS"). The Audited Financial Statements have been examined by the Auditors whose report thereon is attached to such financial statements. All Audited Financial Statements have been prepared in conformity with GAAP applied on a consistent basis (except for changes, if any, disclosed therein). The Audited Financial Statements present fairly, in all material respects, the consolidated financial condition and results of operations of Seller, Subsidiaries and Seller Partnerships as of their respective dates and periods. Since December 31, 1995, there has been no change in the significant accounting policies or procedures of Seller, any Subsidiary or any Seller Partnership. Seller has not received any annual management letters from the Auditors since March 29, 1996. (b) UNAUDITED FINANCIAL STATEMENTS. Seller has delivered to Buyer the consolidated balance sheets of Seller (which reflect the financial position of all Subsidiaries and Seller Partnerships), as of March 31, June 30 and September 30, 1996, and the respective related -10- 16 consolidated statements of operations, cash flows and stockholders' equity for the periods then ended (collectively, the "UNAUDITED FINANCIAL STATEMENTS"). All Unaudited Financial Statements have been prepared in conformity with GAAP applied on a consistent basis (except for changes, if any, disclosed therein). The Unaudited Financial Statements present fairly, in all material respects, the consolidated financial condition and results of operations of Seller, Subsidiaries and Seller Partnerships as of their respective dates and periods. (c) NO MATERIAL ADVERSE CHANGES. Since September 30, 1996, except as set forth in Schedule 3.3, specifically contemplated by this Agreement, specifically disclosed in any SEC Filings filed since September 30, 1996 and prior to the date of this Agreement (copies of which have been provided to Buyer), and except the settlement of the Pure World Litigation, Seller, Subsidiaries and Seller Partnerships have conducted their respective businesses only in the ordinary course and in a manner consistent with past practice and, whether or not in the ordinary course of business, there has not been, occurred or arisen: (i) any change in or event affecting the business of Seller, Subsidiaries and Seller Partnerships that has had a material adverse effect on such business or any materially adverse change or trend in the business, financial condition, assets, results of operations or prospects of Seller, Subsidiaries or Seller Partnerships, or (ii) any condition or action which would be proscribed by (or require consent under) Section 5.3 had it existed, occurred or arisen after the date of this Agreement, or (iii) any casualty, loss, damage or destruction of any real property of Seller, any Subsidiary or any Seller Partnership that has involved or may involve a Loss (whether or not covered by insurance) to Seller, any Subsidiary or any Seller Partnership of more than $100,000 individually, or $300,000 in the aggregate. (d) NO OTHER LIABILITIES OR CONTINGENCIES. Neither Seller nor any Subsidiary nor any Seller Partnership has any material liability of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, probable of assertion or not, except liabilities that (i) were incurred after September 30, 1996 in the ordinary course of business in a manner consistent with past practice and are not material in amount or which involve the Pure World Litigation, or (ii) are set forth in Schedule 3.3 hereto. 3.4 SEC REPORTS. Seller has filed with the SEC all forms, reports, statements, including registration statements, and other material documents, together with any amendments required to be made with respect thereto, that were required to be filed with the SEC since December 31, 1993. Such forms, reports, statements, including registration statements, and other material documents required to be filed with the SEC by Seller since December 31, 1993 are collectively referred to in this Agreement as the "SEC FILINGS." Seller has made available to Buyer all SEC Filings. As of their respective dates, (x) each of the SEC Filings, including the financial -11- 17 statements contained therein, was true and complete in all material respects, (y) each of the SEC Filings, including the financial statements contained therein, complied in all material respects with the Securities Act and Exchange Act, as applicable, and the rules and regulations promulgated thereunder, and (z) none contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 3.5 AUTHORIZATION; NO CONFLICTS. Seller has the requisite power and authority to enter into this Agreement and the Registration Rights Agreement and to carry out its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement by Seller has been duly and validly authorized by the Trust Managers and by all other necessary action on the part of Seller, and no other proceedings on the part of Seller (including Trust Manager and shareholder approval) are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Seller and constitutes the legally valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws and equitable principles relating to or limiting creditors' rights generally. Except as set forth in Schedule 3.5, the execution, delivery and performance of this Agreement by Seller and the consummation by Seller of the transactions contemplated hereby will not (i) conflict with or result in the breach of any provisions of, or trigger any preferential rights under, the Charter Documents or the charter or organizational documents of Subsidiaries or Seller Partnerships, (ii) result in a breach or violation of, a default under, or the triggering of any payment or other material obligations pursuant to, or accelerate vesting under, any Seller Benefit Plans or any grant or award thereunder or any employment or consulting agreement or arrangement of Seller, any Subsidiary or any Seller Partnership, (iii) violate, conflict with, result in a breach of any provision of, constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, result in the termination or in a right of termination or cancellation of, accelerate the performance required by, result in the creation of any Encumbrance upon any Properties under, result in the triggering of any rights under, or result in being declared void, voidable or without further binding effect, any of the terms or provisions of any Material Contract of Seller, any Subsidiary or any Seller Partnership or (iv) violate any Law. Schedule 3.5 lists all Permits and Approvals required to be obtained by Seller, Subsidiaries and Seller Partnerships to consummate the transactions contemplated hereby. Except for matters identified in Schedule 3.5 as requiring that certain actions be taken by or with respect to a third party or Governmental Entity, the execution and delivery of this Agreement by Seller and the consummation of the transactions contemplated hereby will not require the consent, authorization or approval of filing or registration with, or the issuance of any Permit by, any other third party or Governmental Entity under the terms of any applicable Laws or Material Contracts of Seller, Subsidiaries or Seller Partnerships. 3.6 LEGAL PROCEEDINGS. Except as set forth in Schedule 3.6 and except with respect to the Pure World Litigation, there is no Order or Action pending, or to the knowledge of Seller threatened, against or affecting Seller, any Subsidiary, any Seller Partnership, any Trust Manager in his capacity as a trust manager of Seller or any of the Properties which (i) questions the validity of this Agreement, the Registration Rights Agreement, the Settlement Agreement or any action taken or to -12- 18 be taken pursuant hereto or thereto, or (ii) individually or when aggregated with one or more other Orders or Actions has, or if determined adversely will have, a material adverse effect on the business, financial condition, assets, results of operations or prospects of Seller, any Subsidiary or any Seller Partnership or on Seller's ability to perform this Agreement. To Seller's knowledge, Schedule 3.6 lists each Order and each Action that (i) involves a claim or potential claim of aggregate liability in excess of $50,000 against Seller, any Subsidiary or any Seller Partnership that is not covered by insurance, (ii) involves a claim or potential claim of aggregate liability brought by Seller, any Subsidiary or any Seller Partnership against a tenant under any Tenant Lease which Tenant Lease obligates such tenant to pay rent to Seller, any Subsidiary or any Seller Partnership during the year ending December 31, 1996 in an amount equal to or in excess of $150,000, or (iii) that enjoins or seeks to enjoin any activity by Seller, any Subsidiary or any Seller Partnership. There is no matter as to which Seller, any Subsidiary or any Seller Partnership has received any notice, claim or assertion in connection with which any such Person has or may reasonably be expected to have any right to be indemnified by Seller, any Subsidiary or any Seller Partnership. 3.7 COMPLIANCE WITH LAW AND PERMITS. (a) Seller, Subsidiaries and Seller Partnerships are organized and have conducted their respective businesses in accordance with applicable Laws, neither Seller nor any Subsidiaries or Seller Partnerships has received any notice of violation of any Laws which remains uncorrected, and the respective forms, procedures and practices of Seller, Subsidiaries and Seller Partnerships are in compliance with all such Laws, to the extent applicable, the violation of which would have a material adverse effect on the respective businesses, financial condition, assets, results of operations or prospects of Seller, Subsidiaries and Seller Partnerships. (b) Except as set forth in Schedule 3.7, Seller, Subsidiaries and Seller Partnerships hold all permits, licenses, variances, exemptions, authorizations, orders and approvals of all Governmental Entities necessary for the lawful conduct of their respective businesses (the "SELLER PERMITS") and Seller, Subsidiaries and Seller Partnerships are in compliance with the terms of the Seller Permits relating to each such Person, except where the failure to hold such Seller Permits or be in compliance therewith would not, individually or in the aggregate, have a material adverse effect on the business, financial condition, assets, results of operations or prospects of Seller, Subsidiaries or Seller Partnerships. Seller has made available to Buyer correct and complete copies of all Seller Permits. Except as set forth in Schedule 3.7, to the knowledge of the Seller, no investigation or review by any Governmental Entity with respect to the Seller Permits is pending or threatened. 3.8 DIVIDENDS AND OTHER DISTRIBUTIONS. Except as set forth in Schedule 3.8, there has been no dividend or other distribution of assets or securities by Seller or Seller Partnerships (other than Seller Partnerships in which Seller owns 100% beneficial interest) whether consisting of money, property or any other thing of value, declared, issued or paid to or for the benefit of Seller subsequent to the date of the Audited Financial Statements. -13- 19 3.9 CERTAIN INTERESTS. Except as set forth in Schedule 3.1 and Schedule 3.9, no Affiliate of Seller, any Subsidiary or any Seller Partnership, nor any of their respective officers, Trust Managers, directors or partners, nor any Associate of any such individual, has any material interest in any property used in or pertaining to the respective businesses of Seller, any Subsidiary or any Seller Partnership. Except as set forth in Schedule 3.1 and Schedule 3.9, no such Person is indebted or otherwise obligated to Seller, any Subsidiary or any Seller Partnership. Except as set forth in Schedule 3.9, Seller, Subsidiaries and Seller Partnerships are not indebted or otherwise obligated to any such Person, except for amounts due under normal arrangements applicable to all employees generally as to salary or reimbursement of ordinary business expenses not unusual in amount or significance. Except as set forth in Schedule 3.1 and Schedule 3.9, there are no material transactions between Seller, any Subsidiary or any Seller Partnership and any Affiliate of Seller, any Subsidiary or any Seller Partnership or any Associate of any such Affiliate that have continuing obligations of any party thereunder. Except as set forth in Schedule 3.9, the consummation of the transactions contemplated by this Agreement will not (either alone, or upon the occurrence of any act or event, or with the lapse of time, or both) result in any compensation or severance or other payment or benefit arising or becoming due from Seller, any Subsidiary or any Seller Partnership or any of its assigns to any Person. 3.10 NO BROKERS OR FINDERS. No agent, broker, finder, or investment or commercial banker, or other Person or firm engaged by or acting on behalf of Seller or any of its Affiliates in connection with the negotiation, execution or performance of this Agreement or the transactions contemplated by this Agreement, is or will be entitled to any brokerage or finder's or similar fee or other commission as a result of this Agreement or such transactions except for a fee payable to EVEREN. 3.11 EMPLOYEE BENEFIT PLANS. Schedule 3.11 lists all employee benefit plans and collective bargaining, labor and employment agreements or other similar benefit arrangements to which either Seller, any Subsidiary, or any Seller Partnership is a party or by which either Seller, any Subsidiary, or any Seller Partnership is bound (collectively, the "SELLER BENEFIT PLANS"), including (i) any profit-sharing, deferred compensation, bonus, stock option, stock purchase, pension, retainer, consulting, retirement, severance, welfare or incentive plan, agreement or arrangement, (ii) any plan, agreement or arrangement providing for "fringe benefits" or perquisites to employees, officers, directors, trust managers or agents, including benefits relating to automobiles, clubs, vacation, child care, parenting, sabbatical, sick leave, medical, dental, hospitalization, life insurance and other types of insurance, (iii) any employment agreement not terminable on 30 days (or less) written notice or (iv) any other "employee benefit plan" within the meaning of Section 3(3) of ERISA. True and complete copies of the Seller Benefit Plans, current descriptive booklets and summary plan descriptions of the Seller Benefit Plans, any relevant trust agreements or insurance policies or contracts and, if applicable, the most recent annual return on Form 5500 (or equivalent form) have been made available to Buyer. To the extent applicable, the Seller Benefit Plans comply, in all material respects, with the requirements of ERISA and the Code. Except as set forth in Schedule 3.11, no Seller Benefit Plan is or is intended to be a stock bonus, pension or profit-sharing plan within the meaning of Section 401(a) of the Code. Neither any Seller Benefit Plan nor Seller, any Subsidiary, or any Seller Partnership has -14- 20 incurred any liability or penalty under Section 4975 of the Code or Section 502(i) of ERISA. Each Seller Benefit Plan has been maintained and administered in all material respects in compliance with its terms and with ERISA and the Code to the extent applicable thereto. Except as set forth in Schedule 3.11, there are no pending, or to the knowledge of Seller threatened, claims (other than pursuant to the terms of any such plan) against or otherwise involving any of the Seller Benefit Plans and no Action has been brought against or with respect to any Seller Benefit Plan, and neither Seller nor any Subsidiary nor any Seller Partnership has incurred any liability to any party with respect to any Seller Benefit Plan. All contributions required to be made to the Seller Benefit Plans have been made or provided for. Except as set forth in Schedule 3.11, neither Seller nor any Subsidiary nor any Seller Partnership maintains or contributes to any plan or arrangement which provides or has any liability to provide life insurance or medical or other employee welfare benefits to any employee or former employee upon his retirement or termination of employment and neither Seller nor any Subsidiary nor any Seller Partnership has represented, promised or contracted (whether in oral or written form) to any employee or former employee that such benefits would be provided. Except as set forth in Schedule 3.11, the execution of, and performance of the transactions contemplated by, this Agreement will not (either alone or upon the occurrence of any additional or subsequent event) constitute an event under any Seller Benefit Plan or other policy, arrangement or any trust or loan that will or may result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any employee. No Seller Benefit Plan is subject to Title IV of ERISA and neither Seller nor any Subsidiary nor any Seller Partnership has, within six years prior to the date of this Agreement, contributed to or had any obligation to contribute to any employee benefit plan subject to Title IV of ERISA. For purposes of this Section 3.11, (i) the term "Seller" includes any entity required to be aggregated with the Seller pursuant to Code Section 414(b), (c), (m) or (o) and (ii) provisions of ERISA or the Code include regulations prescribed under such provisions. 3.12 LABOR MATTERS. Neither Seller nor any Subsidiary nor any Seller Partnership is a party to or bound by any collective bargaining or other labor union contracts. There is no pending or, to the knowledge of Seller, threatened labor dispute, strike or work stoppage against Seller, any Subsidiary, or any Seller Partnership. Neither Seller nor any Subsidiary nor any Seller Partnership, nor their respective representatives or employees, has committed any unfair labor practices in connection with the operation of the respective businesses of Seller, each Subsidiary, and each Seller Partnership, and there is no pending or, to the knowledge of Seller, threatened charge or complaint against Seller, any Subsidiary, or any Seller Partnership by the National Labor Relations Board or any comparable state agency. Seller, Subsidiaries, and Seller Partnerships are in compliance with all applicable Laws respecting employment, consulting, employment practices, wages, hours, and terms and conditions of employment. 3.13 PROPERTIES. (a) Schedule 3.13 contains a complete and correct list of all real property owned or leased by Seller, each Subsidiary and each Seller Partnership (collectively, the "PROPERTIES"). Except as set forth in Schedule 3.13, Seller, Subsidiary or Seller Partnership, as applicable, owns good and -15- 21 indefeasible title to each Property, including the land and all improvements, all personalty and the Tenant Leases (as hereinafter defined). Except as set forth in Schedule 3.13, the Properties are free and clear of all Encumbrances of any nature, except for (i) liens for real property taxes or similar assessments not yet due and payable, (ii) easements for utilities servicing the Properties and (iii) such Encumbrances as do not materially detract from or interfere with the present use of the Properties subject thereto or affected thereby, or otherwise materially impair the use or value of such Properties. (b) Seller has delivered to Buyer a true, correct and complete copy of a rent roll with respect to each Property setting forth, among other matters, the term (commencement or renewal date and expiration date) of each lease with respect to the Properties (collectively, the "TENANT LEASES"), the square feet for each of the Tenant Leases, the monthly base rental rates for each of the Tenant Leases and the security deposits for each of the Tenant Leases. Other than the Tenant Leases, no party has been granted any license, lease or other material right relating to the use or possession of the Properties which is material to the use or value of the Properties. Except as set forth in Schedule 3.13, all of the Tenant Leases are valid and subsisting and in full force and effect with respect to Seller, Subsidiaries and Seller Partnerships and, to Seller's knowledge, with respect to any other party thereto, and no tenant of the Properties is more than 30 days delinquent on its rental as of October 31, 1996 except as set forth in Schedule 3.13. To Seller's knowledge, no tenant of the Properties has initiated or threatened bankruptcy since January 1, 1996. No tenant of the Properties is an Affiliate or Associate of Seller, any Subsidiary or any Seller Partnership. Except as set forth in Schedule 3.13, there are no contracts or other material obligations outstanding for the sale, exchange or transfer of the Properties or any portion thereof. There are no attachments, executions, assignments for the benefit of creditors, receiverships, conservatorship or voluntary or involuntary proceedings in bankruptcy or pursuant to any other debtor relief laws filed by, or pending against, Seller, Subsidiaries, Seller Partnerships or the Properties. Except as set forth in Schedule 3.13, since January 1, 1996, no tenants have terminated their leases prior to expiration and, to Seller's knowledge, have no intent to do so. (c) Except as set forth in Schedule 3.13 there is no pending condemnation or similar proceeding affecting the land, the improvements or the personalty situated at the Properties or any portion thereof, and neither Seller nor any Subsidiary nor any Seller Partnership has received any written notice and has no knowledge that any such proceeding is contemplated. (d) The continued ownership, operation, use and occupancy of the land or the improvements thereon do not violate any zoning, building, administrative or other law, ordinance, order or regulation or any restrictive covenant applicable to the Properties, the violation of which would have a material adverse effect on the business, financial condition, assets, results of operations or prospects of Seller, Subsidiaries or Seller Partnerships, as applicable, and no written notice of any such violation has been received by Seller, any Subsidiary or any Seller Partnership from any Governmental Entity. (e) Seller, Subsidiaries or Seller Partnerships, as applicable, currently has in place title, liability, casualty and other insurance coverage with respect to the Properties in such amounts as are reasonable and customary for properties similar to the Properties. Each of such policies is in full force -16- 22 and effect, and all premiums due and payable thereunder have been, and on the Closing Date will be, fully paid when due. No notice of cancellation has been received, or to the knowledge of Seller threatened, with respect thereto. (f) Except as set forth in Schedule 3.13, there is no Action pending, or to the knowledge of Seller contemplated, by any Governmental Entity or third party to levy any special assessments against the Properties that, if successful, would have a material adverse effect on the business, financial condition, assets, results of operations or prospects of Seller. (g) To Seller's knowledge, each unsatisfied brokerage obligation that is in excess of $25,000 with respect to the Properties is set forth on Schedule 3.13. (h) To Seller's knowledge and except as set forth on Schedule 3.13, no capital expenditures are contemplated by Seller to be incurred by Seller, any Subsidiary or any Seller Partnership within twelve months after the date of this Agreement in excess of $50,000 per Property with respect to any Property. (i) Except as set forth in Schedule 3.13, all management contracts with respect to the Properties are terminable by Seller on 30 days notice. (j) To Seller's knowledge, except for customary easements for access to building systems or utilities and except as set forth in Schedule 3.13, each Property is an independent unit which does not now rely on any facilities (other than facilities of municipalities or public utilities) located on any property that is not part of the Property for the furnishing to the Property of any essential building systems or utilities (including drainage facilities, catch basins and retention ponds) that if the owner of the Property could not avail the use of which, would materially detract from the value of the Property or materially interfere with the use of the Property. 3.14 TAX MATTERS. (a) For purposes of this Agreement, "TAXES" means any federal (including, without limitation, tax on its undistributed taxable income, alternative minimum tax, tax on certain sale proceeds or other nonqualifying income from foreclosure property or on income from prohibited transactions, and any taxes imposed upon Seller, Subsidiaries or Seller Partnerships under Section 857 or Section 4981 of the Code), state, county, local or foreign taxes, charges, fees, levies, or other assessments, including, without limitation, all net income, gross income, sales and use, ad valorem, transfer, gains, profits, excise, franchise, real and personal property, gross receipt, capital stock, business and occupation, disability, employment, payroll, license, estimated, or withholding taxes or charges imposed by any Governmental Entity, and includes any interest and penalties (civil or criminal) on or additions to any such taxes. (b) For purposes of this Agreement, "TAX RETURN" means a report, return or other information required to be filed with or supplied to a Governmental Entity with respect to Taxes -17- 23 including, without limitation, any notices or information reports or returns required to be filed by Seller, Subsidiaries or Seller Partnerships with respect to their respective operations, income, assets and shareholders or partners in order to maintain Seller's status as a real estate investment trust ("REIT") under the Code. (c) Seller elected to be taxed as a REIT under Sections 856 through 860 of the Code effective for its taxable year ended December 31, 1985 (the "INITIAL REIT YEAR"). Seller, since the Initial REIT Year through the end of the immediately preceding taxable year, has always qualified as a REIT under the Code. At all times from and after the Initial REIT Year to the date hereof, Seller has complied with, and through the Closing Date will comply with, all applicable Code and regulatory requirements necessary to maintain its qualification as a REIT under the Code and has otherwise operated, and through the Closing Date will have otherwise operated, in the manner necessary to maintain its qualification as a REIT under the Code. No dividend will be required to be distributed before December 31, 1996 in order for Seller to maintain its qualification as a REIT under the Code. (d) Except as disclosed in Schedule 3.14, Seller, Subsidiaries and Seller Partnerships have (i) filed all Tax Returns required to be filed by applicable Law since December 31, 1990, and all such Tax Returns were in all material respects (and, as to Tax Returns not filed as of the date hereof but filed on or before the Closing Date, will be in all material respects) true, complete and correct and filed on a timely basis and (ii) within the time and in the manner prescribed by law, paid (and until the Closing Date will pay within the time and in the manner prescribed by law) all material Taxes that were or are due and payable. (e) Except as set forth in Schedule 3.14, Seller, Subsidiaries and Seller Partnerships have established (and until the Closing Date will maintain) on their respective books and records reserves adequate to pay all Taxes of Seller, Subsidiaries and Seller Partnerships not yet due and payable in accordance with GAAP which are reflected in the Audited Financial Statements and Unaudited Financial Statements to the extent required by GAAP. (f) Except as disclosed in Schedule 3.14, as of the date hereof, there are no, and, as of the Closing Date, there will be no, material Tax liens upon the assets of Seller, Subsidiaries and Seller Partnerships, except liens for Taxes not yet due. (g) Except as disclosed in Schedule 3.14, Seller, Subsidiaries, and Seller Partnerships have complied (and until the Closing Date will comply) in all material respects with the provisions of the Code relating to the payment and withholding of Taxes, including the withholding and reporting requirements under Code Sections 1441 through 1464, 3401 through 3406, and 6041 through 6049, as well as similar provisions under any other laws, and have, within the time and in the manner prescribed by law, withheld from employee wages and paid over to the proper governmental authorities all material amounts required by applicable Law. -18- 24 (h) Except as disclosed in Schedule 3.14, Seller, Subsidiaries and Seller Partnerships have not executed any outstanding waivers or comparable consents regarding the application of the statute of limitations with respect to any Taxes or Tax Returns. (i) No notice of any material deficiency for any Taxes has been received by Seller, any Subsidiary or any Seller Partnership that has not been resolved and paid in full or otherwise settled, no audits or other administrative proceedings or court proceedings are presently pending or, to Seller's knowledge, threatened with regard to any Taxes or Tax Returns of Seller, Subsidiaries or Seller Partnerships, and no notice of any material claim has been received by Seller, any Subsidiary or any Seller Partnership from any authority in a jurisdiction where Seller, Subsidiaries or Seller Partnerships do not file Tax Returns that Seller, any Subsidiary or any Seller Partnership is or may be subject to Tax in that jurisdiction. (j) Seller, Subsidiaries and Seller Partnerships have not received a Tax Ruling or entered into a Closing Agreement with the Internal Revenue Service that would have any continuing effect after the Closing Date. (k) Seller has made available (or, with respect to all Tax Returns filed after the date hereof, will make available) to Buyer complete and accurate copies of all Tax Returns, and amendments thereto, filed by Seller, any Subsidiary or any Seller Partnership for all taxable periods or years ending on or prior to the Closing Date. (l) Neither Seller nor any Subsidiary nor any Seller Partnership is required to include in income any adjustment pursuant to Code Section 481(a) by reason of a voluntary change in federal income tax accounting method (other than a change of federal income tax accounting method required as a result of a change in law) initiated by Seller, and the Internal Revenue Service has not proposed any such adjustment or change in accounting method. (m) Seller has made available to Buyer all relevant information with respect to the federal income tax net operating loss carryovers of Seller as of December 31, 1995, based on the federal income Tax Returns filed by Seller as of such date. (n) For all taxable years from and including its Initial REIT Year through the Closing Date, (i) Seller has maintained permanent records containing the information required to be maintained by Code Section 857(a)(2) and Treasury Regulation Sections 1.857-(8)(a), 1.857-8(c) and 1.857-8(e) and (ii) Seller has demanded the written statements from its shareholders required by Treasury Regulation Section 1.857-8(d) in accordance with Treasury Regulation Section 1.857- 8(e). 3.15 MATERIAL CONTRACTS. Schedule 3.15 sets forth an accurate list of all Material Contracts of Seller, Subsidiaries and Seller Partnerships. Seller has made available to Buyer complete and correct copies of all Material Contracts. All Material Contracts are in full force and effect. Except as set forth in Schedule 3.15, Seller, Subsidiaries and Seller Partnerships are not in violation of or default in any material respect (nor is there any waiver in effect of any event that would constitute a -19- 25 default but for such waiver) under, and no event has occurred that (with notice or the lapse of time or both) would constitute a violation of or default under, any Material Contract. Except as set forth in Schedule 3.15, to the knowledge of Seller, no other party to any Material Contract is in breach of the terms, provisions and conditions of such Material Contract and no other party to any Material Contract has notified Seller, any Subsidiary or any Seller Partnership that it intends to terminate or modify a Material Contract. 3.16 INSURANCE. Schedule 3.16 sets forth a complete and correct list of all insurance policies, except for title insurance policies, currently in force insuring against risks of Seller, Subsidiaries and Seller Partnerships. Seller, Subsidiaries and Seller Partnerships are in compliance with the terms of such policies applicable to them and there are no claims by Seller, any Subsidiary or any Seller Partnership under any such policy as to which any insurance company is denying liability or defending under a reservation of rights clause. 3.17 ENVIRONMENTAL MATTERS. (a) Except as set forth in the documentation provided to Seller pursuant to Section 3.17(b) and in Schedule 3.17, there is no material Environmental Noncompliance with respect to any Property and there are no material Environmental Claims with respect to any Property or the Seller, any Subsidiary or any Seller Partnership or, to the knowledge of Seller, any tenants under any of the Tenant Leases. All material permits, consents, licenses, certificates, approvals, registrations, and authorizations in connection with environmental matters (collectively, "ENVIRONMENTAL PERMITS") which are required by any Law have been obtained and are valid. The Properties (and all uses thereof and operations conducted thereon) comply in all material respects with all Environmental Permits. All operations on or at the Properties conducted by Seller are and have been conducted in all material respects in compliance with applicable Environmental Laws. Except as set forth in the documentation provided to Seller pursuant to Section 3.17(b) and in Schedule 3.17, Seller has not received any Notification from any Governmental Entity seeking any information or alleging any violation of any Law regarding Environmental Conditions. Except as set forth in the documentation provided to Seller pursuant to Section 3.17(b) and in Schedule 3.17, Seller has not caused or given its verbal or written authorization to cause, and has no knowledge of, any Release of any Hazardous Materials on-site or off-site of the Properties in violation of any Environmental Law. (b) Seller has made available to Buyer true, correct, and complete copies of all written reports of any environmental assessment, compliance or regulatory audit, inspection, or investigation of the Properties in its possession, and Seller has not received any other written report containing any evidence of Environmental Noncompliance. (c) Except as set forth in the documentation provided to Seller pursuant to Section 3.17(b) and in Schedule 3.17, there is not now, nor has there been in the past, any "friable" asbestos (as the term "friable" is defined under 40 C.F.R. Section 61.141) or friable asbestos containing materials located on, incorporated in, or otherwise contained in the Properties or any portion thereof, -20- 26 and there are not now, and have not in the past been, any underground storage tanks located on the Properties or any portion thereof. (d) Except as set forth in the documentation provided to Seller pursuant to Section 3.17(b), and in Schedule 3.17, none of the tenants under any Tenant Lease handle or store any Hazardous Material as a principal or primary business. 3.18 TRUST RECORDS; ACCOUNTING RECORDS. The minute books of Seller accurately reflect in all material respects all actions taken to the date of this Agreement by the holders of Common Shares, the Trust Managers and committees of the Trust Managers, except for those matters set forth in Schedule 3.18 for which minutes of such actions have not yet been prepared or approved. The share certificate books and records of Seller accurately reflect the ownership of the Common Shares. Seller maintains accounting records which fairly reflect, in all material respects, Seller's transactions. 3.19 NEW YORK STOCK EXCHANGE LISTING. The outstanding Common Shares are listed on the New York Stock Exchange. The sale and delivery of the Shares to Buyer pursuant to this Agreement along with the subsequent sale and delivery of any other Common Shares to Buyer will not violate any listing requirements of the New York Stock Exchange for the listing of Common Shares, including the Shares. 3.20 DISCLOSURE OF FACTS. There are no facts peculiar to Seller, Subsidiaries or the Seller Partnerships that Seller has not disclosed to Buyer that materially adversely affect, or insofar as Seller can reasonably foresee, will materially adversely affect, the business, financial condition, assets, results of operations or prospects of Seller, Subsidiaries or Seller Partnerships. SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants to, and agrees with, Seller as follows: 4.1 ORGANIZATION AND RELATED MATTERS. Buyer is a corporation duly organized and validly existing under the laws of the State of Delaware. Buyer has all necessary corporate power and corporate authority to carry on its business as now being conducted. Buyer has all necessary corporate power and corporate authority to execute, deliver and perform this Agreement and the transactions contemplated hereby. USAA beneficially owns, and at Closing will beneficially own, directly or indirectly, all of the capital stock of Buyer. 4.2 AUTHORIZATION. The execution, delivery and performance of this Agreement by Buyer has been duly and validly authorized by Buyer and by all other necessary corporate action on the part of Buyer and no other corporate proceedings on the part of Buyer are necessary to authorize this Agreement or consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Buyer and constitutes the legally valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws and equitable principles -21- 27 relating to or limiting creditors' rights generally. The execution and delivery of this Agreement by Buyer and the consummation of the transactions contemplated hereby will not require filing or registration with, or the issuance of any Permit by, any other third party or Governmental Entity under the terms of any applicable Law or material Contracts of Buyer, other than any filing required under the Exchange Act. 4.3 NO CONFLICTS. The execution, delivery and performance of this Agreement by Buyer will not violate the provisions of, or constitute a breach or default (whether upon lapse of time and/or the occurrence of any act or event or otherwise) under, (a) Buyer's certificate of incorporation and bylaws, pursuant to which Buyer was organized and by which Buyer is governed, (b) any Law to which Buyer is subject or (c) any Contract to which Buyer is a party that is material to the financial condition, results of operations or conduct of the business of Buyer. 4.4 NO BROKERS OR FINDERS. No agent, broker, finder or investment or commercial banker, or other Person or firms engaged by or acting on behalf of Buyer or their respective Affiliates in connection with the negotiation, execution or performance of this Agreement or the transactions contemplated by this Agreement, is or will be entitled to any broker's or finder's or similar fees or other commissions as a result of this Agreement or such transactions. 4.5 LEGAL PROCEEDINGS. There is no Order or Action pending against or, to the knowledge of Buyer, affecting Buyer that individually or when aggregated with one or more other Actions has, or if determined adversely would have, a material adverse effect on the business, properties, or financial condition of Buyer or on Buyer's ability to perform this Agreement. 4.6 INVESTMENT REPRESENTATION. Buyer is acquiring the Shares from Seller for Buyer's own account, for investment purposes only and not with a view to or for sale in connection with the distribution thereof. Buyer agrees to execute any further certificate or other document representing Buyer's investment intent or as to any other matter reasonably requested by Seller to assure compliance with applicable securities laws. 4.7 LEGENDS; STOP-TRANSFER ORDERS. (a) All certificates for the Shares may bear legends in substantially the following form: "THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE AND, ACCORDINGLY, MAY BE OFFERED, SOLD, TRANSFERRED OR PLEDGED ONLY IN A TRANSACTION WHICH IS REGISTERED UNDER SUCH ACT AND SUCH LAWS OR IS EXEMPT FROM SUCH REGISTRATION REQUIREMENT." -22- 28 (b) The certificates for Shares may also bear any legend required by any applicable state blue sky law. (c) The certificates for the Shares will also bear a legend relating to restrictions on transfer imposed pursuant to the percentage ownership limitation contained in the Charter Documents. (d) Seller may impose appropriate stop-transfer instructions relating to the restrictions set forth herein. 4.8 STATUS FOR REIT OWNERSHIP AND INCOME TESTS. At the Closing, applying the stock ownership rules of Code Section 856(h), Buyer will be treated as a corporation, and the Shares that it owns will be treated as owned proportionately by Buyer's policyholders (its "shareholders" for this purpose). SECTION 5. COVENANTS WITH RESPECT TO CONDUCT OF SELLER PRIOR TO CLOSING From the date of this Agreement up to and including the Closing Date, Seller covenants and agrees to take such actions, or refrain from taking such actions, as are set forth in this Section 5. 5.1 ACCESS. Seller shall, and shall cause the Subsidiaries and Seller Partnerships to, authorize and permit Buyer and its representatives (which term shall be deemed to include its independent accountants and counsel) to have reasonable access during normal business hours, upon reasonable notice and in such manner as will not unreasonably interfere with the conduct of business, to all of the Properties, books, records, operating instructions and procedures, Tax Returns and all other information with respect to the businesses of Seller, Subsidiaries and Seller Partnerships as Buyer may from time to time reasonably request, and to make copies of such books, records and other documents and to discuss the business of Seller, Subsidiaries and Seller Partnerships with Buyer and its partners and their respective officers, employees, accountants and counsel, as Buyer considers necessary or appropriate for the purposes of familiarizing itself with the business of Seller, obtaining any necessary Approvals of, or Permits for, the transactions contemplated by this Agreement and conducting an evaluation of the organization and business of Seller. From the date of this Agreement up to and including the Closing Date, Seller will permit, and cause Subsidiaries and Seller Partnerships to permit, Buyer and its partners, and their respective officers, directors, agents, attorneys, accountants, and representatives, to audit such books and records, to meet with tenants of the Properties, and to conduct such investigations, tests, or inspections of the Properties as Seller shall approve in Seller's sole discretion, including intrusive sampling studies to ascertain whether or not there are any Hazardous Materials on, in, or under the Properties. 5.2 MATERIAL ADVERSE CHANGES; SEC FILINGS; REPORTS; FINANCIAL STATEMENTS. -23- 29 (a) Seller shall promptly notify Buyer of any event of which Seller obtains knowledge which has had or might reasonably be expected to have a material adverse effect on Seller's business or which if known as of the date hereof would have been required to be disclosed to Buyer. (b) Seller will, and will cause the Subsidiaries and Seller Partnerships to, furnish to Buyer as soon as available copies of all SEC Filings, reports, renewals, filings, certificates, statements and other documents filed with any Governmental Entity. 5.3 CONDUCT OF BUSINESS. Except as set forth in Schedule 5.3 and as provided in Section 5.4, from the date of this Agreement until December 24, 1996, Seller agrees with and for the benefit of Buyer that Seller shall not, and Seller shall cause Subsidiaries and Seller Partnerships not to, without the prior written consent of Buyer, which consent may not unreasonably be withheld: (a) conduct the business of Seller, Subsidiaries and Seller Partnerships in any manner except in the ordinary course consistent with past practices; or (b) purchase any real property; or (c) declare, issue, make or pay any dividend or other distribution of assets, whether consisting of money, other tangible or intangible personal property, real property or other thing of value, to its shareholders, or split, combine, dividend, distribute or reclassify any Common Shares or any shares of its Capital Stock, as applicable, except for dividends the record date of which is after the Closing Date; or (d) issue, sell, redeem or acquire for value, or agree to do so, any debt obligations, Common Shares or Capital Stock; or (e) incur or agree to incur any obligation or liability (absolute or contingent) that individually calls for payment by Seller, any Subsidiary or any Seller Partnership of more than $50,000 individually or in the aggregate except for (i) liabilities (other than indebtedness for borrowed money) incurred in the ordinary course of business consistent with past practices (including, but not limited to, tenant improvements and capital improvements to Properties) and (ii) liabilities arising out of, incurred in connection with, or related to the consummation of the transactions contemplated by this Agreement; or (f) merge, sell substantially all of its assets or enter into any other contract involving any other form of business combination or liquidate, wind-up or dissolve (or suffer any liquidation or dissolution) or adopt any plan of liquidation or dissolution; or (g) change the number of Trust Managers or the Board of Directors of any of the Subsidiaries, or admit any additional partners to the Seller Partnerships; or -24- 30 (h) amend the Charter Documents or the charter or organizational documents of the Subsidiaries or Seller Partnerships; or (i) sell, lease, transfer or otherwise dispose of, or mortgage, pledge or otherwise encumber, other than the lease of any Property or space therein in the ordinary course of business consistent with past practices, any of the Properties; or (j) cancel, satisfy or prepay any debt, obligation, liability or encumbrance, or waive any claim or right of value of Seller, Subsidiaries or Seller Partnerships; or (k) (i) increase in any manner the compensation or fringe benefits (including, but not limited to, severance benefits) payable or to become payable by Seller, Subsidiaries, or Seller Partnerships to any officer, Trust Manager, director, partner, consultant or independent contractor as salary or wages or under any bonus, insurance, welfare, severance, deferred compensation, pension, retirement, profit sharing, stock option (including, without limitation, the granting of any stock option or stock appreciation right or performance or restricted stock award), stock purchase or other employee benefit plan, (ii) increase in any manner the compensation or fringe benefits (including, but not limited to, severance benefits) payable or to become payable by Seller, Subsidiaries or Seller Partnerships to any employee who is not an officer, Trust Manager, director or partner of Seller, Subsidiaries or Seller Partnerships as salary or wages or under any bonus, insurance, welfare, severance, deferred compensation, pension, retirement, profit sharing, stock option (including, without limitation, the granting of any stock option or stock appreciation right or performance or restricted stock award) stock purchase or other employee benefit plan, except for such increase in salary, bonuses or severance benefits to such employees in the ordinary course of business consistent with past practices and provided that all such increases in salary, bonuses or severance benefits do not have a material adverse effect on the business, assets, financial condition or prospects of Seller, Subsidiaries or Seller Partnerships, or (iii) enter into, adopt, amend in any material respect (except as required by law) or terminate any Seller Benefit Plan or any agreement, arrangement, plan or policy between Seller, Subsidiaries or Seller Partnerships, as applicable, and one or more of its Trust Managers, directors, partners, officers, employees or independent contractors; or (l) make any tax election other than in connection with maintaining Seller's qualification as a REIT or take any action that would cause Seller not to qualify as a REIT, or fail to take any reasonable action to preserve Seller's qualification as a REIT; or (m) make any change in any significant accounting principles or practices used by Seller, Subsidiaries or Seller Partnerships, except as required by the SEC; or (n) amend, modify or change the terms of any Material Contract other than in the ordinary course of business consistent with past practice and provided that such amendment, modification or change does not have a material adverse effect on the business, assets, financial condition or prospects of Seller, Subsidiaries or Seller Partnerships; or -25- 31 (o) acquire any Person (or interest therein) or any material amount of assets, or make any loans, advances or capital contributions to, or investments in, any Person; or (p) incur any indebtedness for borrowed money or assume, endorse (other than endorsements of negotiable instruments in the ordinary course of business), guarantee or otherwise become liable or responsible (whether directly, contingently or otherwise) for the liabilities or obligations of any Person; or (q) take any action that would, or fail to take any action which failure would, result in any of Seller's representations and warranties set forth in this Agreement not being true; or (r) agree to or make any commitment to take any action prohibited by this Section 5.3. 5.4 PROHIBITION OF SOLICITATION. (a) GENERAL PROHIBITION. Seller shall not, and it shall direct and use its best efforts to cause its officers, Trust Managers, employees, agents and representatives (including, without limitation, any investment banker, attorney or accountant retained by it) to not, directly or indirectly, initiate, solicit or encourage (including by way of furnishing information or assistance), or take any other action to facilitate, the making or implementation of any proposal or offer (including, without limitation, any proposal or offer to its shareholders) with respect to a merger, acquisition, consolidation or similar transaction involving, or any purchase of all or any significant portion of the assets or Common Shares of Seller (any such proposal or offer being hereinafter referred to as an "ALTERNATIVE PROPOSAL") or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any Person relating to an Alternative Proposal, or otherwise facilitate any effort or attempt to make or implement an Alternative Proposal. Except as disclosed to Buyer in writing prior to the date of this Agreement, Seller represents and warrants to Buyer that there are no existing activities, discussions or negotiations with any Person with respect to an Alternative Proposal. Seller hereby agrees to notify Buyer immediately if any inquiries or proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with Seller with respect to an Alternative Proposal. (b) UNSOLICITED OFFERS. Nothing contained in Section 5.4(a) shall prohibit the Trust Managers from: (i) furnishing information to or entering into discussions or negotiations with any Person that makes an unsolicited bona fide Alternative Proposal if, and only to the extent that, (1) prior to furnishing such information to, or entering into discussions or negotiations with, such Person, Seller provides written notice to Buyer to the effect that it is furnishing information to, or entering into discussions or negotiations with, such Person, (2) prior to furnishing such information to, or entering into discussions or negotiations with, such Person, Seller receives from such Person an executed confidentiality agreement in customary form on terms not less favorable in any material respect to Seller than the terms of the letter agreement, dated July 12, 1996 by and between Buyer and Seller (the "CONFIDENTIALITY AGREEMENT"), (3) Seller keeps Buyer informed of the status of any such discussions or negotiations and (4) Seller shall not disclose the terms of this Agreement and other information -26- 32 with respect to transactions among Seller and Buyer except as permitted under Section 12.9 hereto; and (ii) to the extent applicable, complying with Rule 14e- 2 promulgated under the Exchange Act with regard to an Alternative Proposal. Nothing in this Section 5.4 shall permit Seller to terminate this Agreement or affect any other obligation of Seller under this Agreement. (c) BUYER'S CONTINUING RIGHTS. Seller shall be permitted to enter into a binding agreement relating to an Alternative Proposal only if the Trust Managers determine, after considering the advice of its legal counsel, that the failure to consummate such a transaction might reasonably be expected to subject the Trust Managers to liability for breach of their fiduciary duties to Seller's shareholders. The terms of any Alternative Proposal to which Seller is a party in which Seller is the surviving entity shall provide that Buyer shall have the right, at its election, to purchase the Shares upon payment of the Purchase Price prior to consummation of any such transaction. In the event that Seller shall not be the surviving entity of such transaction, upon consummation of such transaction Seller shall cause such third party to assume the obligations of Seller under this Agreement and Buyer shall have the right, at its election, to acquire, upon payment of the Purchase Price, such securities or other property as it would have been entitled to receive upon exchange of the Shares if Buyer had purchased the Shares immediately prior to the consummation of such transaction. (d) REIMBURSEMENT OF EXPENSES. If for any reason, regardless of fault, the Shares are not sold by Seller to Buyer, Seller shall reimburse Buyer for all out-of-pocket expenses incurred by Buyer in connection with the transactions contemplated by this Agreement upon the submission by Buyer to Seller of documentation evidencing the incurrence of such expenses. 5.5 NOTIFICATION OF CERTAIN MATTERS. Seller shall give prompt notice to Buyer, and Buyer shall give prompt notice to Seller, of (a) the occurrence, or failure to occur, of any event that causes any representation or warranty contained in this Agreement to be untrue or inaccurate at any time from the date of this Agreement to the Closing Date and (b) any failure of Buyer or Seller, as the case may be, to comply with or satisfy, in any material respect, any covenant, condition or agreement to be complied with or satisfied by it under this Agreement. 5.6 PERMITS AND APPROVALS. (a) Seller and Buyer each agree to cooperate and use their best efforts to obtain (and will immediately prepare all registrations, filings and applications, requests and notices preliminary to all) Approvals and Permits that may be necessary or which may be reasonably requested by Seller or Buyer to consummate the transactions contemplated by this Agreement. (b) To the extent that the Approval of a third party with respect to any Material Contract is required in connection with the transactions contemplated by this Agreement, Seller shall use its best efforts to obtain such Approval prior to the Closing Date. -27- 33 SECTION 6. ADDITIONAL CONTINUING COVENANTS AND AGREEMENTS 6.1 USE OF PROCEEDS. The proceeds from the sale of the Shares to Buyer, net of any costs (including any accounting, legal and fairness opinion costs and expenses) associated with the transactions contemplated by this Agreement, shall be applied by Seller to expenses provided for in the Settlement Agreement and general reserves. 6.2 APPOINTMENT OF TRUST MANAGERS. (a) Effective as of the Closing Date, Seller shall increase the number of its Trust Managers from three (3) to five (5), and Seller shall appoint two (2) individuals designated by Buyer to fill the vacancies caused by the increase in the number of Trust Managers under this Section 6.2(a). In addition, at the first annual meeting and all subsequent annual meetings of shareholders after the number of Trust Managers has been increased to five (5) under this Section 6.2(a), Seller shall nominate, and use its best efforts to have such persons elected (which efforts shall include, without limitation, including Buyer's nominees in management's slate for nomination and election and solicitation of proxies on their behalf), two (2) designees of Buyer (which may be different persons than the persons initially appointed as Trust Managers pursuant to the first sentence of this Section 6.2(a) if such initial designees shall have died, resigned, been removed or declined to be nominated) as Trust Managers. During such time as Seller shall have individuals designated by Buyer serving as Trust Managers pursuant to this Section 6.2(a), and except as otherwise provided in Section 6.2(b) hereof, the number of Trust Managers shall consist of not more than five (5) persons, including the designees of Buyer. Such designees of Buyer shall hold office until resignation, removal, death or expiration of the term for which he or she was appointed and any successive term for which such representative is duly elected as a Trust Manager by the shareholders of Seller. In the event of the death, resignation or removal from office of a designee of Buyer serving as a Trust Manager pursuant to the first sentence of this Section 6.2(a), the Buyer shall be entitled to appoint a replacement designee as Trust Manager prior to the date Trust Managers are to be elected at the first annual meeting after the number of Trust Managers has been increased to five (5) pursuant to this Section 6.2(a). (b) ADDITIONAL APPOINTMENTS. In addition to Buyer's rights under Section 6.2(a), at any time during the three (3) year period commencing on the Closing Date, Buyer may, by notice in writing to Seller, require Seller to increase the number of Trust Managers from five (5) to seven (7) and to appoint two (2) individuals designated by Buyer in such written notice to fill such resulting vacancies. In addition, including Buyer's rights under Section 6.2(a), at the first annual meeting and all subsequent annual meetings of shareholders after notice by Buyer pursuant to the first sentence of this Section 6.2(b), Seller shall nominate four (4) designees of Buyer (which may be different persons than those persons initially appointed as Trust Managers pursuant to such first sentence if such initial designees shall have died, resigned, been removed or declined to be nominated) as Trust Managers. During such time as Seller shall have designees of Buyer serving as Trust Managers pursuant to this Section 6.2(b), the Trust Managers shall consist of not more than seven (7) persons, including designees of Buyer. Such designees of Buyer shall hold office until resignation, removal, death or -28- 34 expiration of the term for which he or she was appointed and any successive term for which such representative is duly elected as a Trust Manager by the shareholders of Seller. In the event of the death, resignation or removal from office of a designee of Buyer serving as a Trust Manager pursuant to the first sentence of this Section 6.2(b), the Buyer shall be entitled to appoint a replacement designee as Trust Manager. (c) QUALIFICATIONS. Each of the representatives designated by Buyer in accordance with this Section 6.2 shall be a Person selected by Buyer in its sole discretion; provided, however, that any such person may not have been involved in any of the events described in Item 401(d)(1)- (4) of Regulation S-K promulgated under the Exchange Act. (d) COMMITTEES. At any time that Buyer shall have exercised its rights under this Section 6.2 to appoint a designee as Trust Manager, Seller shall appoint at least one of Buyer's designees on each committee of the Trust Managers, and each such committee shall contain no more than three (3) members until expiration of the latest term of office of any designee of Buyer pursuant to Section 6.2(a) or 6.2(b). 6.3 ENVIRONMENTAL MATTERS. Seller will advise Buyer promptly (a) upon obtaining knowledge that a Release has occurred at or upon the Properties and/or (b) upon receipt of a Notification pertaining to the Properties. 6.4 STATUS FOR REIT OWNERSHIP AND INCOME TESTS. Following the Closing, and at all subsequent times during which Buyer owns any of the Shares, applying the stock ownership rules of Code Section 856(h), Buyer will be treated as a corporation, and the Shares that it owns will be treated as owned proportionately by Buyer's policyholders (its "shareholders" for this purpose). 6.5 PROHIBITED TRANSACTIONS. Seller shall not effect any business transactions, or agree to effect any business transactions, with Affiliates, Trust Managers or employees of Seller except in the ordinary course of business and unless the consideration paid by Seller in any such business transaction is fair value at market rates. 6.6 SELLER/BUYER REGISTRATION RIGHTS AGREEMENT. Contemporaneously with the Closing, Buyer and Seller shall enter into a Registration Rights Agreement substantially in the form of Exhibit B. 6.7 REIT QUALIFICATION. Seller shall take all actions necessary to maintain Seller's qualification as a REIT and, without the written consent of Buyer, shall take no action that would cause Seller not to qualify as a REIT or fail to take any action that would preserve Seller's qualification as a REIT. 6.8 SERVICES BY BUYER. To the extent permitted by law and the Charter Documents, Buyer shall have the right to provide management and leasing services to Seller at fair market rates. -29- 35 SECTION 7. GENERAL CONDITIONS OF PURCHASE The obligations of the parties to effect the Closing shall be subject to the following conditions unless waived in writing by all parties: 7.1 NO ORDERS. No Law or Order shall have been enacted, entered, issued, promulgated or enforced by any Governmental Entity which prohibits or restricts the transactions contemplated by this Agreement. No Governmental Entity shall have notified any party to this Agreement that consummation of the transactions contemplated by this Agreement would constitute a violation of any Law of any jurisdiction or that it intends to commence proceedings to restrain or prohibit such transactions or force divestiture or rescission, unless such Governmental Entity shall have withdrawn such notice and abandoned any such proceedings prior to the time which otherwise would have been the Closing Date. 7.2 APPROVALS. To the extent required by applicable Law, all Permits and Approvals required to be obtained in connection with the Closing from any Governmental Entity or any consent from a third party material to Seller or its business shall have been received or obtained on or prior to the Closing Date. 7.3 ABSENCE OF LITIGATION. No Action before any Governmental Entity pertaining to the transactions contemplated by this Agreement shall have been instituted on or before the Closing Date whether or not Buyer or its Affiliates is a party. 7.4 NEW YORK STOCK EXCHANGE. The Shares shall have been approved for listing, upon official notice of issuance, on the New York Stock Exchange. Seller shall have received a letter or other assurance from the New York Stock Exchange confirming that approval by Seller's shareholders of the issuance of the Shares is not required under the rules of the New York Stock Exchange. Seller will use its best efforts to maintain the listing of its Common Shares on the New York Stock Exchange. SECTION 8. CONDITIONS TO OBLIGATIONS OF BUYER The obligations of Buyer to effect the Closing shall be subject to the following conditions except to the extent waived in writing by Buyer: 8.1 SETTLEMENT AGREEMENT. The final settlement of the Pure World Litigation by the court overseeing such settlement shall have occurred on or before the Closing Date. 8.2 ACCURACY OF SELLER'S REPRESENTATIONS AND WARRANTIES. All representations and warranties of Seller set forth in this Agreement shall be true and correct at the Closing Date as if made on and as of the Closing Date. -30- 36 8.3 PERFORMANCE BY SELLER. Seller shall have in all material respects performed, satisfied and complied with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by Seller on or before the Closing Date, including the covenants set forth in Section 5. 8.4 NO MATERIAL ADVERSE CHANGE. During the period from the date of the Audited Financial Statements to the Closing Date, (i) there shall not have been any material adverse change in the business, assets, prospects, financial condition or the results of operations of Seller, and Seller shall not have sustained any material Loss or damage to its assets (including those of Subsidiaries and Seller Partnerships), except for Losses covered by insurance, that adversely affects its ability to conduct a material part of its business and (ii) there shall not have occurred any material adverse change in the financial markets in the United States, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to, in the judgment of Buyer, significantly impair the marketability or value of the Shares, (iii) the trading in any securities of the Company shall not have been suspended or limited by the Commission or the New York Stock Exchange, trading generally on the American Stock Exchange or the New York Stock Exchange or in the Nasdaq National Market shall not have been suspended or limited, minimum or maximum prices for trading shall not have been fixed, and maximum ranges for prices shall not have been required, by any of said exchanges or by such system or by order of the Commission, the National Association of Securities Dealers, Inc. or any other Governmental Entity, and (iv) a banking moratorium shall not have been declared by Federal, Texas or New York authorities. 8.5 CERTIFICATION BY SELLER. Buyer shall have received a certificate, dated as of the Closing Date, signed by the President of Seller, certifying, in such detail as Buyer and its counsel reasonably may request, that the conditions specified in Section 8.1, Section 8.2, Section 8.3, and Section 8.4 have been fulfilled. 8.6 OPINION OF SELLER'S COUNSEL. Buyer shall have received from counsel for Seller an opinion, dated as of the Closing Date, in form and substance reasonably satisfactory to Buyer as to the matters set forth in Schedule 8.6. 8.7 NO OTHER BUSINESS COMBINATION TRANSACTION. Seller shall not have entered into an agreement relating to an Alternative Proposal and its Trust Managers shall not have recommended an Alternative Proposal. SECTION 9. CONDITIONS TO OBLIGATIONS OF SELLER The obligations of Seller to effect the Closing shall be subject to the following conditions, except to the extent waived in writing by Seller: -31- 37 9.1 SETTLEMENT AGREEMENT. The final settlement of the Pure World Litigation by the court overseeing such settlement shall have occurred on or before the Closing Date. 9.2 ACCURACY OF BUYER'S REPRESENTATIONS AND WARRANTIES. All representations and warranties of Buyer set forth in this Agreement shall be true and correct at the Closing Date as if made on and as of the Closing Date. 9.3 BUYER'S PERFORMANCE. Buyer shall have in all material respects performed, satisfied and complied with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by Buyer on or before the Closing Date. 9.4 CERTIFICATION BY BUYER. Seller shall have received a certificate, dated as of the Closing Date, signed by the President or a Vice President of Buyer, certifying, in such detail as Seller and its counsel reasonably may request, that the conditions specified in Section 9.2 and Section 9.3 have been fulfilled. 9.5 OPINION OF BUYER'S COUNSEL. Seller shall have received from counsel to Buyer an opinion, dated as of the Closing Date, in form and substance reasonably satisfactory to Seller as to the matters set forth in Schedule 9.5. SECTION 10. TERMINATION OF OBLIGATIONS; SURVIVAL 10.1 TERMINATION OF AGREEMENT. This Agreement and the transactions contemplated by this Agreement may be terminated at any time before the Closing Date, as follows and in no other manner: (a) MUTUAL CONSENT. By mutual consent in writing of Buyer and Seller. (b) CONDITIONS TO BUYER'S PERFORMANCE NOT MET. By Buyer with written notice to Seller if the Closing Date has not occurred on or before December 31, 1996. Notwithstanding the foregoing, Buyer may not exercise any right to terminate this Agreement pursuant to this paragraph if Buyer has breached in any material respect its covenants or agreements set forth in this Agreement in any manner that shall have proximately contributed to the failure of the Closing Date to occur on or before December 31, 1996. (c) CONDITIONS TO SELLER'S PERFORMANCE NOT MET. By Seller with written notice to Buyer if the Closing Date has not occurred on or before December 31, 1996. Notwithstanding the foregoing, Seller may not exercise any right to terminate this Agreement pursuant to this paragraph if Seller has breached in any material respect its covenants or agreements set forth in this Agreement in any manner that shall have proximately contributed to the failure of the Closing Date to occur on or before December 31, 1996. -32- 38 (d) MISREPRESENTATION OR MATERIAL BREACH. By Buyer or Seller with written notice to the other party if there has been a misrepresentation or material breach on the part of Seller or Buyer, respectively, in their respective representations, warranties and covenants set forth herein, which, with respect to a breach of a covenant, if curable, has not been cured within ten business days after receipt of notice from Buyer or Seller of the terminating party's intention to terminate. (e) ENVIRONMENTAL NONCOMPLIANCE. By Buyer in the event of the discovery of any Release or other matter prior to the Closing Date which, if known to Seller as of the date of this Agreement, would have constituted a breach of the representations and warranties contained in Section 3.17. 10.2 EFFECT OF TERMINATION. In the event that this Agreement shall be terminated pursuant to Section 10.1, all further obligations of the parties under this Agreement shall terminate; provided that the obligations of the parties contained in this Section 10.2, Section 11, and Section 12, (other than Sections 12.3 and 12.8) shall survive any such termination. A termination under Section 10.1 shall not relieve any party of any liability for a breach of, or for any misrepresentation under, this Agreement, or be deemed to constitute a waiver of any available remedy (including specific performance if available) for any such breach or misrepresentation. 10.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and warranties contained in or made pursuant to this Agreement shall expire on the third anniversary of the Closing except that (a) the representations and warranties contained in Section 3.2 shall continue forever (subject to all defenses of Seller available under applicable Law, including the expiration of the applicable statute of limitations period), (b) the representations and warranties contained in Section 3.14 shall continue through the applicable statute of limitations, (c) representations and warranties which are intentionally misrepresented shall continue through the later of the first anniversary of the Closing Date and one year following the date of actual discovery of such intentional misrepresentation, and (d) if a claim or notice is given under Section 11 with respect to the breach of any representation or warranty prior to the applicable expiration date, such representation or warranty shall continue indefinitely until such claim is finally resolved. All covenants and agreements of the parties hereto shall be continuing and shall survive the Closing Date pursuant to the terms thereof. SECTION 11. INDEMNIFICATION 11.1 OBLIGATIONS OF SELLER. Seller agrees to indemnify, defend and hold harmless Buyer and its officers, employees, agents, directors and Affiliates (collectively, the "BUYER INDEMNIFIED PARTIES") from and against any and all Losses of the Buyer Indemnified Parties (as incurred) as a result of, or based upon, relating to or arising out of, directly or indirectly, the transactions contemplated hereby or by the Registration Rights Agreement, including, without limitation, as a consequence of (a) any inaccuracy in, or breach or nonperformance of, any of the representations, warranties, covenants or agreements made by Seller in, or pursuant to, this Agreement, or (b) any pending or threatened Action brought by Seller's shareholders or creditors or any other Person other than the Buyer Indemnified Parties or their creditors relating to, or arising out of or in connection with, -33- 39 directly or indirectly, the transactions contemplated under this Agreement; provided, however, that Seller shall not be obligated to indemnify, defend or hold harmless any of the Buyer Indemnified Parties for any claims based solely on actions taken by any of the Buyer Indemnified Parties other than the performance of the covenants and agreements to be undertaken by Buyer pursuant to the terms and conditions of this Agreement and any other action authorized in writing by Seller. As a condition to the rights of any of the Buyer Indemnified Parties under this Section 11, Seller may require that any such Person provide a written undertaking that such Person will repay to Seller any amount expended by Seller to indemnify, defend or hold harmless such Person in the event and to the extent a court determines that Seller's indemnification or defense of such Person is prohibited by applicable Law. 11.2 OBLIGATIONS OF BUYER. Buyer agrees to indemnify, defend and hold harmless Seller and its Trust Managers, officers, employees, agents, directors and Affiliates (collectively, the "SELLER INDEMNIFIED PARTIES") from and against any Losses of the Seller Indemnified Parties as a result of, or based upon or arising out of, directly or indirectly, (a) any material inaccuracy in, or material breach or material nonperformance of, any of the representations, warranties, covenants or agreements made by Buyer in, or pursuant to, this Agreement, or (b) any pending or threatened Action brought by Buyer's policyholders or creditors relating to, or arising out of or in connection with, directly or indirectly, the transactions contemplated under this Agreement; provided, however, that Buyer shall not be obligated to indemnify, defend or hold harmless any of the Seller Indemnified Parties for any claims based solely on actions taken by any of the Seller Indemnified Parties other than the performance of the covenants and agreements to be undertaken by Seller pursuant to the terms and conditions of this Agreement and any other action authorized in writing by Buyer. As a condition to the rights of any of the Seller Indemnified Parties under this Section 11, Buyer may require that any such Person provide a written undertaking that such Person will repay to Buyer any amount expended by Buyer to indemnify, defend or hold harmless such Person in the event and to the extent a court determines that Buyer's indemnification or defense of such Person is prohibited by applicable Law. 11.3 PROCEDURE. (a) NOTICE. Any party seeking indemnification with respect to any Loss shall give notice to the party required to provide indemnity hereunder (the "INDEMNIFYING PARTY") on or before the date specified in Section 11.4. (b) DEFENSE OF CLAIM. If any claim, demand or liability is asserted by any third party against any Indemnified Party, the Indemnifying Party shall have the right, unless otherwise precluded by applicable law, to conduct and control the defense, compromise or settlement of any Action or threatened Action brought against the Indemnified Party in respect of matters embraced by the indemnity set forth in this Section 11. The Indemnified Party shall have the right to employ counsel separate from counsel employed by the Indemnifying Party in connection with any such Action or threatened Action and to participate in the defense thereof, but the fees and expenses of such counsel employed by the Indemnified Party shall be at the sole expense of the Indemnified Party unless (i) the Indemnifying Party shall have elected not, or, after reasonable written notice of any such Action or threatened Action, shall have failed, to assume or participate in the defense thereof, (ii) the -34- 40 employment thereof has been specifically authorized by the Indemnifying Party in writing, or (iii) the parties to any such Action or threatened Action (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party and the Indemnified Party shall have been advised in writing by counsel for the Indemnified Party that there may be one or more defenses available to the Indemnified Party that are not available to the Indemnifying Party or legal conflicts of interest pursuant to applicable rules of professional conduct between the Indemnifying Party and the Indemnified Party (in any which case, the Indemnifying Party shall not have the right to assume the defense of such Action on behalf of the Indemnified Party), in either of which events referred to in clauses (i), (ii) and (iii) the fees and expenses of such counsel employed by the Indemnified Party shall be at the expense of the Indemnifying Party. The Indemnifying Party shall not, without the written consent of the Indemnified Party, settle or compromise any such Action or threatened Action or consent to the entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party a release from all liability in respect of such Action or threatened Action. Unless the Indemnifying Party shall have elected not, or shall have after reasonable written notice of any such Action or threatened Action failed, to assume or participate in the defense thereof, the Indemnified Party may not settle or compromise any Action or threatened Action without the written consent of the Indemnifying Party. If, after reasonable written notice of any such Action or threatened Action, the Indemnifying Party neglects to defend the Indemnified Party, a recovery against the latter suffered by it in good faith, is conclusive in its favor against the Indemnifying Party; provided, however, that no such conclusive presumption shall be made if the Indemnifying Party has not received reasonable written notice of the Action against the Indemnified Party. 11.4 SURVIVAL. The indemnity set forth in this Section 11 shall survive the Closing or termination of this Agreement and shall remain in effect for a period of (a) with respect to a breach of a representation or warranty, for the period through which such representation or warranty shall continue pursuant to Section 10.3 (including such period of time through which such representation or warranty shall be extended until resolution of a claim with respect thereto) and (b) with respect to a breach of a covenant or agreement or an Action referred to in clause (b) of Sections 11.1 or 11.2, forever. 11.5 NOTICE BY SELLER. Seller and Buyer agree to notify in writing the other party of any liabilities, claims or misrepresentations, breaches or other matters covered by this Section 11 upon discovery or receipt of notice thereof (other than from such other party), whether before or after Closing. SECTION 12. GENERAL 12.1 AMENDMENTS; WAIVERS. This Agreement and any Schedule or Exhibit attached hereto or referenced herein may be amended only by agreement in writing of all parties. No waiver of any provision nor consent to any exception to the terms of this Agreement shall be effective unless in writing and signed by the party to be bound and then only to the specific purpose, extent and instance so provided. -35- 41 12.2 SCHEDULES; EXHIBITS; INTEGRATION. Each Exhibit and Schedule delivered pursuant to the terms of this Agreement shall be in writing and shall constitute a part of the Agreement. This Agreement, together with such Exhibits and Schedules, constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements and understandings of the parties in connection therewith. 12.3 BEST EFFORTS; FURTHER ASSURANCES. Each party will use its best efforts to cause all conditions to its obligations to be timely satisfied and to perform and fulfill all obligations on its part to be performed and fulfilled under this Agreement. The parties shall cooperate with each other in such actions and in securing requisite Approvals. Each party shall execute and deliver such further certificates, agreements and other documents and take such other actions as the other party may reasonably request to consummate or implement the transactions contemplated hereby or to evidence such events or matters, including the seeking of any necessary shareholder approvals. 12.4 GOVERNING LAW. 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 TEXAS, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION (WHETHER OF THE STATE OF TEXAS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS. 12.5 NO ASSIGNMENT. Except as otherwise specifically provided herein, neither this Agreement nor any rights or obligations under it are assignable by any party, except that Buyer may assign its rights hereunder (including but not limited to its rights under Section 11) to any member of the USAA Group. Buyer shall remain liable to Seller for the payment of the Purchase Price and other obligations of Buyer hereunder notwithstanding a permitted assignment. 12.6 HEADINGS. The descriptive headings of the Sections and subsections of this Agreement are for convenience only and do not constitute a part of this Agreement. 12.7 COUNTERPARTS. This Agreement and any other agreement or document delivered pursuant hereto may be executed in one or more counterparts and by different parties in separate counterparts. All of such counterparts shall constitute one and the same agreement or other document and shall become effective when one or more counterparts of this Agreement have been signed by each party and delivered to the other party. 12.8 PUBLICITY AND REPORTS. Seller and Buyer shall coordinate all publicity relating to the transactions contemplated by this Agreement and no party shall issue any press release, publicity statement or other public notice relating to this Agreement, or the transactions contemplated by this Agreement, without obtaining the prior consent of the other party, except to the extent that independent legal counsel to Seller or Buyer, as the case may be, shall advise Seller or Buyer in writing that a particular action is required by applicable Law (in which event the party taking such -36- 42 action shall cooperate with the other party in connection with any disclosure or publicity resulting from such action). 12.9 CONFIDENTIALITY. All information disclosed by any party (or its representatives) to the other party whether before or after the date hereof, in connection with the transactions contemplated by, or the discussions and negotiations preceding, this Agreement to any other party (or its representatives) shall be kept confidential by such other party and its representatives and shall not be used by any such Persons other than as contemplated by this Agreement, except (a) to the extent that such information (i) was known by the recipient when received, (ii) is or hereafter becomes lawfully obtainable from other public sources or (iii) is necessary or appropriate to be disclosed to a Governmental Entity having jurisdiction over the parties, (b) may otherwise be required by Law to be disclosed or (c) to the extent such duty as to confidentiality is waived in writing by the other party. If this Agreement is terminated in accordance with its terms, each party shall use all reasonable efforts to return upon written request from the other party all documents (and reproductions thereof) received by it or its representatives from such other party (and, in the case of reproductions, all such reproductions made by the receiving party) that include information not within the exceptions contained in the first sentence of this Section 12.9, unless the recipients provide assurances reasonably satisfactory to the requesting party that such documents have been destroyed. 12.10 PARTIES IN INTEREST. This Agreement shall be binding upon and inure to the benefit of each party, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Nothing in this Agreement is intended to relieve or discharge the obligation of any third Person to or to confer any right of subrogation or action over or against any party to this Agreement. 12.11 NOTICES. Any notice or other communication hereunder must be given in writing and (a) either delivered in person, (b) transmitted by telex, telefax or telecopy mechanism, (c) mailed by first class mail, return receipt requested, or (d) delivered by overnight mail or courier service, as follows: If to Buyer, addressed to: USAA Real Estate Company 8000 Robert F. McDermott Freeway IH-10 West, Suite 600 San Antonio, Texas 78230-3884 Attention: David M. Holmes Randal R. Seewald, Esq. Telephone: (210) 498-0626 Telecopy: (210) 498-6214 -37- 43 If to Seller, addressed to: American Industrial Properties REIT 6220 North Beltline Road, Suite 205 Irving, Texas 75063-2656 Attention: Mr. Charles W. Wolcott President and Chief Executive Officer Telephone: (972) 550-6053 Telecopy: (972) 550-6037 or to such other address or to such other person as any party shall have last designated by such notice to the other parties. Each such notice or other communication shall be effective (i) if given by telecommunication, when transmitted to the applicable number so specified in this Section 12.11 and an appropriate answer back is received, (ii) if given by mail, three days after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when actually delivered at such address. 12.12 EXPENSES. Seller and Buyer shall pay their own respective expenses incident to the negotiation, preparation and performance of this Agreement and the transactions contemplated hereby, including but not limited to the fees, expenses and disbursements of their respective financial advisers, accountants and counsel. 12.13 REMEDIES; WAIVER. All rights and remedies existing under this Agreement and any related agreements or documents are cumulative to and not exclusive of any rights or remedies otherwise available under applicable Law. No failure on the part of any party to exercise or delay in exercising any right hereunder shall be deemed a waiver thereof, nor shall any single or partial exercise preclude any further or other exercise of such or any other right. Buyer and Seller shall be entitled to seek any equitable remedy to the extent such remedy is available under applicable Law. 12.14 REPRESENTATION BY COUNSEL; INTERPRETATION. Seller and Buyer each acknowledge that each party to this Agreement has been represented by counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of Law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. The provisions of this Agreement shall be interpreted in a reasonable manner to effect the intent of Buyer and Seller, and no rule of strict construction shall be applied against any party to this Agreement. 12.15 SEVERABILITY. If any provision of this Agreement is determined to be invalid, illegal or unenforceable by any Governmental Entity, the remaining provisions of this Agreement to the extent permitted by Law shall remain in full force and effect to the extent permitted by Law, and the parties hereby to the same extent waive any provision of Law that renders any provision hereof prohibited or unenforceable in any respect. -38- 44 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by its duly authorized officers as of the day and year first above written. "BUYER" USAA REAL ESTATE COMPANY By:_____________________________________ T. Patrick Duncan Senior Vice President - Operations "SELLER" AMERICAN INDUSTRIAL PROPERTIES REIT By:_____________________________________ Charles W. Wolcott President and Chief Executive Officer -39- EX-10.4 5 SHARE PURCHASE AGREEMENT DATED 12/19/96 1 EXHIBIT 10.4 SHARE PURCHASE AGREEMENT dated as of December 20, 1996 Among AMERICAN INDUSTRIAL PROPERTIES REIT, INC., AMERICAN INDUSTRIAL PROPERTIES REIT and USAA REAL ESTATE COMPANY 2 TABLE OF CONTENTS SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION.............................-1- 1.1 Definitions......................................................-1- 1.2 Rules of Construction............................................-8- SECTION 2. PURCHASE AND SALE...............................................-8- 2.1 Purchase and Sale of the Shares..................................-8- 2.2 Purchase Price; Payment.........................................-9- 2.3 The Closing......................................................-9- SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER AND TRUST...............-9- 3.1 Organization and Related Matters.................................-9- 3.2 Capital Stock; Title to Shares..................................-10- 3.3 Financial Statements............................................-11- 3.4 SEC Reports.....................................................-12- 3.5 Authorization; No Conflicts.....................................-12- 3.6 Legal Proceedings...............................................-13- 3.7 Compliance with Law and Permits.................................-14- 3.8 Dividends and Other Distributions...............................-14- 3.9 Certain Interests...............................................-14- 3.10 No Brokers or Finders...........................................-15- 3.11 Employee Benefit Plans..........................................-15- 3.12 Labor Matters...................................................-16- 3.13 Properties......................................................-16- 3.14 Tax Matters.....................................................-18- 3.15 Material Contracts..............................................-20- 3.16 Insurance.......................................................-20- 3.17 Environmental Matters...........................................-21- 3.18 Trust Records; Accounting Records...............................-21- 3.19 New York Stock Exchange Listing.................................-22- 3.20 Disclosure of Facts.............................................-22- SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER.........................-22- 4.1 Organization and Related Matters................................-22- 4.2 Authorization...................................................-22- 4.3 No Conflicts....................................................-22- 4.4 No Brokers or Finders...........................................-23- 4.5 Legal Proceedings...............................................-23- 4.6 Investment Representation.......................................-23- 4.7 Legends; Stop-Transfer Orders...................................-23- 4.8 Status for REIT Ownership and Income Tests......................-23- -i- 3 SECTION 5. COVENANTS WITH RESPECT TO CONDUCT OF SELLER PRIOR TO CLOSING.........................................................-23- 5.1 Access..........................................................-23- 5.2 Material Adverse Changes; SEC Filings; Reports; Financial Statements......................................................-24- 5.3 Conduct of Business.............................................-24- 5.4 Prohibition of Solicitation.....................................-26- 5.5 Notification of Certain Matters.................................-28- 5.6 Permits and Approvals...........................................-28- SECTION 6. ADDITIONAL CONTINUING COVENANTS AND AGREEMENTS..................-28- 6.1 Use of Proceeds.................................................-28- 6.2 Environmental Matters...........................................-28- 6.3 Status for REIT Ownership and Income Tests......................-28- 6.4 Prohibited Transactions.........................................-28- 6.5 Registration Rights Agreement...................................-29- 6.6 REIT Qualification..............................................-29- 6.7 Services by Buyer...............................................-29- SECTION 7. GENERAL CONDITIONS OF PURCHASE..................................-29- 7.1 No Orders.......................................................-29- 7.2 Approvals.......................................................-29- 7.3 Absence of Litigation...........................................-29- 7.4 New York Stock Exchange.........................................-29- SECTION 8. CONDITIONS TO OBLIGATIONS OF BUYER..............................-30- 8.1 Settlement Agreement............................................-30- 8.2 Accuracy of Representations and Warranties......................-30- 8.3 Performance by Seller and the Trust.............................-30- 8.4 No Material Adverse Change......................................-30- 8.5 Certification by Seller and the Trust...........................-30- 8.6 Opinion of Seller and the Trust's Counsel.......................-31- 8.7 No Other Business Combination Transaction.......................-31- SECTION 9. CONDITIONS TO OBLIGATIONS OF SELLER AND THE TRUST...............-31- 9.1 Settlement Agreement............................................-31- 9.2 Accuracy of Buyer's Representations and Warranties..............-31- 9.3 Buyer's Performance.............................................-31- 9.4 Certification by Buyer..........................................-31- 9.5 Opinion of Buyer's Counsel......................................-31- SECTION 10. TERMINATION OF OBLIGATIONS; SURVIVAL...........................-31- 10.1 Termination of Agreement........................................-31- 10.2 Effect of Termination...........................................-32- -ii- 4 10.3 Survival of Representations and Warranties......................-32- SECTION 11. INDEMNIFICATION...............................................-33- 11.1 Obligations of Seller and the Trust.............................-33- 11.2 Obligations of Buyer............................................-33- 11.3 Procedure.......................................................-34- 11.4 Survival........................................................-34- 11.5 Notice by Seller and the Trust..................................-35- SECTION 12. GENERAL.......................................................-35- 12.1 Amendments; Waivers.............................................-35- 12.2 Schedules; Exhibits; Integration................................-35- 12.3 Best Efforts; Further Assurances................................-35- 12.4 Governing Law...................................................-35- 12.5 No Assignment...................................................-35- 12.6 Headings........................................................-36- 12.7 Counterparts....................................................-36- 12.8 Publicity and Reports...........................................-36- 12.9 Confidentiality.................................................-36- 12.10 Parties in Interest.............................................-36- 12.11 Notices.........................................................-37- 12.12 Expenses........................................................-37- 12.13 Remedies; Waiver................................................-37- 12.14 Representation By Counsel; Interpretation.......................-38- 12.15 Severability....................................................-38- -iii- 5 EXHIBITS EXHIBIT A Settlement Agreement EXHIBIT B Registration Rights Agreement SCHEDULES SCHEDULE 3.1 Jurisdictions; Officers and Trust Managers SCHEDULE 3.2 Capital Stock; Title to Shares SCHEDULE 3.3 Additional Liabilities or Contingencies SCHEDULE 3.5 Permits and Approvals SCHEDULE 3.6 Litigation SCHEDULE 3.7 Compliance with Law and Permits SCHEDULE 3.8 Dividends and Other Distributions SCHEDULE 3.9 Certain Interests SCHEDULE 3.11 Trust Benefit Plans SCHEDULE 3.13 Properties and Encumbrances SCHEDULE 3.14 Taxes SCHEDULE 3.15 Material Contracts SCHEDULE 3.16 Insurance SCHEDULE 3.17 Environmental Compliance SCHEDULE 3.18 Trust Records SCHEDULE 5.3 Conduct of Business SCHEDULE 8.6 List of Opinions of Seller and the Trust's Counsel SCHEDULE 9.5 List of Opinions of Buyer's Counsel -iv- 6 SHARE PURCHASE AGREEMENT THIS SHARE PURCHASE AGREEMENT (this "AGREEMENT") is made and entered into as of December 20, 1996, by and among AMERICAN INDUSTRIAL PROPERTIES REIT, INC., a Maryland corporation ("SELLER"), AMERICAN INDUSTRIAL PROPERTIES REIT, a Texas real estate investment trust ("TRUST"), and USAA REAL ESTATE COMPANY, a Delaware corporation ("BUYER"). R E C I T A L S A. Seller is a wholly-owned subsidiary of the Trust. B. The Trust qualifies and operates as a real estate investment trust for federal income tax purposes. C. Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, a certain number of Common Shares (as defined herein) owned by Seller upon the terms and subject to the conditions set forth in this Agreement. D. The proceeds from the sale of the Common Shares owned by Seller are to be used for the purposes set forth in this Agreement. A G R E E M E N T NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION 1.1 DEFINITIONS. The capitalized terms used in this Agreement, the Exhibits and the Schedules attached hereto shall have the meanings set forth below: "ACTION" means any action, complaint, investigation, Suit or other proceeding, whether civil or criminal, in law or in equity, or before any mediator, arbitrator or Governmental Entity. "AFFILIATE" means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, a specified Person. "AGREEMENT" means this Share Purchase Agreement, by and among Seller, the Trust and Buyer, as amended from time to time pursuant to the terms of this Agreement, together with all Exhibits and all Schedules attached hereto. -1- 7 "ALTERNATIVE PROPOSAL" has the meaning set forth in Section 5.4(a) of this Agreement. "APPROVAL" means any approval, authorization, consent, qualification or registration, or any waiver of the foregoing, or any notice, statement or other communication required to be filed with or delivered to any Governmental Entity or any other Person. "ASSOCIATE" of a Person means (i) a corporation or organization (other than Seller or a party to this Agreement) of which such Person is an officer or partner or is, directly or indirectly, the beneficial owner of 10% or more of any class of equity securities; (ii) any trust or other estate in which such Person has a substantial beneficial interest or as to which such Person serves as trustee or in a similar capacity; and (iii) any relative or spouse of such Person who has the same residence as such Person. "AUDITED FINANCIAL STATEMENTS" has the meaning set forth in Section 3.3(a) of this Agreement. "AUDITORS" means Ernst & Young, LLP, independent public accountants to the Trust. "BUYER" means USAA Real Estate Company, a Delaware corporation, or permitted assigns. "BUYER INDEMNIFIED PARTIES" has the meaning set forth in Section 11.1 of this Agreement. "CAPITAL STOCK" means any capital stock, beneficial interest or other equity interest, or any securities convertible into or exchangeable or exercisable for capital stock, beneficial interests or other equity interests, or any other rights, warrants or options to acquire any of the foregoing securities. "CHARTER DOCUMENTS" means the Trust's Second Amended and Restated Declaration of Trust and Fourth Amended and Restated Bylaws as in effect as of the date of this Agreement. "CLOSING" has the meaning set forth in Section 2.3(a) of this Agreement. "CLOSING AGREEMENT" shall mean a written and legally binding agreement with a taxing authority relating to Taxes. "CLOSING DATE" means the date specified in Section 2.3(a) of this Agreement. -2- 8 "CODE" means the Internal Revenue Code of 1986, as amended, and, as applicable, the regulations promulgated thereunder. "COMMON SHARES" means common shares of beneficial interest, par value $.10 per share, of the Trust. "CONFIDENTIALITY AGREEMENT" has the meaning set forth in Section 5.4(b) of this Agreement. "CONTRACT" means any agreement, arrangement, bond, commitment, franchise, indemnity, indenture, instrument, lease, license or understanding, whether or not in writing. "DECEMBER 13 AGREEMENT" has the meaning set forth in Section 3.5 of this Agreement. "DEMAND NOTE" has the meaning set forth in Section 2.2 of this Agreement. "ENCUMBRANCE" means any claim, charge, easement, encumbrance, lease, covenant, security interest, lien, option, pledge, rights of others, preferential right, right of first refusal or restriction (whether on voting, sale, transfer, disposition or otherwise), whether imposed by agreement, understanding, law, equity or otherwise, except that "Encumbrance" does not include any such item that (i) is reflected in the Audited Financial Statements or (ii) constitutes a statutory lien arising in the ordinary course of business. "ENVIRONMENTAL CLAIMS" means any of the following to the extent they relate to, or arise out of, directly or indirectly, Environmental Noncompliance with respect to the Properties or actual or alleged Environmental Conditions or any Notification which may lead to: (i) claims, demands, suits, causes of action for personal injury, death or property damage; (ii) claims for actual or threatened damages to natural resources; (iii) claims for the recovery of response costs, or administrative or judicial orders directing the performance of investigations, response or remedial actions under any Environmental Law; (iv) a requirement to implement "corrective action" pursuant to any restitution, contribution or equitable indemnity to third parties or any Governmental Entity; (v) fines, penalties, liens against the Properties; (vi) claims for injunctive relief or other orders or notices of violation from any Governmental Entity; or (vii) with regard to any present or former employees, tenants or guests, exposure to or injury from Environmental Conditions. "ENVIRONMENTAL CONDITIONS" means conditions of the environment, including the ocean, natural resources (including flora and fauna), soil, surface water, ground water, any actual or potential drinking or water supply, subsurface strata, or air, including ambient air, relating to or arising out of the use, handling, storage, treatment, recycling, generation, transportation, release, spilling, leaking, pumping, pouring, emptying, discharging, injecting, escaping, leaching, disposal, dumping or threatened release of Hazardous Materials from, in, on, or onto the Properties. -3- 9 "ENVIRONMENTAL NONCOMPLIANCE" means any of the following to the extent they are applicable to the Properties or alleged to be applicable to the Properties or to the Trust, Subsidiaries or a Trust Partnership: (i) the Release of any Hazardous Material into the environment, any storm drain, sewer, septic system or publicly-owned treatment works, in violation of any effluent or emission limitations, standards or other criteria or guidelines established by any Environmental Law; (ii) any noncompliance of physical structure, equipment, process or premises with the requirements of building or fire codes, zoning or land use regulations or ordinances or conditional use permits; (iii) any noncompliance with federal, state or local requirements governing occupational safety and health; (iv) any operations, procedures and designs at or on the Properties which do not conform to the statutory or regulatory requirements of any Law (including land use regulations and ordinances) intended to protect public health, welfare and the environment; (v) the failure to have obtained permits, licenses, variances or other governmental authorizations necessary for the legal use and/or operation of any equipment, process or any activity at the Properties; or (vi) the operation and/or use of any process or equipment in violation of any permit condition, schedule of compliance, administrative or court order. "ENVIRONMENTAL PERMITS" has the meaning set forth in Section 3.17(a) of this Agreement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "EVEREN" means EVEREN Securities, Inc. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "GAAP" means generally accepted accounting principles as in effect from time to time. "GOVERNMENTAL ENTITY" means any agency, bureau, commission, court, department, official, political subdivision, tribunal or other instrumentality of any government, whether federal, state or local, domestic or foreign. "HAZARDOUS MATERIALS" means any substance, matter, material, waste, solid, liquid, gas, or pollutant, the generation, storage, disposal, handling, recycling, Release (or threatened Release) or treatment of which is regulated, prohibited, or limited under: (1) the Resource Conservation and Recovery Act, as amended by the Hazardous and Solid Waste Amendments of 1984, as now or hereafter amended ("RCRA") (42 U.S.C. Sections 6901 et seq.); (ii) the Comprehensive Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act of 1986, as now or hereafter amended ("CERCLA") (42 U.S.C. Sections 9601 et seq.); (iii) the Clean Water Act, as now or hereafter amended ("CWA") (33 U.S.C. Sections 1251 et seq.); (iv) the Toxic Substances Control Act, as now or hereafter amended ("TSCA") (15 U.S.C. Sections 2601 et seq.); (v) the Clean Air Act, as now or hereafter amended ("CAA") (42 U.S.C. Sections 7401 et seq.) (RCRA, CERCLA, CWA, TSCA and CAA are -4- 10 collectively referred to herein as the "FEDERAL ENVIRONMENTAL LAWS"); (vi) any local, state or foreign law, statute, regulation, or ordinance analogous to any of the Federal Environmental Laws; or (vii) any other federal, state, local, or foreign law (including any common law), statute, regulation, or ordinance regulating, prohibiting, or otherwise restricting the placement, Release, threatened Release, generation, treatment, or disposal upon or into any environmental media of any substance, pollutant, or waste which is now or hereafter classified or considered to be hazardous or toxic to human health or the environment. All of the laws, statutes, regulations and ordinances referred to in subsections (vi) and (vii) above, together with the Federal Environmental Laws, are collectively referred to herein as "ENVIRONMENTAL LAWS." The term "HAZARDOUS MATERIALS" shall also include: (a) gasoline, diesel fuel, fuel oil, motor oil, waste oil, and any other petroleum hydrocarbons, including any additives or other by-products associated therewith; (b) "friable" asbestos (as the term "friable" is defined under 40 C.F.R. Section 61.141) and friable asbestos-containing materials in any form; (c) polychlorinated biphenyls; or (d) any substance the presence of which on the Properties, (x) requires reporting or remediation under any Environmental Law, (y) causes or threatens to cause a nuisance on the Properties or poses or threatens to pose a hazard to the health or safety of persons on the Properties, or (z) which, if it emanated or migrated from the Properties, could constitute a trespass, nuisance or health or safety hazard to persons on adjacent property. "INDEMNIFIABLE CLAIM" means any Loss for or against which any Person is entitled to indemnification under this Agreement; "INDEMNIFIED PARTY" means the party entitled to indemnity hereunder and their successors, assigns, and heirs; and "INDEMNIFYING PARTY" means the Person obligated to provide indemnification hereunder and its successors and assigns. "INITIAL REIT YEAR" has the meaning set forth in Section 3.14(c) of this Agreement. "LAW" means any constitutional provision, statute or other law, rule, regulation or interpretation of any thereof and any Order of any Governmental Entity (including Environmental Laws, including, without limitation, the Americans with Disabilities Act). "LOSS" means any claim, amount paid in settlement, cost, damage (including, without limitation, consequential damage), disbursement, expense (including legal fees and expenses), liability, loss, deficiency, diminution in value or obligation. "MATERIAL CONTRACT" means any Contract to which the Trust, any Subsidiary or any Trust Partnership is a party or by which any such Person or any of their respective Properties are bound that currently is in effect and (a) after December 31, 1995 obligates the Trust, any Subsidiary or any Trust Partnership to pay an amount equal to $100,000 or more, (b) is one of the group of Tenant Leases that is anticipated by the Trust to produce 66 2/3% of the Trust's gross income during the fiscal year ending December 31, 1997, such group of Tenant Leases calculated beginning with the Tenant Lease that is anticipated to produce the most gross income during such period and thereafter in descending order of magnitude of gross income anticipated to be earned during such period under each other Tenant Lease until such percentage of gross income is reached, (c) is a Tenant Lease involving the lease of space in excess of 10,000 square feet for any Property, (d) other than any Tenant -5- 11 Lease, has an unexpired term as of December 31, 1995 in excess of five (5) years, (e) other than any Tenant Lease, contains a covenant not to compete or otherwise significantly restricts business activities of the Trust, any Subsidiary or any Trust Partnership, (f) provides for the extension of credit by the Trust, any Subsidiary or any Trust Partnership or a line of credit to the Trust, any Subsidiary or any Trust Partnership in excess of $50,000, (g) provides for a guaranty or indemnity by the Trust, any Subsidiary or any Trust Partnership, (h) grants a power of attorney, agency or similar authority to another Person, (i) contains an option to purchase or a right of first refusal relating to any of the Properties, (j) relates to the sale or issuance of any equity securities of the Trust or securities exercisable for or convertible into any equity securities of the Trust, or (k) any other Contract that is not within the general descriptions of clauses (a) through (j) (i.e., is not a Tenant Lease or within any of the other general categories listed above) but is material to the business, financial condition, assets, results of operations or prospects of the Trust, Subsidiaries or Trust Partnerships. "NOTIFICATION" means any summons, citation, directive, order, claim, litigation, pleading, investigation, proceeding, judgment, letter or any other written or oral communication from any Governmental Entity, any entity or any individual, concerning any intentional or unintentional act or omission which has resulted in or which may result in any Environmental Noncompliance or Environmental Claim. "ORDER" means any decree, injunction, judgment, order, ruling, assessment or writ. "PERMIT" means any license, permit, franchise, certificate of authority or order, or any waiver of the foregoing, required to be issued by any Governmental Entity. "PERSON" means an association, a corporation, an individual, a partnership, a joint venture, a limited liability company, a trust or any other entity or organization, including a Governmental Entity. "PROPERTIES" means the real property owned or leased the Trust, Subsidiaries and Trust Partnerships listed on Schedule 3.13 hereto. "PURCHASE PRICE" has the meaning set forth in Section 2.2 of this Agreement. "PURE WORLD LITIGATION" means that case pending in the United States District Court for the Northern District of Texas Dallas Division, Civil No. 3:96-CV-0068-H, involving the Trust, Pure World, Inc., Robert Strougo, et. al. "REGISTRATION RIGHTS AGREEMENT" means the registration rights agreement between Buyer and the Trust to be executed contemporaneously with the Closing. "REIT" has the meaning set forth in Section 3.14(b) of this Agreement. -6- 12 "RELEASE" means releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, ejecting, escaping, leaching, disposing, seeping, infiltrating, draining or dumping of any Hazardous Material. This term shall be interpreted to include both the present and past tense, as appropriate. "SCHEDULE" means any schedule attached to this Agreement. "SEC" means the Securities and Exchange Commission or any successor entity. "SEC FILINGS" has the meaning set forth in Section 3.4 of this Agreement. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SELLER" means American Industrial Properties REIT, Inc., a Maryland corporation and a wholly-owned subsidiary of the Trust. "SELLER INDEMNIFIED PARTIES" has the meaning set forth in Section 11.2 of this Agreement. "SELLING SHAREHOLDER AGREEMENTS" has the meaning set forth in Section 3.5 of this Agreement. "SETTLEMENT AGREEMENT" shall mean the settlement agreement by and among the Trust, Charles W. Wolcott and William H. Bricker on the one hand and Pure World, Inc., Paul O. Koether and Robert Strougo on the other hand attached hereto as Exhibit A. "SHARES" has the meaning set forth in Section 2.1 of this Agreement. "SUBSIDIARIES" has the meaning set forth in Section 3.1 of this Agreement. All references herein to Subsidiaries shall include Seller. "TAXES" has the meaning set forth in Section 3.14(a) of this Agreement. "TAX RETURN" has the meaning set forth in Section 3.14(b) of this Agreement. "TENANT LEASES" has the meaning set forth in Section 3.13(b) of this Agreement. "TRUST" means American Industrial Properties REIT, a Texas real estate investment trust. "TRUST BENEFIT PLANS" has the meaning set forth in Section 3.11 of this Agreement. "TRUST MANAGERS" means the Trust Managers of the Trust. -7- 13 "TRUST PARTNERSHIPS" has the meaning set forth in Section 3.1 of this Agreement. "TRUST PERMITS" has the meaning set forth in Section 3.7(b) of this Agreement. "UNAUDITED FINANCIAL STATEMENTS" has the meaning set forth in Section 3.3(b) of this Agreement. "USAA GROUP" means United Services Automobile Association, a reciprocal interinsurance exchange under the Texas Insurance Code ("USAA"), and, as designated by USAA from time to time, any entity in which USAA directly or indirectly owns 100% of the issued and outstanding equity securities. 1.2 RULES OF CONSTRUCTION. This Agreement shall be construed in accordance with the following rules of construction: (a) the terms defined in this Agreement include the plural as well as the singular; (b) all accounting terms not otherwise defined herein have the meanings given such terms under GAAP; (c) all references in the Agreement to designated "Sections " and other subdivisions are to the designated Sections and other subdivisions of the body of this Agreement; (d) pronouns of either gender or neuter shall include, as appropriate, the other pronoun forms; (e) the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Section or other subdivision; (f) the words "includes" and "including" are not limiting; and (g) knowledge of any Subsidiary or any Trust Partnership shall be deemed to be knowledge of Seller and the Trust. SECTION 2. PURCHASE AND SALE 2.1 PURCHASE AND SALE OF THE SHARES. Subject to the terms and conditions set forth herein, on the Closing Date, Seller shall sell to Buyer, and Buyer shall purchase from Seller, an aggregate of 998,100 Common Shares (the "SHARES"). 2.2 PURCHASE PRICE; PAYMENT. The aggregate purchase price for the Shares (the "PURCHASE PRICE") is payable on the Closing Date by the cancellation of all principal and interest -8- 14 outstanding under the Promissory Note dated November 25, 1996 in the principal amount of $2,769,775 between the Trust and Buyer (the "DEMAND NOTE"). 2.3 THE CLOSING. (a) The closing of the purchase and sale of the Shares (the "CLOSING") will take place at 10:00 a.m. at the offices of Liddell, Sapp, Zivley, Hill & LaBoon, L.L.P., counsel to Seller and the Trust, within one (1) or two (2) business days of final approval of the settlement of the Pure World Litigation by the court overseeing such settlement (the "CLOSING DATE"). (b) At the Closing, Seller shall deliver to Buyer the certificate or certificates evidencing the Shares. In addition, all other actions shall be taken and all other documents shall be delivered which are necessary to consummate the purchase and sale of the Shares, other than such actions and documents as are to be taken or delivered at another date, as specifically provided in this Agreement. (c) At the Closing, Buyer shall pay and deliver to Seller the Purchase Price in the manner set forth in Section 2.2 above. SECTION 3. REPRESENTATIONS AND WARRANTIES OF SELLER AND TRUST Seller and the Trust, jointly and severally, represent and warrant to, and agree with, Buyer as follows: 3.1 ORGANIZATION AND RELATED MATTERS. Seller is duly organized, validly existing and in good standing under the laws of the State of Maryland. Seller has all necessary corporate power and corporate authority to execute, deliver and perform this Agreement. The Trust is duly organized, validly existing and in good standing under the laws of the State of Texas. The Trust has all necessary power and authority to execute, deliver and perform this Agreement. Schedule 3.1 lists all Subsidiaries (the "SUBSIDIARIES," which term includes Seller) and all Trust Partnerships (the "TRUST PARTNERSHIPS") of the Trust and correctly sets forth the Trust's ownership interest therein, the jurisdiction in which each Subsidiary and each Trust Partnership is organized and each jurisdiction in which the Trust, each Subsidiary and each Trust Partnership is and is required to be qualified or licensed to do business as a foreign Person. Each Subsidiary and each Trust Partnership is duly organized, validly existing and, with respect to each Subsidiary, in good standing under the laws of the jurisdiction of its incorporation or organization. The Trust, Subsidiaries and Trust Partnerships have all necessary power (whether corporate, partnership or other power, as applicable) and authority to own their respective properties and assets and to carry on their respective businesses as now conducted. The Trust, Subsidiaries and Trust Partnerships are duly qualified or licensed to do business as foreign Persons in good standing in all jurisdictions in which the character or the location of the assets owned or leased by any of them or the nature of the business conducted by any of them requires licensing or qualification, except where the failure to be so qualified or licensed is not and will not be material to their respective businesses, financial condition, assets, results of operations or prospects. Schedule 3.1 correctly lists the current Trust Managers, directors, general partners and -9- 15 executive officers of the Trust, Subsidiaries and Trust Partnerships. True, correct and complete copies of the Charter Documents and the charter or organizational documents of Subsidiaries and Trust Partnerships (including the declaration of trust, articles or certificate of incorporation, bylaws and partnership agreements, as applicable) as in effect on the date hereof have been delivered to Buyer. The Trust is registered and is a reporting company under the Exchange Act. Neither any Subsidiary nor any Trust Partnership is registered or is a reporting company under the Exchange Act. Except as listed on Schedule 3.1, the Trust does not directly or indirectly own or control any equity interest in any Person. 3.2 CAPITAL STOCK; TITLE TO SHARES. The authorized Capital Stock of the Trust consists of 10,000,000 Common Shares of which 10,000,000 Common Shares are issued and outstanding. The Trust owns all of the outstanding Capital Stock of Subsidiaries free and clear of any Encumbrances, equities and claims except as specified in Schedule 3.2. The Trust owns the equity interest in each Trust Partnership free and clear of any Encumbrances, equities and claims except as specified in Schedule 3.2. No Common Shares or Capital Stock of any Subsidiary are held in treasury. Except as set forth in Schedule 3.2 or as contemplated in this Agreement, there are no outstanding Contracts or other rights to subscribe for or purchase, or Contracts or other obligations to issue or grant any rights to acquire, any Common Shares, any Capital Stock of any Subsidiary or any Trust Partnership or to restructure or recapitalize the Trust, any Subsidiary or any Trust Partnership. Except as set forth in Schedule 3.2, there are no outstanding Contracts of the Trust, any Subsidiary or any Trust Partnership to repurchase, redeem or otherwise acquire any of their respective Common Shares or Capital Stock, as applicable. No bonds, debentures, notes or other indebtedness having general voting rights (or convertible into securities having general voting rights) of the Trust, any Subsidiary or any Trust Partnership are issued or outstanding. There are no voting trusts or other agreements or understandings to which the Trust, any Subsidiary or any Trust Partnership is a party or is bound, or to the knowledge of the Trust and Seller, to which any other Person is a party or is bound, with respect to the voting of the Common Shares or the Capital Stock of any Subsidiary or any Trust Partnership. All issued and outstanding Common Shares and Capital Stock of all Subsidiaries and Trust Partnerships were duly authorized and validly issued at the time of issuance and are fully paid and nonassessable. There are no preemptive rights in respect of any Common Shares or Capital Stock of any Subsidiary or any Trust Partnership. Upon the sale of the Shares to Buyer at the Closing, the Shares will have been validly issued and be validly outstanding, fully paid and nonassessable, and the sale of such Shares is not and will not be subject to preemptive rights of any other shareholder of the Trust. Buyer shall receive good and marketable title to the Shares, free and clear of all Encumbrances, except for restrictions on the transferability of the Shares set forth in the Charter Documents or generally imposed on securities under federal and state securities laws. Such Shares will rank equally with all other Common Shares of the Trust with respect to priority in payment of dividends and the distribution of assets upon any liquidation of the Trust, and there are no shares of any class of Capital Stock of the Trust having any priority in respect thereof. 3.3 FINANCIAL STATEMENTS. -10- 16 (a) AUDITED FINANCIAL STATEMENTS. The Trust has delivered to Buyer the consolidated balance sheets of the Trust (which reflect the financial position of all Subsidiaries and Trust Partnerships), as of December 31, 1993, 1994 and 1995, and the respective related consolidated statements of operations, cash flows and stockholders' equity for the periods then ended (collectively, the "AUDITED FINANCIAL STATEMENTS"). The Audited Financial Statements have been examined by the Auditors whose report thereon is attached to such financial statements. All Audited Financial Statements have been prepared in conformity with GAAP applied on a consistent basis (except for changes, if any, disclosed therein). The Audited Financial Statements present fairly, in all material respects, the consolidated financial condition and results of operations of the Trust, Subsidiaries and Trust Partnerships as of their respective dates and periods. Since December 31, 1995, there has been no change in the significant accounting policies or procedures of the Trust, any Subsidiary or any Trust Partnership. The Trust has not received any annual management letters from the Auditors since March 29, 1996. (b) UNAUDITED FINANCIAL STATEMENTS. The Trust has delivered to Buyer the consolidated balance sheets of the Trust (which reflect the financial position of all Subsidiaries and Trust Partnerships), as of March 31, June 30 and September 30, 1996, and the respective related consolidated statements of operations, cash flows and stockholders' equity for the periods then ended (collectively, the "UNAUDITED FINANCIAL STATEMENTS"). All Unaudited Financial Statements have been prepared in conformity with GAAP applied on a consistent basis (except for changes, if any, disclosed therein). The Unaudited Financial Statements present fairly, in all material respects, the consolidated financial condition and results of operations of the Trust, Subsidiaries and Trust Partnerships as of their respective dates and periods. (c) NO MATERIAL ADVERSE CHANGES. Since September 30, 1996, except as set forth in Schedule 3.3, specifically contemplated by this Agreement, specifically disclosed in any SEC Filings filed since September 30, 1996 and prior to the date of this Agreement (copies of which have been provided to Buyer), and except the settlement of the Pure World Litigation, the Trust, Subsidiaries and Trust Partnerships have conducted their respective businesses only in the ordinary course and in a manner consistent with past practice and, whether or not in the ordinary course of business, there has not been, occurred or arisen: (i) any change in or event affecting the business of the Trust, Subsidiaries and Trust Partnerships that has had a material adverse effect on such business or any materially adverse change or trend in the business, financial condition, assets, results of operations or prospects of the Trust, Subsidiaries or Trust Partnerships, or (ii) any condition or action which would be proscribed by (or require consent under) Section 5.3 had it existed, occurred or arisen after the date of this Agreement, or (iii) any casualty, loss, damage or destruction of any real property of the Trust, any Subsidiary or any Trust Partnership that has involved or may involve a Loss (whether or not -11- 17 covered by insurance) to the Trust, any Subsidiary or any Trust Partnership of more than $100,000 individually, or $300,000 in the aggregate. (d) NO OTHER LIABILITIES OR CONTINGENCIES. Neither the Trust nor any Subsidiary nor any Trust Partnership has any material liability of any nature, whether accrued, absolute, contingent or otherwise, and whether due or to become due, probable of assertion or not, except liabilities that (i) were incurred after September 30, 1996 in the ordinary course of business in a manner consistent with past practice and are not material in amount or which involve the Pure World Litigation, or (ii) are set forth in Schedule 3.3 hereto. 3.4 SEC REPORTS. The Trust has filed with the SEC all forms, reports, statements, including registration statements, and other material documents, together with any amendments required to be made with respect thereto, that were required to be filed with the SEC since December 31, 1993. Such forms, reports, statements, including registration statements, and other material documents required to be filed with the SEC by the Trust since December 31, 1993 are collectively referred to in this Agreement as the "SEC FILINGS." The Trust has made available to Buyer all SEC Filings. As of their respective dates, (x) each of the SEC Filings, including the financial statements contained therein, was true and complete in all material respects, (y) each of the SEC Filings, including the financial statements contained therein, complied in all material respects with the Securities Act and Exchange Act, as applicable, and the rules and regulations promulgated thereunder, and (z) none contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 3.5 AUTHORIZATION; NO CONFLICTS. Seller has the requisite corporate power and corporate authority to enter into this Agreement and to carry out its obligations hereunder. The Trust has the requisite power and authority to enter into this Agreement and the Registration Rights Agreement and to carry out its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement by Seller has been duly and validly authorized by its Board of Directors and by all other necessary action on the part of Seller, and no other proceedings on the part of Seller (including shareholder approval) are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by the Trust has been duly and validly authorized by the Trust Managers and by all other necessary action on the part of the Trust, and no other proceedings on the part of the Trust (including shareholder approval) are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Seller and constitutes the legally valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws and equitable principles relating to or limiting creditors' rights generally. This Agreement has been duly executed and delivered by the Trust and constitutes the legally valid and binding obligation of the Trust, enforceable against the Trust in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws and equitable principles relating to or limiting creditors' rights generally. Except as set forth in Schedule -12- 18 3.5, the execution, delivery and performance of this Agreement by Seller and the Trust and the consummation by Seller and the Trust of the transactions contemplated hereby, by the Share Purchase Agreement between the Trust and Buyer, dated as of December 13, 1996 (the "DECEMBER 13 AGREEMENT") and by the share purchase agreements dated as of November 25, 1996 between Buyer and (i) Pure World, Inc. and (ii) Jonathan Tratt, Stanley D. L. Horwitz, Keith Sexton and C. J. Scott (the "SELLING SHAREHOLDER AGREEMENTS") will not (i) conflict with or result in the breach of any provisions of, or trigger any preferential rights under, the Charter Documents or the charter or organizational documents of Subsidiaries or Trust Partnerships, (ii) result in a breach or violation of, a default under, or the triggering of any payment or other material obligations pursuant to, or accelerate vesting under, any Trust Benefit Plans or any grant or award thereunder or any employment or consulting agreement or arrangement of the Trust, any Subsidiary or any Trust Partnership, (iii) violate, conflict with, result in a breach of any provision of, constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, result in the termination or in a right of termination or cancellation of, accelerate the performance required by, result in the creation of any Encumbrance upon any Properties under, result in the triggering of any rights under, or result in being declared void, voidable or without further binding effect, any of the terms or provisions of any Material Contract of the Trust, any Subsidiary or any Trust Partnership or (iv) violate any Law. Schedule 3.5 lists all Permits and Approvals required to be obtained by Seller, the Trust, Subsidiaries and Trust Partnerships to consummate the transactions contemplated hereby and by the December 13 Agreement. Except for matters identified in Schedule 3.5 as requiring that certain actions be taken by or with respect to a third party or Governmental Entity, the execution and delivery of this Agreement by Seller and the Trust and the consummation of the transactions contemplated hereby and by the December 13 Agreement will not require the consent, authorization or approval of filing or registration with, or the issuance of any Permit by, any other third party or Governmental Entity under the terms of any applicable Laws or Material Contracts of Seller, the Trust, Subsidiaries or Trust Partnerships. 3.6 LEGAL PROCEEDINGS. Except as set forth in Schedule 3.6 and except with respect to the Pure World Litigation, there is no Order or Action pending, or to the knowledge of Seller or the Trust threatened, against or affecting the Trust, any Subsidiary, any Trust Partnership, any Trust Manager in his capacity as a trust manager of the Trust or any of the Properties which (i) questions the validity of this Agreement, the Registration Rights Agreement, the Settlement Agreement or any action taken or to be taken pursuant hereto or thereto, or (ii) individually or when aggregated with one or more other Orders or Actions has, or if determined adversely will have, a material adverse effect on the business, financial condition, assets, results of operations or prospects of the Trust, any Subsidiary or any Trust Partnership or on the Trust's ability to perform this Agreement. To Seller's and the Trust's knowledge, Schedule 3.6 lists each Order and each Action that (i) involves a claim or potential claim of aggregate liability in excess of $50,000 against the Trust, any Subsidiary or any Trust Partnership that is not covered by insurance, (ii) involves a claim or potential claim of aggregate liability brought by the Trust, any Subsidiary or any Trust Partnership against a tenant under any Tenant Lease which Tenant Lease obligates such tenant to pay rent to the Trust, any Subsidiary or any Trust Partnership during the year ending December 31, 1996 in an amount equal to or in excess of $150,000, or (iii) that enjoins or seeks to enjoin any activity by the Trust, any Subsidiary or any Trust -13- 19 Partnership. There is no matter as to which the Trust, any Subsidiary or any Trust Partnership has received any notice, claim or assertion in connection with which any such Person has or may reasonably be expected to have any right to be indemnified by the Trust, any Subsidiary or any Trust Partnership. 3.7 COMPLIANCE WITH LAW AND PERMITS. (a) The Trust, Subsidiaries and Trust Partnerships are organized and have conducted their respective businesses in accordance with applicable Laws, neither the Trust nor any Subsidiaries or Trust Partnerships has received any notice of violation of any Laws which remains uncorrected, and the respective forms, procedures and practices of the Trust, Subsidiaries and Trust Partnerships are in compliance with all such Laws, to the extent applicable, the violation of which would have a material adverse effect on the respective businesses, financial condition, assets, results of operations or prospects of the Trust, Subsidiaries and Trust Partnerships. (b) Except as set forth in Schedule 3.7, the Trust, Subsidiaries and Trust Partnerships hold all permits, licenses, variances, exemptions, authorizations, orders and approvals of all Governmental Entities necessary for the lawful conduct of their respective businesses (the "THE TRUST PERMITS") and the Trust, Subsidiaries and Trust Partnerships are in compliance with the terms of the Trust Permits relating to each such Person, except where the failure to hold such Trust Permits or be in compliance therewith would not, individually or in the aggregate, have a material adverse effect on the business, financial condition, assets, results of operations or prospects of the Trust, Subsidiaries or Trust Partnerships. The Trust has made available to Buyer correct and complete copies of all Trust Permits. Except as set forth in Schedule 3.7, to the knowledge of the Seller and the Trust, no investigation or review by any Governmental Entity with respect to the Trust Permits is pending or threatened. 3.8 DIVIDENDS AND OTHER DISTRIBUTIONS. Except as set forth in Schedule 3.8, there has been no dividend or other distribution of assets or securities by the Trust or Trust Partnerships (other than Trust Partnerships in which the Trust owns 100% beneficial interest) whether consisting of money, property or any other thing of value, declared, issued or paid to or for the benefit of the Trust subsequent to the date of the Audited Financial Statements. 3.9 CERTAIN INTERESTS. Except as set forth in Schedule 3.1 and Schedule 3.9, no Affiliate of the Trust, any Subsidiary or any Trust Partnership, nor any of their respective officers, Trust Managers, directors or partners, nor any Associate of any such individual, has any material interest in any property used in or pertaining to the respective businesses of the Trust, any Subsidiary or any Trust Partnership. Except as set forth in Schedule 3.1 and Schedule 3.9, no such Person is indebted or otherwise obligated to the Trust, any Subsidiary or any Trust Partnership. Except as set forth in Schedule 3.9, the Trust, Subsidiaries and Trust Partnerships are not indebted or otherwise obligated to any such Person, except for amounts due under normal arrangements applicable to all employees generally as to salary or reimbursement of ordinary business expenses not unusual in amount or significance. Except as set forth in Schedule 3.1 and Schedule 3.9, there are no material transactions -14- 20 between the Trust, any Subsidiary or any Trust Partnership and any Affiliate of the Trust, any Subsidiary or any Trust Partnership or any Associate of any such Affiliate that have continuing obligations of any party thereunder. Except as set forth in Schedule 3.9, the consummation of the transactions contemplated by this Agreement will not (either alone, or upon the occurrence of any act or event, or with the lapse of time, or both) result in any compensation or severance or other payment or benefit arising or becoming due from the Trust, any Subsidiary or any Trust Partnership or any of its assigns to any Person. 3.10 NO BROKERS OR FINDERS. No agent, broker, finder, or investment or commercial banker, or other Person or firm engaged by or acting on behalf of Seller, the Trust or any of their Affiliates in connection with the negotiation, execution or performance of this Agreement or the transactions contemplated by this Agreement, is or will be entitled to any brokerage or finder's or similar fee or other commission as a result of this Agreement or such transactions except for a fee payable to EVEREN. 3.11 EMPLOYEE BENEFIT PLANS. Schedule 3.11 lists all employee benefit plans and collective bargaining, labor and employment agreements or other similar benefit arrangements to which either the Trust, any Subsidiary, or any Trust Partnership is a party or by which either the Trust, any Subsidiary, or any Trust Partnership is bound (collectively, the "THE TRUST BENEFIT PLANS"), including (i) any profit-sharing, deferred compensation, bonus, stock option, stock purchase, pension, retainer, consulting, retirement, severance, welfare or incentive plan, agreement or arrangement, (ii) any plan, agreement or arrangement providing for "fringe benefits" or perquisites to employees, officers, directors, trust managers or agents, including benefits relating to automobiles, clubs, vacation, child care, parenting, sabbatical, sick leave, medical, dental, hospitalization, life insurance and other types of insurance, (iii) any employment agreement not terminable on 30 days (or less) written notice or (iv) any other "employee benefit plan" within the meaning of Section 3(3) of ERISA. True and complete copies of the Trust Benefit Plans, current descriptive booklets and summary plan descriptions of the Trust Benefit Plans, any relevant trust agreements or insurance policies or contracts and, if applicable, the most recent annual return on Form 5500 (or equivalent form) have been made available to Buyer. To the extent applicable, the Trust Benefit Plans comply, in all material respects, with the requirements of ERISA and the Code. Except as set forth in Schedule 3.11, no Trust Benefit Plan is or is intended to be a stock bonus, pension or profit-sharing plan within the meaning of Section 401(a) of the Code. Neither any Trust Benefit Plan nor the Trust, any Subsidiary, or any Trust Partnership has incurred any liability or penalty under Section 4975 of the Code or Section 502(i) of ERISA. Each Trust Benefit Plan has been maintained and administered in all material respects in compliance with its terms and with ERISA and the Code to the extent applicable thereto. Except as set forth in Schedule 3.11, there are no pending, or to the knowledge of Seller and the Trust threatened, claims (other than pursuant to the terms of any such plan) against or otherwise involving any of the Trust Benefit Plans and no Action has been brought against or with respect to any Trust Benefit Plan, and neither the Trust nor any Subsidiary nor any Trust Partnership has incurred any liability to any party with respect to any Trust Benefit Plan. All contributions required to be made to the Trust Benefit Plans have been made or provided for. Except as set forth in Schedule 3.11, neither the Trust nor any Subsidiary nor any Trust Partnership maintains or contributes to any plan or -15- 21 arrangement which provides or has any liability to provide life insurance or medical or other employee welfare benefits to any employee or former employee upon his retirement or termination of employment and neither the Trust nor any Subsidiary nor any Trust Partnership has represented, promised or contracted (whether in oral or written form) to any employee or former employee that such benefits would be provided. Except as set forth in Schedule 3.11, the execution of, and performance of the transactions contemplated by, this Agreement will not (either alone or upon the occurrence of any additional or subsequent event) constitute an event under any Trust Benefit Plan or other policy, arrangement or any trust or loan that will or may result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any employee. No Trust Benefit Plan is subject to Title IV of ERISA and neither the Trust nor any Subsidiary nor any Trust Partnership has, within six years prior to the date of this Agreement, contributed to or had any obligation to contribute to any employee benefit plan subject to Title IV of ERISA. For purposes of this Section 3.11, (i) the term "Trust" includes any entity required to be aggregated with the Trust pursuant to Code Section 414(b), (c), (m) or (o) and (ii) provisions of ERISA or the Code include regulations prescribed under such provisions. 3.12 LABOR MATTERS. Neither the Trust nor any Subsidiary nor any Trust Partnership is a party to or bound by any collective bargaining or other labor union contracts. There is no pending or, to the knowledge of Seller and the Trust, threatened labor dispute, strike or work stoppage against the Trust, any Subsidiary, or any Trust Partnership. Neither the Trust nor any Subsidiary nor any Trust Partnership, nor their respective representatives or employees, has committed any unfair labor practices in connection with the operation of the respective businesses of the Trust, each Subsidiary, and each Trust Partnership, and there is no pending or, to the knowledge of the Seller and the Trust, threatened charge or complaint against the Trust, any Subsidiary, or any Trust Partnership by the National Labor Relations Board or any comparable state agency. The Trust, Subsidiaries, and Trust Partnerships are in compliance with all applicable Laws respecting employment, consulting, employment practices, wages, hours, and terms and conditions of employment. 3.13 PROPERTIES. (a) Schedule 3.13 contains a complete and correct list of all real property owned or leased by the Trust, each Subsidiary and each Trust Partnership (collectively, the "PROPERTIES"). Except as set forth in Schedule 3.13, the Trust, Subsidiary or Trust Partnership, as applicable, owns good and indefeasible title to each Property, including the land and all improvements, all personalty and the Tenant Leases (as hereinafter defined). Except as set forth in Schedule 3.13, the Properties are free and clear of all Encumbrances of any nature, except for (i) liens for real property taxes or similar assessments not yet due and payable, (ii) easements for utilities servicing the Properties and (iii) such Encumbrances as do not materially detract from or interfere with the present use of the Properties subject thereto or affected thereby, or otherwise materially impair the use or value of such Properties. (b) The Trust has delivered to Buyer a true, correct and complete copy of a rent roll with respect to each Property setting forth, among other matters, the term (commencement or renewal date -16- 22 and expiration date) of each lease with respect to the Properties (collectively, the "TENANT LEASES"), the square feet for each of the Tenant Leases, the monthly base rental rates for each of the Tenant Leases and the security deposits for each of the Tenant Leases. Other than the Tenant Leases, no party has been granted any license, lease or other material right relating to the use or possession of the Properties which is material to the use or value of the Properties. Except as set forth in Schedule 3.13, all of the Tenant Leases are valid and subsisting and in full force and effect with respect to the Trust, Subsidiaries and Trust Partnerships and, to Seller's and the Trust's knowledge, with respect to any other party thereto, and no tenant of the Properties is more than 30 days delinquent on its rental as of October 31, 1996 except as set forth in Schedule 3.13. To Seller's and the Trust's knowledge, no tenant of the Properties has initiated or threatened bankruptcy since January 1, 1996. No tenant of the Properties is an Affiliate or Associate of the Trust, any Subsidiary or any Trust Partnership. Except as set forth in Schedule 3.13, there are no contracts or other material obligations outstanding for the sale, exchange or transfer of the Properties or any portion thereof. There are no attachments, executions, assignments for the benefit of creditors, receiverships, conservatorship or voluntary or involuntary proceedings in bankruptcy or pursuant to any other debtor relief laws filed by, or pending against, the Trust, Subsidiaries, Trust Partnerships or the Properties. Except as set forth in Schedule 3.13, since January 1, 1996, no tenants have terminated their leases prior to expiration and, to Seller's and the Trust's knowledge, have no intent to do so. (c) Except as set forth in Schedule 3.13 there is no pending condemnation or similar proceeding affecting the land, the improvements or the personalty situated at the Properties or any portion thereof, and neither the Trust nor any Subsidiary nor any Trust Partnership has received any written notice and has no knowledge that any such proceeding is contemplated. (d) The continued ownership, operation, use and occupancy of the land or the improvements thereon do not violate any zoning, building, administrative or other law, ordinance, order or regulation or any restrictive covenant applicable to the Properties, the violation of which would have a material adverse effect on the business, financial condition, assets, results of operations or prospects of the Trust, Subsidiaries or Trust Partnerships, as applicable, and no written notice of any such violation has been received by the Trust, any Subsidiary or any Trust Partnership from any Governmental Entity. (e) The Trust, Subsidiaries or Trust Partnerships, as applicable, currently has in place title, liability, casualty and other insurance coverage with respect to the Properties in such amounts as are reasonable and customary for properties similar to the Properties. Each of such policies is in full force and effect, and all premiums due and payable thereunder have been, and on the Closing Date will be, fully paid when due. No notice of cancellation has been received, or to the knowledge of Seller and the Trust threatened, with respect thereto. (f) Except as set forth in Schedule 3.13, there is no Action pending, or to the knowledge of Seller and the Trust contemplated, by any Governmental Entity or third party to levy any special assessments against the Properties that, if successful, would have a material adverse effect on the business, financial condition, assets, results of operations or prospects of the Trust. -17- 23 (g) To the Seller's and the Trust's knowledge, each unsatisfied brokerage obligation that is in excess of $25,000 with respect to the Properties is set forth on Schedule 3.13. (h) To Seller's and the Trust's knowledge and except as set forth on Schedule 3.13, no capital expenditures are contemplated by the Trust to be incurred by the Trust, any Subsidiary or any Trust Partnership within twelve months after the date of this Agreement in excess of $50,000 per Property with respect to any Property. (i) Except as set forth in Schedule 3.13, all management contracts with respect to the Properties are terminable by the Trust on 30 days notice. (j) To Seller's and the Trust's knowledge, except for customary easements for access to building systems or utilities and except as set forth in Schedule 3.13, each Property is an independent unit which does not now rely on any facilities (other than facilities of municipalities or public utilities) located on any property that is not part of the Property for the furnishing to the Property of any essential building systems or utilities (including drainage facilities, catch basins and retention ponds) that if the owner of the Property could not avail the use of which, would materially detract from the value of the Property or materially interfere with the use of the Property. 3.14 TAX MATTERS. (a) For purposes of this Agreement, "TAXES" means any federal (including, without limitation, tax on its undistributed taxable income, alternative minimum tax, tax on certain sale proceeds or other nonqualifying income from foreclosure property or on income from prohibited transactions, and any taxes imposed upon the Trust, Subsidiaries or Trust Partnerships under Section 857 or Section 4981 of the Code), state, county, local or foreign taxes, charges, fees, levies, or other assessments, including, without limitation, all net income, gross income, sales and use, ad valorem, transfer, gains, profits, excise, franchise, real and personal property, gross receipt, capital stock, business and occupation, disability, employment, payroll, license, estimated, or withholding taxes or charges imposed by any Governmental Entity, and includes any interest and penalties (civil or criminal) on or additions to any such taxes. (b) For purposes of this Agreement, "TAX RETURN" means a report, return or other information required to be filed with or supplied to a Governmental Entity with respect to Taxes including, without limitation, any notices or information reports or returns required to be filed by the Trust, Subsidiaries or Trust Partnerships with respect to their respective operations, income, assets and shareholders or partners in order to maintain the Trust's status as a real estate investment trust ("REIT") under the Code. (c) The Trust elected to be taxed as a REIT under Sections 856 through 860 of the Code effective for its taxable year ended December 31, 1985 (the "INITIAL REIT YEAR"). The Trust, since the Initial REIT Year through the end of the immediately preceding taxable year, has always qualified as a REIT under the Code. At all times from and after the Initial REIT Year to the date hereof, the -18- 24 Trust has complied with, and through the Closing Date will comply with, all applicable Code and regulatory requirements necessary to maintain its qualification as a REIT under the Code and has otherwise operated, and through the Closing Date will have otherwise operated, in the manner necessary to maintain its qualification as a REIT under the Code. No dividend will be required to be distributed before December 31, 1996 in order for the Trust to maintain its qualification as a REIT under the Code. (d) Except as disclosed in Schedule 3.14, the Trust, Subsidiaries and Trust Partnerships have (i) filed all Tax Returns required to be filed by applicable Law since December 31, 1990, and all such Tax Returns were in all material respects (and, as to Tax Returns not filed as of the date hereof but filed on or before the Closing Date, will be in all material respects) true, complete and correct and filed on a timely basis and (ii) within the time and in the manner prescribed by law, paid (and until the Closing Date will pay within the time and in the manner prescribed by law) all material Taxes that were or are due and payable. (e) Except as set forth in Schedule 3.14, the Trust, Subsidiaries and Trust Partnerships have established (and until the Closing Date will maintain) on their respective books and records reserves adequate to pay all Taxes of the Trust, Subsidiaries and Trust Partnerships not yet due and payable in accordance with GAAP which are reflected in the Audited Financial Statements and Unaudited Financial Statements to the extent required by GAAP. (f) Except as disclosed in Schedule 3.14, as of the date hereof, there are no, and, as of the Closing Date, there will be no, material Tax liens upon the assets of the Trust, Subsidiaries and Trust Partnerships, except liens for Taxes not yet due. (g) Except as disclosed in Schedule 3.14, the Trust, Subsidiaries, and Trust Partnerships have complied (and until the Closing Date will comply) in all material respects with the provisions of the Code relating to the payment and withholding of Taxes, including the withholding and reporting requirements under Code Sections 1441 through 1464, 3401 through 3406, and 6041 through 6049, as well as similar provisions under any other laws, and have, within the time and in the manner prescribed by law, withheld from employee wages and paid over to the proper governmental authorities all material amounts required by applicable Law. (h) Except as disclosed in Schedule 3.14, the Trust, Subsidiaries and Trust Partnerships have not executed any outstanding waivers or comparable consents regarding the application of the statute of limitations with respect to any Taxes or Tax Returns. (i) No notice of any material deficiency for any Taxes has been received by the Trust, any Subsidiary or any Trust Partnership that has not been resolved and paid in full or otherwise settled, no audits or other administrative proceedings or court proceedings are presently pending or, to Seller's and the Trust's knowledge, threatened with regard to any Taxes or Tax Returns of the Trust, Subsidiaries or Trust Partnerships, and no notice of any material claim has been received by the Trust, any Subsidiary or any Trust Partnership from any authority in a jurisdiction where the Trust, -19- 25 Subsidiaries or Trust Partnerships do not file Tax Returns that the Trust, any Subsidiary or any Trust Partnership is or may be subject to Tax in that jurisdiction. (j) The Trust, Subsidiaries and Trust Partnerships have not received a Tax Ruling or entered into a Closing Agreement with the Internal Revenue Service that would have any continuing effect after the Closing Date. (k) The Trust has made available (or, with respect to all Tax Returns filed after the date hereof, will make available) to Buyer complete and accurate copies of all Tax Returns, and amendments thereto, filed by the Trust, any Subsidiary or any Trust Partnership for all taxable periods or years ending on or prior to the Closing Date. (l) Neither the Trust nor any Subsidiary nor any Trust Partnership is required to include in income any adjustment pursuant to Code Section 481(a) by reason of a voluntary change in federal income tax accounting method (other than a change of federal income tax accounting method required as a result of a change in law) initiated by the Trust, and the Internal Revenue Service has not proposed any such adjustment or change in accounting method. (m) The Trust has made available to Buyer all relevant information with respect to the federal income tax net operating loss carryovers of the Trust as of December 31, 1995, based on the federal income Tax Returns filed by the Trust as of such date. (n) For all taxable years from and including its Initial REIT Year through the Closing Date, (i) the Trust has maintained permanent records containing the information required to be maintained by Code Section 857(a)(2) and Treasury Regulation Sections 1.857-(8)(a), 1.857-8(c) and 1.857-8(e) and (ii) the Trust has demanded the written statements from its shareholders required by Treasury Regulation Section 1.857-8(d) in accordance with Treasury Regulation Section 1.857-8(e). 3.15 MATERIAL CONTRACTS. Schedule 3.15 sets forth an accurate list of all Material Contracts of the Trust, Subsidiaries and Trust Partnerships. The Trust has made available to Buyer complete and correct copies of all Material Contracts. All Material Contracts are in full force and effect. Except as set forth in Schedule 3.15, the Trust, Subsidiaries and Trust Partnerships are not in violation of or default in any material respect (nor is there any waiver in effect of any event that would constitute a default but for such waiver) under, and no event has occurred that (with notice or the lapse of time or both) would constitute a violation of or default under, any Material Contract. Except as set forth in Schedule 3.15, to the knowledge of Seller and the Trust, no other party to any Material Contract is in breach of the terms, provisions and conditions of such Material Contract and no other party to any Material Contract has notified the Trust, any Subsidiary or any Trust Partnership that it intends to terminate or modify a Material Contract. 3.16 INSURANCE. Schedule 3.16 sets forth a complete and correct list of all insurance policies, except for title insurance policies, currently in force insuring against risks of the Trust, Subsidiaries and Trust Partnerships. The Trust, Subsidiaries and Trust Partnerships are in compliance -20- 26 with the terms of such policies applicable to them and there are no claims by the Trust, any Subsidiary or any Trust Partnership under any such policy as to which any insurance company is denying liability or defending under a reservation of rights clause. 3.17 ENVIRONMENTAL MATTERS. (a) Except as set forth in the documentation provided to the Trust pursuant to Section 3.17(b) and in Schedule 3.17, there is no material Environmental Noncompliance with respect to any Property and there are no material Environmental Claims with respect to any Property or the Trust, any Subsidiary or any Trust Partnership or, to the knowledge of Seller and the Trust, any tenants under any of the Tenant Leases. All material permits, consents, licenses, certificates, approvals, registrations, and authorizations in connection with environmental matters (collectively, "ENVIRONMENTAL PERMITS") which are required by any Law have been obtained and are valid. The Properties (and all uses thereof and operations conducted thereon) comply in all material respects with all Environmental Permits. All operations on or at the Properties conducted by the Trust are and have been conducted in all material respects in compliance with applicable Environmental Laws. Except as set forth in the documentation provided to the Trust pursuant to Section 3.17(b) and in Schedule 3.17, the Trust has not received any Notification from any Governmental Entity seeking any information or alleging any violation of any Law regarding Environmental Conditions. Except as set forth in the documentation provided to the Trust pursuant to Section 3.17(b) and in Schedule 3.17, the Trust has not caused or given its verbal or written authorization to cause, and has no knowledge of, any Release of any Hazardous Materials on-site or off-site of the Properties in violation of any Environmental Law. (b) The Trust has made available to Buyer true, correct, and complete copies of all written reports of any environmental assessment, compliance or regulatory audit, inspection, or investigation of the Properties in its possession, and the Trust has not received any other written report containing any evidence of Environmental Noncompliance. (c) Except as set forth in the documentation provided to the Trust pursuant to Section 3.17(b) and in Schedule 3.17, there is not now, nor has there been in the past, any "friable" asbestos (as the term "friable" is defined under 40 C.F.R. Section 61.141) or friable asbestos containing materials located on, incorporated in, or otherwise contained in the Properties or any portion thereof, and there are not now, and have not in the past been, any underground storage tanks located on the Properties or any portion thereof. (d) Except as set forth in the documentation provided to the Trust pursuant to Section 3.17(b), and in Schedule 3.17, none of the tenants under any Tenant Lease handle or store any Hazardous Material as a principal or primary business. 3.18 TRUST RECORDS; ACCOUNTING RECORDS. The minute books of Seller and the Trust accurately reflect in all material respects all actions taken to the date of this Agreement by the shareholder of Seller, the holders of Common Shares, the Board of Directors of Seller, the Trust -21- 27 Managers and committees of the Trust Managers, as applicable, except for those matters set forth in Schedule 3.18 for which minutes of such actions have not yet been prepared or approved. The share certificate books and records of the Trust accurately reflect the ownership of the Common Shares. The Trust maintains accounting records which fairly reflect, in all material respects, the Trust's transactions. 3.19 NEW YORK STOCK EXCHANGE LISTING. The outstanding Common Shares are listed on the New York Stock Exchange. The sale and delivery of the Shares to Buyer pursuant to this Agreement along with the subsequent sale and delivery of any other Common Shares to Buyer will not violate any listing requirements of the New York Stock Exchange for the listing of Common Shares, including the Shares. 3.20 DISCLOSURE OF FACTS. There are no facts peculiar to the Trust, Subsidiaries or the Trust Partnerships that the Trust has not disclosed to Buyer that materially adversely affect, or insofar as Seller and the Trust can reasonably foresee, will materially adversely affect, the business, financial condition, assets, results of operations or prospects of the Trust, Subsidiaries or Trust Partnerships. SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER Buyer represents and warrants to, and agrees with, Seller and the Trust as follows: 4.1 ORGANIZATION AND RELATED MATTERS. Buyer is a corporation duly organized and validly existing under the laws of the State of Delaware. Buyer has all necessary corporate power and corporate authority to carry on its business as now being conducted. Buyer has all necessary corporate power and corporate authority to execute, deliver and perform this Agreement and the transactions contemplated hereby. USAA beneficially owns, and at Closing will beneficially own, directly or indirectly, all of the capital stock of Buyer. 4.2 AUTHORIZATION. The execution, delivery and performance of this Agreement by Buyer has been duly and validly authorized by Buyer and by all other necessary corporate action on the part of Buyer and no other corporate proceedings on the part of Buyer are necessary to authorize this Agreement or consummate the transactions contemplated hereby. This Agreement has been duly executed and delivered by Buyer and constitutes the legally valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws and equitable principles relating to or limiting creditors' rights generally. The execution and delivery of this Agreement by Buyer and the consummation of the transactions contemplated hereby will not require filing or registration with, or the issuance of any Permit by, any other third party or Governmental Entity under the terms of any applicable Law or material Contracts of Buyer, other than any filing required under the Exchange Act. 4.3 NO CONFLICTS. The execution, delivery and performance of this Agreement by Buyer will not violate the provisions of, or constitute a breach or default (whether upon lapse of time and/or -22- 28 the occurrence of any act or event or otherwise) under, (a) Buyer's certificate of incorporation and bylaws, pursuant to which Buyer was organized and by which Buyer is governed, (b) any Law to which Buyer is subject or (c) any Contract to which Buyer is a party that is material to the financial condition, results of operations or conduct of the business of Buyer. 4.4 NO BROKERS OR FINDERS. No agent, broker, finder or investment or commercial banker, or other Person or firms engaged by or acting on behalf of Buyer or their respective Affiliates in connection with the negotiation, execution or performance of this Agreement or the transactions contemplated by this Agreement, is or will be entitled to any broker's or finder's or similar fees or other commissions as a result of this Agreement or such transactions. 4.5 LEGAL PROCEEDINGS. There is no Order or Action pending against or, to the knowledge of Buyer, affecting Buyer that individually or when aggregated with one or more other Actions has, or if determined adversely would have, a material adverse effect on the business, properties, or financial condition of Buyer or on Buyer's ability to perform this Agreement. 4.6 INVESTMENT REPRESENTATION. Buyer is acquiring the Shares from Seller for Buyer's own account, for investment purposes only and not with a view to or for sale in connection with the distribution thereof. Buyer agrees to execute any further certificate or other document representing Buyer's investment intent or as to any other matter reasonably requested by Seller or the Trust to assure compliance with applicable securities laws. 4.7 LEGENDS; STOP-TRANSFER ORDERS. (a) The certificates for the Shares will bear a legend relating to restrictions on transfer imposed pursuant to the percentage ownership limitation contained in the Charter Documents. (b) The Trust may impose appropriate stop-transfer instructions relating to the restrictions set forth herein. 4.8 STATUS FOR REIT OWNERSHIP AND INCOME TESTS. At the Closing, applying the stock ownership rules of Code Section 856(h), Buyer will be treated as a corporation, and the Shares that it owns will be treated as owned proportionately by Buyer's policyholders (its "shareholders" for this purpose). SECTION 5. COVENANTS WITH RESPECT TO CONDUCT OF SELLER PRIOR TO CLOSING From the date of this Agreement up to and including the Closing Date, Seller and the Trust, jointly and severally, covenant and agree to take such actions, or refrain from taking such actions, as are set forth in this Section 5. -23- 29 5.1 ACCESS. The Trust shall, and shall cause the Subsidiaries and Trust Partnerships to, authorize and permit Buyer and its representatives (which term shall be deemed to include its independent accountants and counsel) to have reasonable access during normal business hours, upon reasonable notice and in such manner as will not unreasonably interfere with the conduct of business, to all of the Properties, books, records, operating instructions and procedures, Tax Returns and all other information with respect to the businesses of the Trust, Subsidiaries and Trust Partnerships as Buyer may from time to time reasonably request, and to make copies of such books, records and other documents and to discuss the business of the Trust, Subsidiaries and Trust Partnerships with Buyer and its partners and their respective officers, employees, accountants and counsel, as Buyer considers necessary or appropriate for the purposes of familiarizing itself with the business of the Trust, obtaining any necessary Approvals of, or Permits for, the transactions contemplated by this Agreement and conducting an evaluation of the organization and business of the Trust. From the date of this Agreement up to and including the Closing Date, the Trust will permit, and cause Subsidiaries and Trust Partnerships to permit, Buyer and its partners, and their respective officers, directors, agents, attorneys, accountants, and representatives, to audit such books and records, to meet with tenants of the Properties, and to conduct such investigations, tests, or inspections of the Properties as the Trust shall approve in the Trust's sole discretion, including intrusive sampling studies to ascertain whether or not there are any Hazardous Materials on, in, or under the Properties. 5.2 MATERIAL ADVERSE CHANGES; SEC FILINGS; REPORTS; FINANCIAL STATEMENTS. (a) The Trust shall promptly notify Buyer of any event of which Seller or the Trust obtains knowledge which has had or might reasonably be expected to have a material adverse effect on the Trust's business or which if known as of the date hereof would have been required to be disclosed to Buyer. (b) The Trust will, and will cause the Subsidiaries and Trust Partnerships to, furnish to Buyer as soon as available copies of all SEC Filings, reports, renewals, filings, certificates, statements and other documents filed with any Governmental Entity. 5.3 CONDUCT OF BUSINESS. Except as set forth in Schedule 5.3 and as provided in Section 5.4, from the date of this Agreement until December 24, 1996, the Trust agrees with and for the benefit of Buyer that the Trust shall not, and the Trust shall cause Subsidiaries and Trust Partnerships not to, without the prior written consent of Buyer, which consent may not unreasonably be withheld: (a) conduct the business of the Trust, Subsidiaries and Trust Partnerships in any manner except in the ordinary course consistent with past practices; or (b) purchase any real property; or (c) declare, issue, make or pay any dividend or other distribution of assets, whether consisting of money, other tangible or intangible personal property, real property or other thing of value, to its shareholders, or split, combine, dividend, distribute or reclassify any Common Shares or -24- 30 any shares of its Capital Stock, as applicable, except for dividends the record date of which is after the Closing Date; or (d) issue, sell, redeem or acquire for value, or agree to do so, any debt obligations, Common Shares or Capital Stock; or (e) incur or agree to incur any obligation or liability (absolute or contingent) that individually calls for payment by the Trust, any Subsidiary or any Trust Partnership of more than $50,000 individually or in the aggregate except for (i) liabilities (other than indebtedness for borrowed money) incurred in the ordinary course of business consistent with past practices (including, but not limited to, tenant improvements and capital improvements to Properties) and (ii) liabilities arising out of, incurred in connection with, or related to the consummation of the transactions contemplated by this Agreement; or (f) merge, sell substantially all of its assets or enter into any other contract involving any other form of business combination or liquidate, wind-up or dissolve (or suffer any liquidation or dissolution) or adopt any plan of liquidation or dissolution; or (g) change the number of Trust Managers or the Board of Directors of any of the Subsidiaries, or admit any additional partners to the Trust Partnerships; or (h) amend the Charter Documents or the charter or organizational documents of the Subsidiaries or Trust Partnerships; or (i) sell, lease, transfer or otherwise dispose of, or mortgage, pledge or otherwise encumber, other than the lease of any Property or space therein in the ordinary course of business consistent with past practices, any of the Properties; or (j) cancel, satisfy or prepay any debt, obligation, liability or encumbrance, or waive any claim or right of value of the Trust, Subsidiaries or Trust Partnerships; or (k) (i) increase in any manner the compensation or fringe benefits (including, but not limited to, severance benefits) payable or to become payable by the Trust, Subsidiaries, or Trust Partnerships to any officer, Trust Manager, director, partner, consultant or independent contractor as salary or wages or under any bonus, insurance, welfare, severance, deferred compensation, pension, retirement, profit sharing, stock option (including, without limitation, the granting of any stock option or stock appreciation right or performance or restricted -25- 31 stock award), stock purchase or other employee benefit plan, (ii) increase in any manner the compensation or fringe benefits (including, but not limited to, severance benefits) payable or to become payable by the Trust, Subsidiaries or Trust Partnerships to any employee who is not an officer, Trust Manager, director or partner of the Trust, Subsidiaries or Trust Partnerships as salary or wages or under any bonus, insurance, welfare, severance, deferred compensation, pension, retirement, profit sharing, stock option (including, without limitation, the granting of any stock option or stock appreciation right or performance or restricted stock award) stock purchase or other employee benefit plan, except for such increase in salary, bonuses or severance benefits to such employees in the ordinary course of business consistent with past practices and provided that all such increases in salary, bonuses or severance benefits do not have a material adverse effect on the business, assets, financial condition or prospects of the Trust, Subsidiaries or Trust Partnerships, or (iii) enter into, adopt, amend in any material respect (except as required by law) or terminate any Trust Benefit Plan or any agreement, arrangement, plan or policy between the Trust, Subsidiaries or Trust Partnerships, as applicable, and one or more of its Trust Managers, directors, partners, officers, employees or independent contractors; or (l) make any tax election other than in connection with maintaining the Trust's qualification as a REIT or take any action that would cause the Trust not to qualify as a REIT, or fail to take any reasonable action to preserve the Trust's qualification as a REIT; or (m) make any change in any significant accounting principles or practices used by the Trust, Subsidiaries or Trust Partnerships, except as required by the SEC; or (n) amend, modify or change the terms of any Material Contract other than in the ordinary course of business consistent with past practice and provided that such amendment, modification or change does not have a material adverse effect on the business, assets, financial condition or prospects of the Trust, Subsidiaries or Trust Partnerships; or (o) acquire any Person (or interest therein) or any material amount of assets, or make any loans, advances or capital contributions to, or investments in, any Person; or (p) incur any indebtedness for borrowed money or assume, endorse (other than endorsements of negotiable instruments in the ordinary course of business), guarantee or otherwise become liable or responsible (whether directly, contingently or otherwise) for the liabilities or obligations of any Person; or (q) take any action that would, or fail to take any action which failure would, result in any of Seller's and the Trust's representations and warranties set forth in this Agreement not being true; or (r) agree to or make any commitment to take any action prohibited by this Section 5.3. 5.4 PROHIBITION OF SOLICITATION. (a) GENERAL PROHIBITION. The Trust shall not, and it shall direct and use its best efforts to cause its officers, Trust Managers, employees, agents and representatives (including, without limitation, any investment banker, attorney or accountant retained by it), and Seller to not, directly or indirectly, initiate, solicit or encourage (including by way of furnishing information or assistance), or take any other action to facilitate, the making or implementation of any proposal or offer (including, without limitation, any proposal or offer to its shareholders) with respect to a merger, acquisition, -26- 32 consolidation or similar transaction involving, or any purchase of all or any significant portion of the assets or Common Shares of the Trust (any such proposal or offer being hereinafter referred to as an "ALTERNATIVE PROPOSAL") or engage in any negotiations concerning, or provide any confidential information or data to, or have any discussions with, any Person relating to an Alternative Proposal, or otherwise facilitate any effort or attempt to make or implement an Alternative Proposal. Except as disclosed to Buyer in writing prior to the date of this Agreement, Seller and the Trust represent and warrant to Buyer that there are no existing activities, discussions or negotiations with any Person with respect to an Alternative Proposal. Seller and the Trust hereby agree to notify Buyer immediately if any inquiries or proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with Seller or the Trust with respect to an Alternative Proposal. (b) UNSOLICITED OFFERS. Nothing contained in Section 5.4(a) shall prohibit the Trust Managers or Board of Directors of Seller from: (i) furnishing information to or entering into discussions or negotiations with any Person that makes an unsolicited bona fide Alternative Proposal if, and only to the extent that, (1) prior to furnishing such information to, or entering into discussions or negotiations with, such Person, the Trust or Seller provides written notice to Buyer to the effect that it is furnishing information to, or entering into discussions or negotiations with, such Person, (2) prior to furnishing such information to, or entering into discussions or negotiations with, such Person, the Trust or Seller receives from such Person an executed confidentiality agreement in customary form on terms not less favorable in any material respect to the Trust or Seller than the terms of the letter agreement, dated July 12, 1996 by and between Buyer and the Trust (the "CONFIDENTIALITY AGREEMENT"), (3) the Trust or Seller keeps Buyer informed of the status of any such discussions or negotiations and (4) the Trust and Seller shall not disclose the terms of this Agreement and other information with respect to transactions among Seller, the Trust and Buyer except as permitted under Section 12.9 hereto; and (ii) to the extent applicable, complying with Rule 14e-2 promulgated under the Exchange Act with regard to an Alternative Proposal. Nothing in this Section 5.4 shall permit Seller or the Trust to terminate this Agreement or affect any other obligation of Seller or the Trust under this Agreement. (c) BUYER'S CONTINUING RIGHTS. Seller or the Trust shall be permitted to enter into a binding agreement relating to an Alternative Proposal only if the Trust Managers or the Board of Directors of Seller, as applicable, determine, after considering the advice of its legal counsel, that the failure to consummate such a transaction might reasonably be expected to subject the Trust Managers or Board of Directors of Seller to liability for breach of their fiduciary duties to the Trust's or Seller's shareholders. The terms of any Alternative Proposal to which the Trust or Seller is a party in which the Trust is the surviving entity shall provide that Buyer shall have the right, at its election, to purchase the Shares upon payment of the Purchase Price prior to consummation of any such transaction. In the event that the Trust shall not be the surviving entity of such transaction, upon consummation of such transaction the Trust and Seller shall cause such third party to assume the obligations of Seller and the Trust under this Agreement and Buyer shall have the right, at its election, to acquire, upon payment of the Purchase Price, such securities or other property as it would have been -27- 33 entitled to receive upon exchange of the Shares if Buyer had purchased the Shares immediately prior to the consummation of such transaction. (d) REIMBURSEMENT OF EXPENSES. If for any reason, regardless of fault, the Shares are not sold by Seller to Buyer, Seller or the Trust shall reimburse Buyer for all out-of-pocket expenses incurred by Buyer in connection with the transactions contemplated by this Agreement upon the submission by Buyer to Seller and the Trust of documentation evidencing the incurrence of such expenses. 5.5 NOTIFICATION OF CERTAIN MATTERS. Seller and the Trust shall give prompt notice to Buyer, and Buyer shall give prompt notice to Seller and the Trust, of (a) the occurrence, or failure to occur, of any event that causes any representation or warranty contained in this Agreement to be untrue or inaccurate at any time from the date of this Agreement to the Closing Date and (b) any failure of Buyer, the Trust or Seller, as the case may be, to comply with or satisfy, in any material respect, any covenant, condition or agreement to be complied with or satisfied by it under this Agreement. 5.6 PERMITS AND APPROVALS. (a) Seller, the Trust and Buyer each agree to cooperate and use their best efforts to obtain (and will immediately prepare all registrations, filings and applications, requests and notices preliminary to all) Approvals and Permits that may be necessary or which may be reasonably requested by Seller, the Trust or Buyer to consummate the transactions contemplated by this Agreement. (b) To the extent that the Approval of a third party with respect to any Material Contract is required in connection with the transactions contemplated by this Agreement, Seller and the Trust shall use their best efforts to obtain such Approval prior to the Closing Date. SECTION 6. ADDITIONAL CONTINUING COVENANTS AND AGREEMENTS 6.1 USE OF PROCEEDS. The proceeds from the sale of the Shares to Buyer, net of any costs (including any accounting and legal costs and expenses) associated with the transactions contemplated by this Agreement, shall be applied by Seller to expenses provided for in the Settlement Agreement and general reserves. 6.2 ENVIRONMENTAL MATTERS. Seller and the Trust will advise Buyer promptly (a) upon obtaining knowledge that a Release has occurred at or upon the Properties and/or (b) upon receipt of a Notification pertaining to the Properties. 6.3 STATUS FOR REIT OWNERSHIP AND INCOME TESTS. Following the Closing, and at all subsequent times during which Buyer owns any of the Shares, applying the stock ownership rules of -28- 34 Code Section 856(h), Buyer will be treated as a corporation, and the Shares that it owns will be treated as owned proportionately by Buyer's policyholders (its "shareholders" for this purpose). 6.4 PROHIBITED TRANSACTIONS. The Trust shall not effect any business transactions, or agree to effect any business transactions, with Affiliates, Trust Managers or employees of the Trust except in the ordinary course of business and unless the consideration paid by the Trust in any such business transaction is fair value at market rates. 6.5 REGISTRATION RIGHTS AGREEMENT. Contemporaneously with the Closing, Buyer and the Trust shall enter into a Registration Rights Agreement substantially in the form of Exhibit B. 6.6 REIT QUALIFICATION. The Trust shall take all actions necessary to maintain the Trust's qualification as a REIT and, without the written consent of Buyer, shall take no action that would cause the Trust not to qualify as a REIT or fail to take any action that would preserve the Trust's qualification as a REIT. 6.7 SERVICES BY BUYER. To the extent permitted by law and the Charter Documents, Buyer shall have the right to provide management and leasing services to the Trust at fair market rates. SECTION 7. GENERAL CONDITIONS OF PURCHASE The obligations of the parties to effect the Closing shall be subject to the following conditions unless waived in writing by all parties: 7.1 NO ORDERS. No Law or Order shall have been enacted, entered, issued, promulgated or enforced by any Governmental Entity which prohibits or restricts the transactions contemplated by this Agreement. No Governmental Entity shall have notified any party to this Agreement that consummation of the transactions contemplated by this Agreement would constitute a violation of any Law of any jurisdiction or that it intends to commence proceedings to restrain or prohibit such transactions or force divestiture or rescission, unless such Governmental Entity shall have withdrawn such notice and abandoned any such proceedings prior to the time which otherwise would have been the Closing Date. 7.2 APPROVALS. To the extent required by applicable Law, all Permits and Approvals required to be obtained in connection with the Closing from any Governmental Entity or any consent from a third party material to the Trust or its business shall have been received or obtained on or prior to the Closing Date. 7.3 ABSENCE OF LITIGATION. No Action before any Governmental Entity pertaining to the transactions contemplated by this Agreement shall have been instituted on or before the Closing Date whether or not Buyer or its Affiliates is a party. -29- 35 7.4 NEW YORK STOCK EXCHANGE. The Trust will use its best efforts to maintain the listing of its Common Shares on the New York Stock Exchange. -30- 36 SECTION 8. CONDITIONS TO OBLIGATIONS OF BUYER The obligations of Buyer to effect the Closing shall be subject to the following conditions except to the extent waived in writing by Buyer: 8.1 SETTLEMENT AGREEMENT. The final settlement of the Pure World Litigation by the court overseeing such settlement shall have occurred on or before the Closing Date. 8.2 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations and warranties of Seller and the Trust set forth in this Agreement shall be true and correct at the Closing Date as if made on and as of the Closing Date. 8.3 PERFORMANCE BY SELLER AND THE TRUST. Seller and the Trust shall have in all material respects performed, satisfied and complied with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by Seller and the Trust on or before the Closing Date, including the covenants set forth in Section 5. 8.4 NO MATERIAL ADVERSE CHANGE. During the period from the date of the Audited Financial Statements to the Closing Date, (i) there shall not have been any material adverse change in the business, assets, prospects, financial condition or the results of operations of the Trust, and the Trust shall not have sustained any material Loss or damage to its assets (including those of Subsidiaries and Trust Partnerships), except for Losses covered by insurance, that adversely affects its ability to conduct a material part of its business and (ii) there shall not have occurred any material adverse change in the financial markets in the United States, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to, in the judgment of Buyer, significantly impair the marketability or value of the Shares, (iii) the trading in any securities of the Company shall not have been suspended or limited by the Commission or the New York Stock Exchange, trading generally on the American Stock Exchange or the New York Stock Exchange or in the Nasdaq National Market shall not have been suspended or limited, minimum or maximum prices for trading shall not have been fixed, and maximum ranges for prices shall not have been required, by any of said exchanges or by such system or by order of the Commission, the National Association of Securities Dealers, Inc. or any other Governmental Entity, and (iv) a banking moratorium shall not have been declared by Federal, Texas or New York authorities. 8.5 CERTIFICATION BY SELLER AND THE TRUST. Buyer shall have received a certificate, dated as of the Closing Date, signed by the President of Seller and by the President of the Trust, certifying, in such detail as Buyer and its counsel reasonably may request, that the conditions specified in Section 8.1, Section 8.2, Section 8.3, and Section 8.4 have been fulfilled. -31- 37 8.6 OPINION OF SELLER AND THE TRUST'S COUNSEL. Buyer shall have received from counsel for Seller and the Trust an opinion, dated as of the Closing Date, in form and substance reasonably satisfactory to Buyer as to the matters set forth in Schedule 8.6. 8.7 NO OTHER BUSINESS COMBINATION TRANSACTION. Seller or the Trust shall not have entered into an agreement relating to an Alternative Proposal and the Board of Directors of Seller or the Trust Managers shall not have recommended an Alternative Proposal. SECTION 9. CONDITIONS TO OBLIGATIONS OF SELLER AND THE TRUST The obligations of Seller and the Trust to effect the Closing shall be subject to the following conditions, except to the extent waived in writing by Seller and the Trust: 9.1 SETTLEMENT AGREEMENT. The final settlement of the Pure World Litigation by the court overseeing such settlement shall have occurred on or before the Closing Date. 9.2 ACCURACY OF BUYER'S REPRESENTATIONS AND WARRANTIES. All representations and warranties of Buyer set forth in this Agreement shall be true and correct at the Closing Date as if made on and as of the Closing Date. 9.3 BUYER'S PERFORMANCE. Buyer shall have in all material respects performed, satisfied and complied with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by Buyer on or before the Closing Date. 9.4 CERTIFICATION BY BUYER. Seller and the Trust shall have received a certificate, dated as of the Closing Date, signed by the President or a Vice President of Buyer, certifying, in such detail as Seller, the Trust and their counsel reasonably may request, that the conditions specified in Section 9.2 and Section 9.3 have been fulfilled. 9.5 OPINION OF BUYER'S COUNSEL. Seller and the Trust shall have received from counsel to Buyer an opinion, dated as of the Closing Date, in form and substance reasonably satisfactory to the Trust as to the matters set forth in Schedule 9.5. SECTION 10. TERMINATION OF OBLIGATIONS; SURVIVAL 10.1 TERMINATION OF AGREEMENT. This Agreement and the transactions contemplated by this Agreement may be terminated at any time before the Closing Date, as follows and in no other manner: (a) MUTUAL CONSENT. By mutual consent in writing of Buyer, the Trust and Seller. (b) CONDITIONS TO BUYER'S PERFORMANCE NOT MET. By Buyer with written notice to Seller and the Trust if the Closing Date has not occurred on or before December 31, 1996. -32- 38 Notwithstanding the foregoing, Buyer may not exercise any right to terminate this Agreement pursuant to this paragraph if Buyer has breached in any material respect its covenants or agreements set forth in this Agreement in any manner that shall have proximately contributed to the failure of the Closing Date to occur on or before December 31, 1996. (c) CONDITIONS TO SELLER'S AND THE TRUST'S PERFORMANCE NOT MET. By Seller and the Trust with written notice to Buyer if the Closing Date has not occurred on or before December 31, 1996. Notwithstanding the foregoing, Seller and the Trust may not exercise any right to terminate this Agreement pursuant to this paragraph if Seller or the Trust has breached in any material respect its covenants or agreements set forth in this Agreement in any manner that shall have proximately contributed to the failure of the Closing Date to occur on or before December 31, 1996. (d) MISREPRESENTATION OR MATERIAL BREACH. By Buyer, Seller or the Trust with written notice to the other party if there has been a misrepresentation or material breach on the part of Seller, the Trust or Buyer, respectively, in their respective representations, warranties and covenants set forth herein, which, with respect to a breach of a covenant, if curable, has not been cured within ten business days after receipt of notice from Buyer, Seller or the Trust of the terminating party's intention to terminate. (e) ENVIRONMENTAL NONCOMPLIANCE. By Buyer in the event of the discovery of any Release or other matter prior to the Closing Date which, if known to Seller or the Trust as of the date of this Agreement, would have constituted a breach of the representations and warranties contained in Section 3.17. 10.2 EFFECT OF TERMINATION. In the event that this Agreement shall be terminated pursuant to Section 10.1, all further obligations of the parties under this Agreement shall terminate; provided that the obligations of the parties contained in this Section 10.2, Section 11, and Section 12, (other than Sections 12.3 and 12.8) shall survive any such termination. A termination under Section 10.1 shall not relieve any party of any liability for a breach of, or for any misrepresentation under, this Agreement, or be deemed to constitute a waiver of any available remedy (including specific performance if available) for any such breach or misrepresentation. 10.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and warranties contained in or made pursuant to this Agreement shall expire on the third anniversary of the Closing except that (a) the representations and warranties contained in Section 3.2 shall continue forever (subject to all defenses of Seller and the Trust available under applicable Law, including the expiration of the applicable statute of limitations period), (b) the representations and warranties contained in Section 3.14 shall continue through the applicable statute of limitations, (c) representations and warranties which are intentionally misrepresented shall continue through the later of the first anniversary of the Closing Date and one year following the date of actual discovery of such intentional misrepresentation, and (d) if a claim or notice is given under Section 11 with respect to the breach of any representation or warranty prior to the applicable expiration date, such representation or warranty -33- 39 shall continue indefinitely until such claim is finally resolved. All covenants and agreements of the parties hereto shall be continuing and shall survive the Closing Date pursuant to the terms thereof. SECTION 11. INDEMNIFICATION 11.1 OBLIGATIONS OF SELLER AND THE TRUST. Seller and the Trust, jointly and severally, agree to indemnify, defend and hold harmless Buyer and its officers, employees, agents, directors and Affiliates (collectively, the "BUYER INDEMNIFIED PARTIES") from and against any and all Losses of the Buyer Indemnified Parties (as incurred) as a result of, or based upon, relating to or arising out of, directly or indirectly, the transactions contemplated hereby or by the Registration Rights Agreement, including, without limitation, as a consequence of (a) any inaccuracy in, or breach or nonperformance of, any of the representations, warranties, covenants or agreements made by Seller and the Trust in, or pursuant to, this Agreement, or (b) any pending or threatened Action brought by the Trust's shareholders or creditors or any other Person other than the Buyer Indemnified Parties or their creditors relating to, or arising out of or in connection with, directly or indirectly, the transactions contemplated under this Agreement; provided, however, that Seller and the Trust shall not be obligated to indemnify, defend or hold harmless any of the Buyer Indemnified Parties for any claims based solely on actions taken by any of the Buyer Indemnified Parties other than the performance of the covenants and agreements to be undertaken by Buyer pursuant to the terms and conditions of this Agreement and any other action authorized in writing by Seller and the Trust. As a condition to the rights of any of the Buyer Indemnified Parties under this Section 11, Seller and the Trust may require that any such Person provide a written undertaking that such Person will repay to Seller or the Trust, as applicable, any amount expended by Seller or the Trust to indemnify, defend or hold harmless such Person in the event and to the extent a court determines that Seller's and the Trust's indemnification or defense of such Person is prohibited by applicable Law. 11.2 OBLIGATIONS OF BUYER. Buyer agrees to indemnify, defend and hold harmless Seller and the Trust and their Trust Managers, officers, employees, agents, directors and Affiliates (collectively, the "SELLER INDEMNIFIED PARTIES") from and against any Losses of the Seller Indemnified Parties as a result of, or based upon or arising out of, directly or indirectly, (a) any material inaccuracy in, or material breach or material nonperformance of, any of the representations, warranties, covenants or agreements made by Buyer in, or pursuant to, this Agreement, or (b) any pending or threatened Action brought by Buyer's policyholders or creditors relating to, or arising out of or in connection with, directly or indirectly, the transactions contemplated under this Agreement; provided, however, that Buyer shall not be obligated to indemnify, defend or hold harmless any of the Seller Indemnified Parties for any claims based solely on actions taken by any of the Seller Indemnified Parties other than the performance of the covenants and agreements to be undertaken by Seller and the Trust pursuant to the terms and conditions of this Agreement and any other action authorized in writing by Buyer. As a condition to the rights of any of the Seller Indemnified Parties under this Section 11, Buyer may require that any such Person provide a written undertaking that such Person will repay to Buyer any amount expended by Buyer to indemnify, defend or hold harmless such Person in the event and to the extent a court determines that Buyer's indemnification or defense of such Person is prohibited by applicable Law. -34- 40 11.3 PROCEDURE. (a) NOTICE. Any party seeking indemnification with respect to any Loss shall give notice to the party required to provide indemnity hereunder (the "INDEMNIFYING PARTY") on or before the date specified in Section 11.4. (b) DEFENSE OF CLAIM. If any claim, demand or liability is asserted by any third party against any Indemnified Party, the Indemnifying Party shall have the right, unless otherwise precluded by applicable law, to conduct and control the defense, compromise or settlement of any Action or threatened Action brought against the Indemnified Party in respect of matters embraced by the indemnity set forth in this Section 11. The Indemnified Party shall have the right to employ counsel separate from counsel employed by the Indemnifying Party in connection with any such Action or threatened Action and to participate in the defense thereof, but the fees and expenses of such counsel employed by the Indemnified Party shall be at the sole expense of the Indemnified Party unless (i) the Indemnifying Party shall have elected not, or, after reasonable written notice of any such Action or threatened Action, shall have failed, to assume or participate in the defense thereof, (ii) the employment thereof has been specifically authorized by the Indemnifying Party in writing, or (iii) the parties to any such Action or threatened Action (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party and the Indemnified Party shall have been advised in writing by counsel for the Indemnified Party that there may be one or more defenses available to the Indemnified Party that are not available to the Indemnifying Party or legal conflicts of interest pursuant to applicable rules of professional conduct between the Indemnifying Party and the Indemnified Party (in any which case, the Indemnifying Party shall not have the right to assume the defense of such Action on behalf of the Indemnified Party), in either of which events referred to in clauses (i), (ii) and (iii) the fees and expenses of such counsel employed by the Indemnified Party shall be at the expense of the Indemnifying Party. The Indemnifying Party shall not, without the written consent of the Indemnified Party, settle or compromise any such Action or threatened Action or consent to the entry of any judgment which does not include as an unconditional term thereof the giving by the claimant or the plaintiff to the Indemnified Party a release from all liability in respect of such Action or threatened Action. Unless the Indemnifying Party shall have elected not, or shall have after reasonable written notice of any such Action or threatened Action failed, to assume or participate in the defense thereof, the Indemnified Party may not settle or compromise any Action or threatened Action without the written consent of the Indemnifying Party. If, after reasonable written notice of any such Action or threatened Action, the Indemnifying Party neglects to defend the Indemnified Party, a recovery against the latter suffered by it in good faith, is conclusive in its favor against the Indemnifying Party; provided, however, that no such conclusive presumption shall be made if the Indemnifying Party has not received reasonable written notice of the Action against the Indemnified Party. 11.4 SURVIVAL. The indemnity set forth in this Section 11 shall survive the Closing or termination of this Agreement and shall remain in effect for a period of (a) with respect to a breach of a representation or warranty, for the period through which such representation or warranty shall continue pursuant to Section 10.3 (including such period of time through which such representation -35- 41 or warranty shall be extended until resolution of a claim with respect thereto) and (b) with respect to a breach of a covenant or agreement or an Action referred to in clause (b) of Sections 11.1 or 11.2, forever. 11.5 NOTICE BY SELLER AND THE TRUST. Seller, the Trust and Buyer agree to notify in writing the other party of any liabilities, claims or misrepresentations, breaches or other matters covered by this Section 11 upon discovery or receipt of notice thereof (other than from such other party), whether before or after Closing. SECTION 12. GENERAL 12.1 AMENDMENTS; WAIVERS. This Agreement and any Schedule or Exhibit attached hereto or referenced herein may be amended only by agreement in writing of all parties. No waiver of any provision nor consent to any exception to the terms of this Agreement shall be effective unless in writing and signed by the party to be bound and then only to the specific purpose, extent and instance so provided. 12.2 SCHEDULES; EXHIBITS; INTEGRATION. Each Exhibit and Schedule delivered pursuant to the terms of this Agreement shall be in writing and shall constitute a part of the Agreement. This Agreement, together with such Exhibits and Schedules, constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements and understandings of the parties in connection therewith. 12.3 BEST EFFORTS; FURTHER ASSURANCES. Each party will use its best efforts to cause all conditions to its obligations to be timely satisfied and to perform and fulfill all obligations on its part to be performed and fulfilled under this Agreement. The parties shall cooperate with each other in such actions and in securing requisite Approvals. Each party shall execute and deliver such further certificates, agreements and other documents and take such other actions as the other party may reasonably request to consummate or implement the transactions contemplated hereby or to evidence such events or matters, including the seeking of any necessary shareholder approvals. 12.4 GOVERNING LAW. 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 TEXAS, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICT OF LAW PROVISION (WHETHER OF THE STATE OF TEXAS OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF TEXAS. 12.5 NO ASSIGNMENT. Except as otherwise specifically provided herein, neither this Agreement nor any rights or obligations under it are assignable by any party, except that Buyer may assign its rights hereunder (including but not limited to its rights under Section 11) to any member of -36- 42 the USAA Group. Buyer shall remain liable to Seller for the payment of the Purchase Price and for other obligations of Buyer hereunder notwithstanding a permitted assignment. 12.6 HEADINGS. The descriptive headings of the Sections and subsections of this Agreement are for convenience only and do not constitute a part of this Agreement. 12.7 COUNTERPARTS. This Agreement and any other agreement or document delivered pursuant hereto may be executed in one or more counterparts and by different parties in separate counterparts. All of such counterparts shall constitute one and the same agreement or other document and shall become effective when one or more counterparts of this Agreement have been signed by each party and delivered to the other party. 12.8 PUBLICITY AND REPORTS. The Trust and Buyer shall coordinate all publicity relating to the transactions contemplated by this Agreement and no party shall issue any press release, publicity statement or other public notice relating to this Agreement, or the transactions contemplated by this Agreement, without obtaining the prior consent of the other party, except to the extent that independent legal counsel to the Trust or Buyer, as the case may be, shall advise the Trust or Buyer in writing that a particular action is required by applicable Law (in which event the party taking such action shall cooperate with the other party in connection with any disclosure or publicity resulting from such action). 12.9 CONFIDENTIALITY. All information disclosed by any party (or its representatives) to the other party whether before or after the date hereof, in connection with the transactions contemplated by, or the discussions and negotiations preceding, this Agreement to any other party (or its representatives) shall be kept confidential by such other party and its representatives and shall not be used by any such Persons other than as contemplated by this Agreement, except (a) to the extent that such information (i) was known by the recipient when received, (ii) is or hereafter becomes lawfully obtainable from other public sources or (iii) is necessary or appropriate to be disclosed to a Governmental Entity having jurisdiction over the parties, (b) may otherwise be required by Law to be disclosed or (c) to the extent such duty as to confidentiality is waived in writing by the other party. If this Agreement is terminated in accordance with its terms, each party shall use all reasonable efforts to return upon written request from the other party all documents (and reproductions thereof) received by it or its representatives from such other party (and, in the case of reproductions, all such reproductions made by the receiving party) that include information not within the exceptions contained in the first sentence of this Section 12.9, unless the recipients provide assurances reasonably satisfactory to the requesting party that such documents have been destroyed. 12.10 PARTIES IN INTEREST. This Agreement shall be binding upon and inure to the benefit of each party, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Nothing in this Agreement is intended to relieve or discharge the obligation of any third Person to or to confer any right of subrogation or action over or against any party to this Agreement. -37- 43 12.11 NOTICES. Any notice or other communication hereunder must be given in writing and (a) either delivered in person, (b) transmitted by telex, telefax or telecopy mechanism, (c) mailed by first class mail, return receipt requested, or (d) delivered by overnight mail or courier service, as follows: If to Buyer, addressed to: USAA Real Estate Company 8000 Robert F. McDermott Freeway IH-10 West, Suite 600 San Antonio, Texas 78230-3884 Attention: David M. Holmes Randal R. Seewald, Esq. Telephone: (210) 498-0626 Telecopy: (210) 498-6214 If to Seller or the Trust, addressed to: American Industrial Properties REIT 6220 North Beltline Road, Suite 205 Irving, Texas 75063-2656 Attention: Mr. Charles W. Wolcott President and Chief Executive Officer Telephone: (972) 550-6053 Telecopy: (972) 550-6037 or to such other address or to such other person as any party shall have last designated by such notice to the other parties. Each such notice or other communication shall be effective (i) if given by telecommunication, when transmitted to the applicable number so specified in this Section 12.11 and an appropriate answer back is received, (ii) if given by mail, three days after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any other means, when actually delivered at such address. 12.12 EXPENSES. Seller, the Trust and Buyer shall pay their own respective expenses incident to the negotiation, preparation and performance of this Agreement and the transactions contemplated hereby, including but not limited to the fees, expenses and disbursements of their respective financial advisers, accountants and counsel. 12.13 REMEDIES; WAIVER. All rights and remedies existing under this Agreement and any related agreements or documents are cumulative to and not exclusive of any rights or remedies otherwise available under applicable Law. No failure on the part of any party to exercise or delay in exercising any right hereunder shall be deemed a waiver thereof, nor shall any single or partial exercise preclude any further or other exercise of such or any other right. Buyer, Seller and the Trust -38- 44 shall be entitled to seek any equitable remedy to the extent such remedy is available under applicable Law. 12.14 REPRESENTATION BY COUNSEL; INTERPRETATION. Seller, the Trust and Buyer each acknowledge that each party to this Agreement has been represented by counsel in connection with this Agreement and the transactions contemplated by this Agreement. Accordingly, any rule of Law or any legal decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. The provisions of this Agreement shall be interpreted in a reasonable manner to effect the intent of Buyer, Seller and the Trust, and no rule of strict construction shall be applied against any party to this Agreement. 12.15 SEVERABILITY. If any provision of this Agreement is determined to be invalid, illegal or unenforceable by any Governmental Entity, the remaining provisions of this Agreement to the extent permitted by Law shall remain in full force and effect to the extent permitted by Law, and the parties hereby to the same extent waive any provision of Law that renders any provision hereof prohibited or unenforceable in any respect. -39- 45 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by its duly authorized officers as of the day and year first above written. "BUYER" USAA REAL ESTATE COMPANY By:_____________________________________ T. Patrick Duncan Senior Vice President - Operations "SELLER" AMERICAN INDUSTRIAL PROPERTIES REIT, INC. By:_____________________________________ Charles W. Wolcott President and Chief Executive Officer "TRUST" AMERICAN INDUSTRIAL PROPERTIES REIT By:_____________________________________ Charles W. Wolcott President and Chief Executive Officer -40- EX-10.5 6 LETTER AGREEMENT 1 EXHIBIT 10.5 USAA REAL ESTATE COMPANY 8000 MCDERMOTT FREEWAY SUITE 600 SAN ANTONIO, TEXAS 78230-3884 December 18, 1996 American Industrial Properties REIT 6220 North Beltline, Suite 205 Irving, Texas 75063 Re: 8.8% Promissory Note dated February 27, 1992 in the original principal amount of $23,261,317.66 ("Note A") executed by Trammell Crow Real Estate Investors ("Trammell Crow") and payable to The Manufacturers Life Insurance Company ("MLI") and the 8.8% Promissory Note, dated February 27, 1992, in the original principal amount of $19,143,646.92 ("Note B") executed by Trammell Crow and payable to The Manufacturers Life Insurance Company (U.S.A.) ("MLI-USA") (collectively the "Notes") Gentlemen: American Industrial Properties REIT ("AIP"), the predecessor obligor on the Notes, has requested that USAA Real Estate Company or one of its affiliates (collectively, "USAA") commence negotiations with MLI and MLI-USA for the purchase or repayment of the Notes. USAA is willing to commence these negotiations, subject to AIP's acceptance of the following terms and conditions: 1. Purchase of the Notes. USAA, with the assistance of AIP, will commence negotiations with MLI to purchase the Notes at a price acceptable to USAA, in its sole discretion. Consummation of any such purchase by USAA shall be in USAA's sole discretion, but shall in any event require (a) completion of satisfactory due diligence, in USAA's sole discretion, with respect to the Notes, including, without limitation, review of the Notes, the Settlement Agreement by and between AIP, Patapsco #1 Limited Partnership, Patapsco #2 Limited Partnership, MLI and MLI-USA dated as of May 22, 1996, the Note Purchase Agreement, dated February 27, 1992, by and between Trammell Crow Real Estate Investors and MLI, the Option Agreement, dated May 22, 1996, between MLI, MLI-USA and AIP and other agreements concerning the obligations under the Notes (collectively the "Note Documents"), (b) negotiation and consummation of the purchase or repayment of the Notes (the "Purchase Documents"), on terms satisfactory to USAA, in its sole discretion, and (c) execution and delivery of agreements, in form and substance satisfactory to 2 AIP December 18, 1996 Page 2 USAA, in its sole discretion, by USAA and AIP, necessary to implement the modifications to (or replacement of) the Notes and the other Note Documents described in paragraph 2 below. AIP will use its best efforts to assist USAA to complete this transaction and will also execute any consents or other documents necessary for USAA to acquire the Notes. In the event USAA does not purchase the Notes from MLI, USAA shall have the option, in its sole discretion, to advance to AIP the funds necessary to repay the Notes, in which case AIP agrees to repay USAA such funds on terms consistent with those set forth below. 2. Note Modifications. For the consideration of the mutual obligations set forth below, the Notes (or the obligations represented thereby) and the other Note Documents (or the obligations represented thereby) will be modified (or replaced), effective upon consummation of the Purchase Documents, to incorporate the following terms: a. USAA will amend the current aggregate principal balance ($9,419,213) of the Notes so that the resulting aggregate principal balance of the Notes will be at least $7,040,721, and in any event $1,591,103 greater than the amount paid by USAA to purchase the Notes (provided such purchase price for this purpose shall be limited to $5,449,618 plus accrued interest), plus the expenses incurred by USAA in connection with this transaction. Such amendment shall not apply to any accrued and unpaid interest on the Notes. AIP acknowledges that the foregoing may result in income to AIP. b. Subject to clause (e) below, the Notes will continue to accrue interest at a non-default rate of 8.8% per annum, with accrued interest payable monthly in arrears, and the maturity of the Note will be extended to December 31, 2000. c. AIP will waive its right to make the discounted prepayments contemplated by the Option Agreement dated as of May 22, 1996 relating to the Notes (the "Option Agreement") and AIP will have no further right to make any optional prepayment of the Notes. d. The Notes will be amended to provide that, subject to obtaining the shareholder approval described in clause (e) below, such Notes are convertible (in whole or in part) at USAA's option, at any time, into a number of shares of beneficial interest, $.10 par value per share, of AIP (the "Shares") determined as follows: P / C = S 3 AIP December 18, 1996 Page 3 where (i) "P" equals the aggregate principal balance of such Notes at the date of conversion; (ii) "C" equals the conversion price determined pursuant to clause (f) below; and (iii) "S" equals such number of Shares. e. AIP will submit the conversion feature described in clause (d) above to its shareholders for approval as promptly as possible after USAA acquires the Notes and will use its best efforts to secure such approval. If AIP has not obtained shareholder approval of such conversion feature by June 30, 1997, (a) effective July 1, 1997 the interest rate applicable to the Notes will increase to 18% (but in no event to exceed the highest lawful rate) and (b) AIP will be required to make a mandatory prepayment of the full principal of the Notes, plus accrued, unpaid interest on October 31, 1997. f. The conversion price "C" referred to in clause (d) above will be determined as follows: (i) if the conversion of such Note occurs on or before December 31, 1997, the conversion price will be $2.00; (ii) if the conversion of such Note occurs after the period in (i) above but on or before December 31, 2000, the conversion price per share will be $2.25. The conversion prices described above will be subject to further adjustment pursuant to anti-dilution provisions acceptable to USAA. g. Upon conversion of either Note into Shares, AIP shall be required to enter into a Registration Rights Agreement with USAA covering the resale of such Shares substantially in the same form as provided in the Registration Rights Agreement dated December 13, 1996, between AIP and USAA. 3. No Defaults. AIP represents and warrants that it is in compliance with the terms of the Settlement Agreement dated as of May 22, 1996 relating to the Notes (the "Settlement Agreement") and the other documents pertaining thereto and that there are currently no defaults existing with respect to the Settlement Agreement or any other material contract of AIP. 4. Term. The term of this Agreement shall be four years from the date hereof, unless replaced by the terms of new notes and related documents reflecting the terms set forth herein. 4 AIP December 18, 1996 Page 4 This letter does not constitute a commitment by USAA to lend or to otherwise advance funds to AIP. However, AIP understands that USAA will commence negotiations with MLI and expend funds in connection therewith in reliance upon AIP's agreements contained herein. Please acknowledge your agreement to the foregoing by signing a counterpart hereof in the space provided below and returning the same to USAA no later than 5:00 p.m. (San Antonio, Texas time) on December 17, 1996. Very truly yours, USAA REAL ESTATE COMPANY By:______________________________________ Name: T. Patrick Duncan Title: Senior Vice President - Operations Accepted and agreed to this _____ day of December, 1996. AMERICAN INDUSTRIAL PROPERTIES REIT By:______________________________________ Name: Charles W. Wolcott Title: President EX-10.6 7 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 10.6 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "AGREEMENT") is made and entered into as of December 19, 1996, by and between American Industrial Properties REIT, a Texas real estate investment trust (the "COMPANY"), and USAA Real Estate Company, a Delaware corporation ("USAA"). WITNESSETH: WHEREAS, pursuant to that certain Share Purchase Agreement, dated as of December 13, 1996, between the Company and USAA (the "SHARE PURCHASE AGREEMENT"), USAA purchased 924,600 Common Shares (the "SHARES"); and WHEREAS, pursuant to the terms of the Share Purchase Agreement, the Company and USAA agreed that the Company would grant certain registration rights to USAA with respect to the Shares; NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following capitalized terms shall have the following meanings: Closing Date: The closing date as defined in the Share Purchase Agreement. Common Shares: The common shares of beneficial interest, $.10 par value per share, of the Company. Exchange Act: The Securities Exchange Act of 1934, as amended from time to time. Person: An individual, partnership, corporation, limited liability company, trust or unincorporated organization, or a government or agency or political subdivision thereof. Prospectus: The prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus. Registrable Securities: (a) The Shares and (b) any securities issued or issuable with respect to the Shares by way of stock dividend or stock split or in connection with a combination of 2 shares, recapitalization, merger, consolidation or other reorganization or otherwise. Any Registrable Security will cease to be a Registrable Security when (i) a registration statement covering such Registrable Security has been declared effective by the SEC and the Registrable Security has been disposed of pursuant to such effective registration statement, (ii) the Registrable Security is sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met, or (iii) the Registrable Security has been otherwise transferred, the Company has delivered a new certificate or other evidence of ownership for it not bearing a legend restricting further transfer, and it may be resold without subsequent registration under the Securities Act. Registration Expenses: See Section 5 hereof. Registration Statement: The Registration Statement of the Company that covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus included therein, all amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement. SEC: The Securities and Exchange Commission or any successor entity. Securities Act: The Securities Act of 1933, as amended from time to time. Share Purchase Agreement: See the Recitals to this Agreement. Shares: See the Recitals to this Agreement. Underwritten Registration or Underwritten Offering: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. 2. Registration Rights. (a) Shelf Registration. Upon the written request of USAA, the Company shall file a "shelf" registration statement on any appropriate form pursuant to Rule 415 (or similar rule that may be adopted by the SEC) under the Securities Act (a "SHELF REGISTRATION") for all of the then Registrable Securities, subject to the request of USAA to exclude any Registrable Securities. The Company hereby agrees to file such registration statement as promptly as practicable following the request therefor, and in any event within 60 days following the date such request is received by the Company, and thereafter to use its commercially reasonable efforts to cause such Shelf Registration to become effective and thereafter to keep it continuously effective, and to prevent the happening of any event of the kind described in Section 4(c)(3), (4), (5) or (6) hereof that requires the Company to give notice pursuant to the last paragraph of Section 4 hereof, for a period terminating on the third year anniversary of the date on which the SEC declares the Shelf Registration effective, or such shorter period as shall terminate, on the date on which all the Registrable Securities covered by the Shelf Registration have been sold pursuant to such Shelf 2 3 Registration. The Company shall be obligated to file only one Shelf Registration and shall not be obligated to file a Shelf Registration if three Demand Registrations (hereinafter defined) have been effected under Section 2(b). The Company further agrees to promptly supplement or make amendments to the Shelf Registration, if required by the rules, regulations or instructions applicable to the registration form utilized by the Company or by the Securities Act or rules and regulations thereunder for shelf registration or if requested by USAA or any underwriter of the Registrable Securities. If USAA so elects, the offering of Registrable Securities pursuant to a Shelf Registration shall be in the form of an Underwritten Offering. (b) Demand Registration. At any time during the five year period following the Closing Date, USAA may make a written request (the "DEMAND NOTICE") for registration under the Securities Act (a "DEMAND REGISTRATION") of the Registrable Securities held by it. The Demand Notice will specify the number of shares of Registrable Securities proposed to be sold and will also specify the intended method of disposition thereof. Unless USAA shall consent in writing, no other party, including the Company, shall be permitted to offer securities under any such Demand Registration. The Company shall not be required to effect more than three Demand Registrations under this Section 2(b). A registration requested pursuant to this Section 2(b) will not be deemed to have been effected (and it shall not count as one of the three Demand Registrations) unless the Registration Statement relating thereto has become effective under the Securities Act; provided, however that if, after such Registration Statement has become effective, the offering of the Registrable Securities pursuant to such registration is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court, such registration will be deemed not to have been effected (and it shall not count as one of the three Demand Registrations). USAA may, at any time prior to the effective date of the Registration Statement relating to such registration, revoke its Demand Notice by providing a written notice to the Company. If USAA so elects, the offering of Registrable Securities pursuant to a Demand Registration shall be in the form of an Underwritten Offering. If the managing underwriter or underwriters of such offering advise the Company and USAA in writing that in their opinion the number of shares of Registrable Securities requested to be included in such offering is sufficiently large to materially and adversely affect the success of such offering, the Company will include in such registration the aggregate number of Registrable Securities which in the opinion of such managing underwriter or underwriters can be sold without any such material adverse effect; provided, however, that Registrable Securities may be excluded before all shares proposed to be sold by other parties, including the Company, have been excluded. If any Registrable Securities are excluded, such registration shall not count as one of the three Demand Registrations. 3 4 No registration pursuant to a request or requests referred to in this subsection 2(b) shall be deemed to be a Shelf Registration. (c) Incidental Registration. If at any time during the five year period following the Closing Date the Company proposes to file a registration statement under the Securities Act (other than in connection with the Shelf Registration, a Demand Registration or a Registration Statement on Form S-4 or S-8, or any form that is substituting therefor or is a successor thereto) with respect to an offering of any class of security by the Company for its own account or for the account of any of its security holders, then the Company shall give written notice of such proposed filing to USAA as soon as practicable (but in no event less than thirty days before the anticipated filing date), and such notice shall (i) offer USAA the opportunity to register such number of Registrable Securities as it may request and (ii) describe such securities and specifying the form and manner and other relevant facts involved in such proposed registration (including, without limitation, (x) whether or not such registration will be in connection with an Underwritten Offering and, if so, the identity of the managing underwriter and whether such Underwritten Offering will be pursuant to a "best efforts" or "firm commitment" underwriting and (y) the price (net of any underwriting commissions, discounts and the like) at which the Registrable Securities are reasonably expected to be sold, if such disclosure is acceptable to the managing underwriter), USAA shall advise the Company in writing within twenty (20) days after the date of receipt of such notice from the Company of the number of Registrable Securities for which registration is requested. The Company shall include in such Registration Statement all such Registrable Securities so requested to be included therein, and, if such registration is an Underwritten Registration, the Company shall use its commercially reasonable efforts to cause the managing underwriter or underwriters to permit the Registrable Securities requested to be included in the registration statement for such offering to be included (on the same terms and conditions as similar securities of the Company included therein to the extent appropriate); provided, however, that if the managing underwriter or underwriters of such offering deliver a written opinion to USAA that either because of (i) the kind of securities which USAA, the Company, or any other Persons intend to include in such offering or (ii) the size of the offering which USAA, the Company, or such other Persons intend to make, the success of the offering would be materially and adversely affected by inclusion of the Registrable Securities requested to be included, then (A) in the event that the size of the offering is the basis of such managing underwriter's opinion, the amount of securities to be offered for the account of USAA and other holders registering securities of the Company pursuant to similar incidental registration rights shall be reduced pro rata (according to the Registrable Securities beneficially owned by such holders) to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by such managing underwriter or underwriters; and (B) in the event that the combination of securities to be offered is the basis of such managing underwriter's opinion, (x) the Registrable Securities and other securities to be included in such offering shall be reduced as described in clause (A) above or, (y) if the actions described in clause (A) would, in the judgment of the managing underwriter, be insufficient to substantially eliminate the adverse effect that inclusion of the Registrable Securities requested to be included would have on such offering, such Registrable Securities will be excluded from such offering. No registration pursuant to a request or requests referred to in this subsection 2(c) shall 4 5 be deemed to be a Shelf Registration. 3. Hold-Back Agreements. (a) Restrictions on Public Sale by Holder of Registrable Securities. USAA agrees, if reasonably requested by the managing underwriters in an Underwritten Offering, not to effect any public sale or distribution of securities of the Company of the same class as the securities included in such Registration Statement, including a sale pursuant to Rule 144 under the Securities Act (except as part of such Underwritten Registration), during the 10-day period prior to the filing of a Registration Statement with respect to such Underwritten Offering, and during the 90-day period beginning on the closing date of each Underwritten Offering made pursuant to such Registration Statement, to the extent timely notified in writing by the Company or the managing underwriters. (b) Restrictions on Sale of Securities by the Company. The Company agrees not to effect any public sale or distribution of any securities similar to those being registered, or any securities convertible into or exchangeable or exercisable for such securities (except pursuant to a registration statement on Form S-4 or S-8, or any substitute form that may be adopted by the SEC) during the ten days prior to the filing of a registration statement with respect to such Underwritten Offering, and during the 90-day period beginning on the effective date of any Registration Statement (except as part of such registration statement (x) where USAA consents or (y) where USAA is participating in such registration statement pursuant to Section 2(c) hereof, such registration statement was filed by the Company with respect to the sale of securities by the Company, and USAA is not simultaneously participating in a registration statement pursuant to Section 2(b) hereof) or the commencement of a public distribution of Registrable Securities pursuant to such registration statement. 4. Registration Procedures. In connection with the Company's registration obligations pursuant to Section 2 hereof, the Company will use its commercially reasonable efforts to effect such registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Company will use commercially reasonable efforts to as expeditiously as possible: (a) prepare and file with the SEC, as soon as practicable, and in any event within 60 days from the date of request, a Registration Statement relating to the applicable registration on any appropriate form under the Securities Act, which forms shall be available for the sale of the Registrable Securities in accordance with the intended method or methods of distribution thereof and shall include all financial statements of the Company, and use its commercially reasonable efforts to cause such Registration Statement to become effective; provided that before filing a Registration Statement or Prospectus or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of the Registration Statement, the Company will furnish USAA and the underwriters, if any, copies of all such documents proposed to be filed, which documents will be subject to the review of USAA and the underwriters, and the Company will not file any Registration Statement or amendment thereto or any Prospectus or any supplement thereto (including such documents incorporated by reference) to which USAA or the 5 6 underwriters, if any, shall reasonably object; (b) prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period, or such shorter period which will terminate when all Registrable Securities covered by such Registration Statement have been sold; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act; and comply with the provisions of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; the Company shall not be deemed to have used commercially reasonable efforts to keep a Registration Statement effective during the applicable period if it voluntarily takes any action that would result in USAA not being able to sell its Registrable Securities during that period unless such action is required under applicable law; provided that the foregoing shall not apply to actions taken by the Company in good faith and for valid business reasons, including without limitation the acquisition or divestiture of assets, so long as the Company promptly thereafter complies with the requirements of Section 4(l) hereof, if applicable; (c) notify USAA and the managing underwriters, if any, promptly, and (if requested by any such Person) confirm such advice in writing, (1) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective, (2) of any request by the SEC for amendments or supplements to the Registration Statement or the Prospectus or for additional information, (3) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, (4) if at any time the representations and warranties of the Company contemplated by paragraph (n) below cease to be true and correct, (5) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and (6) of the happening of any event which makes any statement made in the Registration Statement, the Prospectus or any document incorporated therein by reference untrue or which requires the making of any changes in the Registration Statement, the Prospectus or any document incorporated therein by reference in order to make the statements therein not misleading; (d) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement at the earliest possible moment; (e) if reasonably requested by the managing underwriter or underwriters or USAA, promptly incorporate in a Prospectus supplement or post-effective amendment such information as the managing underwriters and USAA agree should be included therein relating to the sale of the Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being sold to such underwriters, the purchase price being paid therefor by such underwriters and with respect to any other terms of the Underwritten (or best efforts underwritten) Offering of the Registrable Securities to be sold in such offering; and make all 6 7 required filings of such Prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; (f) prior to the filing of any document which is to be incorporated by reference into the Registration Statement or the Prospectus (after initial filing of the Registration Statement), make available representatives of the Company for discussion of such document and make such changes in such document prior to the filing thereof as USAA or the underwriters may reasonably request; (g) furnish to USAA and each managing underwriter, if any, without charge, at least one signed copy of the Registration Statement and any post-effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference); (h) deliver to USAA and the underwriters, if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons may reasonably request; the Company consents to the use of the Prospectus or any amendment or supplement thereto by USAA and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto; (i) prior to any public offering of Registrable Securities, register or qualify or cooperate with USAA, the underwriters, if any, and their respective counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions as USAA or any underwriter reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the Registration Statement; (j) cooperate with USAA and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters may request at least two business days prior to any sale of Registrable Securities to the underwriters; (k) cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable USAA or the underwriters, if any, to consummate the disposition of such Registrable Securities; (l) upon the occurrence of any event contemplated by Section 4(c)(6) above, prepare a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, the Prospectus will not 7 8 contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; (m) cause all Registrable Securities covered by the Registration Statement to be listed on each securities exchange on which similar securities issued by the Company are then listed; (n) enter into such agreements (including an underwriting agreement) and take all such other actions in connection therewith in order to expedite or facilitate the disposition of such Registrable Securities and in connection therewith, whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, (1) make such representations and warranties to USAA and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings; (2) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and USAA, covering the matters customarily covered in opinions requested in Underwritten Offerings and such other matters as may be reasonably requested by USAA and the underwriters, if any); (3) obtain "cold comfort" letters and updates thereof from the Company's independent certified public accountants addressed to USAA and the underwriters, if any, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters by underwriters in connection with primary Underwritten Offerings; (4) if an underwriting agreement is entered into, the same shall set forth in full the indemnification provisions and procedures of Section 6 hereof with respect to all parties to be indemnified pursuant to said Section ; and (5) the Company shall deliver such documents and certificates as may be requested by USAA and the managing underwriters, if any, to evidence compliance with clause (1) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. The above shall be done at each closing under such underwriting or similar agreement or as and to the extent required thereunder; (o) make available for inspection by a representative of USAA, any underwriter participating in any disposition pursuant to such registration, and any attorney or accountant retained by USAA or any underwriter, all financial and other records, pertinent corporate documents and properties of the Company and cause the Company's officers, trust managers and employees to supply all information reasonably requested by any such representative, underwriter, attorney or accountant in connection with such registration; provided that any records, information or documents that are designated by the Company in writing as confidential shall be kept confidential by such Persons unless disclosure of such records, information or documents is required by court or administrative order; (p) otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering a period of 12 months, beginning within three months after the effective date of the registration statement, which earnings statement shall satisfy the 8 9 provisions of section 11(a) of the Securities Act; and (q) cooperate with USAA and each underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD"). The Company may require USAA to furnish to the Company such information regarding the distribution of Registrable Securities as the Company may from time to time reasonably request in writing. 9 10 USAA agrees by acquisition of such Registrable Securities that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(l) hereof, USAA will forthwith discontinue disposition of Registrable Securities until USAA's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 4(l) hereof, or until it is advised in writing (the "ADVICE") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the Prospectus, and, if so directed by the Company, USAA will deliver to the Company (at the Company's expense), all copies, other than permanent file copies then in USAA's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. In the event the Company shall give any such notice, the time periods regarding the effectiveness of Registration Statements set forth in Section 2 hereof and Section 4(b) hereof shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 4(c)(6) hereof to the date when USAA shall receive copies of the supplemented or amended prospectus contemplated by Section 4(l) hereof or the Advice. 5. Registration Expenses. All expenses incident to the Company's performance of or compliance with this Agreement, including without limitation: all registration and filing fees; fees with respect to filings required to be made with the NASD; fees and expenses of compliance with securities or blue sky laws (including fees and disbursements of counsel for the underwriters or USAA in connection with blue sky qualifications of the Registrable Securities and determination of their eligibility for investment under the laws of such jurisdictions as the managing underwriters or USAA may designate); printing expenses, messenger, telephone and delivery expenses; fees and disbursements of counsel for the Company and fees and expenses for independent certified public accountants retained by the Company (including the expenses of any comfort letters or costs associated with the delivery by independent certified public accountants of a comfort letter or comfort letters requested pursuant to Section 4(n) hereof); securities acts liability insurance, if the Company so desires; all internal expenses of the Company (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties); the expense of any annual audit; the fees and expenses incurred in connection with the listing of the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed; and the fees and expenses of any Person, including special experts, retained by the Company (all such expenses being herein called "REGISTRATION EXPENSES") will be borne by the Company regardless of whether the Registration Statement becomes effective. The Company shall not have any obligation to pay any underwriting fees, discounts, or commissions attributable to the sale of Registrable Securities, or any legal fees and expenses of counsel to USAA. 6. Indemnification; Contribution. (a) Indemnification by Company. The Company agrees to indemnify and hold harmless USAA and its partners, and their respective partners, officers, directors, employees and agents, and each Person who controls such Person (within the meaning of Section 15 of the Securities Act 10 11 or Section 20 of the Exchange Act) against all losses, claims, damages, liabilities and expenses arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, Prospectus or preliminary prospectus or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by USAA expressly for use therein. The Company will also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers and trust managers and each Person who controls such Persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of USAA, if requested. (b) Indemnification by Holder of Registrable Securities. USAA agrees to indemnify and hold harmless the Company and its trust managers, officers, employees and agents, and each Person who controls the Company (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue statement of a material fact or any omission of a material fact required to be stated in the Registration Statement or Prospectus or preliminary prospectus or necessary to make the statements therein not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in any information or affidavit so furnished in writing by USAA to the Company specifically for inclusion in such Registration Statement or Prospectus. In no event shall the liability of USAA hereunder be greater in amount than the dollar amount of the proceeds received by USAA upon the sale of the Registrable Securities giving rise to such indemnification obligation. The Company shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above with respect to information so furnished in writing by such Persons specifically for inclusion in any Prospectus or Registration Statement. (c) Conduct of Indemnification Proceedings. Any Person entitled to indemnification hereunder will (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided, however that any Person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person unless (a) the indemnifying party has agreed to pay such fees or expenses, (b) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such Person or (c) based upon written advice of counsel to such Person, there shall be one or more defenses available to such Person that are not available to the indemnifying party or there shall exist conflicts of interest pursuant to applicable rules of professional conduct between such Person and the indemnifying party (in which case, if the Person notifies the indemnifying party in writing that such Person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume 11 12 the defense of such claim on behalf of such Person), in each of which events the fees and expenses of such counsel shall be at the expense of the indemnifying party. The indemnifying party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld), but if settled with its written consent, or if there be a final judgment for the plaintiff in any such action or proceeding, the indemnifying party shall indemnify and hold harmless the indemnified parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. No indemnified party will be required to consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Contribution. If for any reason the indemnification provided for in the preceding clauses (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless as contemplated by the preceding clauses (a) and (b), then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the indemnified party and the indemnifying party, but also the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations, provided, that USAA shall not be required to contribute an amount greater than the dollar amount of the proceeds received by USAA with respect to the sale of the Registrable Securities giving rise to such indemnification obligation. The relative fault of the Company on the one hand and of USAA on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 10(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentations. 7. Rule 144. The Company hereby agrees that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if the Company is not required to file such reports, it will, upon the request of USAA, make publicly available other information so long as necessary to permit sales pursuant to Rule 144 under the Securities Act), and it will take such further action as USAA may reasonably request, all to the extent required from time to time to enable USAA to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon the request of USAA, the Company will deliver to USAA a written statement as to whether it has complied with such information and requirements. 8. Participation in Underwritten Registrations. (a) If any of the Registrable Securities covered by the Shelf Registration are to be sold in an Underwritten Offering, the investment banker or investment bankers and manager or 12 13 managers that will administer the offering will be selected by USAA; provided, that such investment bankers and managers must be reasonably satisfactory to the Company. (b) No Person may participate in any Underwritten Registration hereunder unless such Person (i) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. Nothing in this Section 8 shall be construed to create any additional rights regarding the registration of Registrable Securities in any Person otherwise than as set forth herein. 9. Miscellaneous. (a) Remedies. Each party hereto, in addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement to the extent available under applicable law. Each party hereto agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) Additional Registration Rights. The Company will not on or after the date of this Agreement, enter into any agreement granting registration rights to any other Person with respect to the securities of the Company that are not junior or subordinate to the rights granted to USAA hereunder without the written consent of USAA. The Company has not previously entered into any agreement with respect to its securities granting any registration rights to any Person. (c) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given without the written consent of the Company and USAA. (d) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telecopier, or air courier guaranteeing overnight delivery: (i) if to USAA, at the most current address given by USAA to the Company in accordance with the provisions of this subsection, which address initially is 8000 Robert F. McDermott Freeway, IH-10, Suite 600, San Antonio, Texas 78230-3884, Attention: David Holmes. (ii) if to the Company, initially at 6220 Beltline Road, Suite 205, Irving, Texas 75063-2656, Attention: Charles W. Wolcott, President and Chief Executive Officer, and thereafter at such other address as may be designated from time to time by notice given in accordance with the provisions of this Section 9(d). 13 14 (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent holders of Registrable Securities, it being understood that the registration rights granted to USAA hereunder shall also be for the benefit of, and enforceable by, the single first transferee of 100% of USAA's remaining registrable securities and, provided further, that the Company cannot assign its rights hereunder except pursuant to a merger. (f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) Governing Law. THIS AGREEMENT, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO, SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAWS. (i) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (j) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 14 15 In any proceeding brought to enforce any provision of this Agreement the successful party shall be entitled to recover reasonable attorneys' fees in addition to its costs and expenses and any other available remedy. IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date first written above. "COMPANY" AMERICAN INDUSTRIAL PROPERTIES REIT By:_____________________________________ Charles W. Wolcott President and Chief Executive Officer "USAA" USAA REAL ESTATE COMPANY By:_____________________________________ T. Patrick Duncan Senior Vice President - Operations 15 EX-10.7 8 REGISTRATION RIGHTS AGREEMENT 1 Exhibit 10.7 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "AGREEMENT") is made and entered into as of December 20, 1996, by and between American Industrial Properties REIT, a Texas real estate investment trust (the "COMPANY"), and USAA Real Estate Company, a Delaware corporation ("USAA"). WITNESSETH: WHEREAS, pursuant to that certain Share Purchase Agreement, dated as of December 20, 1996, among the Company, American Industrial Properties REIT, Inc., a Maryland corporation ("Sub"), and USAA (the "SHARE PURCHASE AGREEMENT"), USAA purchased 998,100 Common Shares (the "SHARES") from Sub; and WHEREAS, pursuant to the terms of the Share Purchase Agreement, the Company and USAA agreed that the Company would grant certain registration rights to USAA with respect to the Shares; NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following capitalized terms shall have the following meanings: Closing Date: The closing date as defined in the Share Purchase Agreement. Common Shares: The common shares of beneficial interest, $.10 par value per share, of the Company. Exchange Act: The Securities Exchange Act of 1934, as amended from time to time. Person: An individual, partnership, corporation, limited liability company, trust or unincorporated organization, or a government or agency or political subdivision thereof. Prospectus: The prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference in such prospectus. 2 Registrable Securities: (a) The Shares and (b) any securities issued or issuable with respect to the Shares by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. Any Registrable Security will cease to be a Registrable Security when (i) a registration statement covering such Registrable Security has been declared effective by the SEC and the Registrable Security has been disposed of pursuant to such effective registration statement, (ii) the Registrable Security is sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met, or (iii) the Registrable Security has been otherwise transferred, the Company has delivered a new certificate or other evidence of ownership for it not bearing a legend restricting further transfer, and it may be resold without subsequent registration under the Securities Act. Registration Expenses: See Section 5 hereof. Registration Statement: The Registration Statement of the Company that covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus included therein, all amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement. SEC: The Securities and Exchange Commission or any successor entity. Securities Act: The Securities Act of 1933, as amended from time to time. Share Purchase Agreement: See the Recitals to this Agreement. Shares: See the Recitals to this Agreement. Underwritten Registration or Underwritten Offering: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. 2. Registration Rights. (a) Shelf RegistrationUpon the written request of USAA, the Company shall file a "shelf" registration statement on any appropriate form pursuant to Rule 415 (or similar rule that may be adopted by the SEC) under the Securities Act (a "SHELF REGISTRATION") for all of the then Registrable Securities, subject to the request of USAA to exclude any Registrable Securities. The Company hereby agrees to file such registration statement as promptly as practicable following the request therefor, and in any event within 60 days following the date such request is received by the Company, and thereafter to use its commercially reasonable efforts to cause such Shelf Registration to become effective and thereafter to keep it continuously effective, and to prevent the happening of any event of the kind described in Section 4(c)(3), (4), (5) or (6) hereof that 2 3 requires the Company to give notice pursuant to the last paragraph of Section 4 hereof, for a period terminating on the third year anniversary of the date on which the SEC declares the Shelf Registration effective, or such shorter period as shall terminate, on the date on which all the Registrable Securities covered by the Shelf Registration have been sold pursuant to such Shelf Registration. The Company shall be obligated to file only one Shelf Registration and shall not be obligated to file a Shelf Registration if three Demand Registrations (hereinafter defined) have been effected under Section 2(b). The Company further agrees to promptly supplement or make amendments to the Shelf Registration, if required by the rules, regulations or instructions applicable to the registration form utilized by the Company or by the Securities Act or rules and regulations thereunder for shelf registration or if requested by USAA or any underwriter of the Registrable Securities. If USAA so elects, the offering of Registrable Securities pursuant to a Shelf Registration shall be in the form of an Underwritten Offering. (b) Demand Registration. At any time during the five year period following the Closing Date, USAA may make a written request (the "DEMAND NOTICE") for registration under the Securities Act (a "DEMAND REGISTRATION") of the Registrable Securities held by it. The Demand Notice will specify the number of shares of Registrable Securities proposed to be sold and will also specify the intended method of disposition thereof. Unless USAA shall consent in writing, no other party, including the Company, shall be permitted to offer securities under any such Demand Registration. The Company shall not be required to effect more than three Demand Registrations under this Section 2(b). A registration requested pursuant to this Section 2(b) will not be deemed to have been effected (and it shall not count as one of the three Demand Registrations) unless the Registration Statement relating thereto has become effective under the Securities Act; provided, however that if, after such Registration Statement has become effective, the offering of the Registrable Securities pursuant to such registration is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court, such registration will be deemed not to have been effected (and it shall not count as one of the three Demand Registrations). USAA may, at any time prior to the effective date of the Registration Statement relating to such registration, revoke its Demand Notice by providing a written notice to the Company. If USAA so elects, the offering of Registrable Securities pursuant to a Demand Registration shall be in the form of an Underwritten Offering. If the managing underwriter or underwriters of such offering advise the Company and USAA in writing that in their opinion the number of shares of Registrable Securities requested to be included in such offering is sufficiently large to materially and adversely affect the success of such offering, the Company will include in such registration the aggregate number of Registrable Securities which in the opinion of such managing underwriter or 3 4 underwriters can be sold without any such material adverse effect; provided, however, that Registrable Securities may be excluded before all shares proposed to be sold by other parties, including the Company, have been excluded. If any Registrable Securities are excluded, such registration shall not count as one of the three Demand Registrations. No registration pursuant to a request or requests referred to in this subsection 2(b) shall be deemed to be a Shelf Registration. (c) Incidental Registration. If at any time during the five year period following the Closing Date the Company proposes to file a registration statement under the Securities Act (other than in connection with the Shelf Registration, a Demand Registration or a Registration Statement on Form S-4 or S-8, or any form that is substituting therefor or is a successor thereto) with respect to an offering of any class of security by the Company for its own account or for the account of any of its security holders, then the Company shall give written notice of such proposed filing to USAA as soon as practicable (but in no event less than thirty days before the anticipated filing date), and such notice shall (i) offer USAA the opportunity to register such number of Registrable Securities as it may request and (ii) describe such securities and specifying the form and manner and other relevant facts involved in such proposed registration (including, without limitation, (x) whether or not such registration will be in connection with an Underwritten Offering and, if so, the identity of the managing underwriter and whether such Underwritten Offering will be pursuant to a "best efforts" or "firm commitment" underwriting and (y) the price (net of any underwriting commissions, discounts and the like) at which the Registrable Securities are reasonably expected to be sold, if such disclosure is acceptable to the managing underwriter), USAA shall advise the Company in writing within twenty (20) days after the date of receipt of such notice from the Company of the number of Registrable Securities for which registration is requested. The Company shall include in such Registration Statement all such Registrable Securities so requested to be included therein, and, if such registration is an Underwritten Registration, the Company shall use its commercially reasonable efforts to cause the managing underwriter or underwriters to permit the Registrable Securities requested to be included in the registration statement for such offering to be included (on the same terms and conditions as similar securities of the Company included therein to the extent appropriate); provided, however, that if the managing underwriter or underwriters of such offering deliver a written opinion to USAA that either because of (i) the kind of securities which USAA, the Company, or any other Persons intend to include in such offering or (ii) the size of the offering which USAA, the Company, or such other Persons intend to make, the success of the offering would be materially and adversely affected by inclusion of the Registrable Securities requested to be included, then (A) in the event that the size of the offering is the basis of such managing underwriter's opinion, the amount of securities to be offered for the account of USAA and other holders registering securities of the Company pursuant to similar incidental registration rights shall be reduced pro rata (according to the Registrable Securities beneficially owned by such holders) to the extent necessary to reduce the total amount of securities to be included in such offering to the amount recommended by such managing underwriter or underwriters; and (B) in the event that the combination of securities to be offered is the basis of such managing underwriter's opinion, (x) the Registrable Securities and other securities to be included in such offering shall be reduced as described in clause (A) above or, (y) 4 5 if the actions described in clause (A) would, in the judgment of the managing underwriter, be insufficient to substantially eliminate the adverse effect that inclusion of the Registrable Securities requested to be included would have on such offering, such Registrable Securities will be excluded from such offering. No registration pursuant to a request or requests referred to in this subsection 2(c) shall be deemed to be a Shelf Registration. 3. Hold-Back Agreements. (a) Restrictions on Public Sale by Holder of Registrable Securities. USAA agrees, if reasonably requested by the managing underwriters in an Underwritten Offering, not to effect any public sale or distribution of securities of the Company of the same class as the securities included in such Registration Statement, including a sale pursuant to Rule 144 under the Securities Act (except as part of such Underwritten Registration), during the 10-day period prior to the filing of a Registration Statement with respect to such Underwritten Offering, and during the 90-day period beginning on the closing date of each Underwritten Offering made pursuant to such Registration Statement, to the extent timely notified in writing by the Company or the managing underwriters. (b) Restrictions on Sale of Securities by the Company. The Company agrees not to effect any public sale or distribution of any securities similar to those being registered, or any securities convertible into or exchangeable or exercisable for such securities (except pursuant to a registration statement on Form S-4 or S-8, or any substitute form that may be adopted by the SEC) during the ten days prior to the filing of a registration statement with respect to such Underwritten Offering, and during the 90-day period beginning on the effective date of any Registration Statement (except as part of such registration statement (x) where USAA consents or (y) where USAA is participating in such registration statement pursuant to Section 2(c) hereof, such registration statement was filed by the Company with respect to the sale of securities by the Company, and USAA is not simultaneously participating in a registration statement pursuant to Section 2(b) hereof) or the commencement of a public distribution of Registrable Securities pursuant to such registration statement. 4. Registration Procedures. In connection with the Company's registration obligations pursuant to Section 2 hereof, the Company will use its commercially reasonable efforts to effect such registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Company will use commercially reasonable efforts to as expeditiously as possible: (a) prepare and file with the SEC, as soon as practicable, and in any event within 60 days from the date of request, a Registration Statement relating to the applicable registration on any appropriate form under the Securities Act, which forms shall be available for the sale of the Registrable Securities in accordance with the intended method or methods of distribution thereof and shall include all financial statements of the Company, and use its commercially reasonable efforts 5 6 to cause such Registration Statement to become effective; provided that before filing a Registration Statement or Prospectus or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of the Registration Statement, the Company will furnish USAA and the underwriters, if any, copies of all such documents proposed to be filed, which documents will be subject to the review of USAA and the underwriters, and the Company will not file any Registration Statement or amendment thereto or any Prospectus or any supplement thereto (including such documents incorporated by reference) to which USAA or the underwriters, if any, shall reasonably object; (b) prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period, or such shorter period which will terminate when all Registrable Securities covered by such Registration Statement have been sold; cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act; and comply with the provisions of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; the Company shall not be deemed to have used commercially reasonable efforts to keep a Registration Statement effective during the applicable period if it voluntarily takes any action that would result in USAA not being able to sell its Registrable Securities during that period unless such action is required under applicable law; provided that the foregoing shall not apply to actions taken by the Company in good faith and for valid business reasons, including without limitation the acquisition or divestiture of assets, so long as the Company promptly thereafter complies with the requirements of Section 4(l) hereof, if applicable; (c) notify USAA and the managing underwriters, if any, promptly, and (if requested by any such Person) confirm such advice in writing, (1) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to the Registration Statement or any post-effective amendment, when the same has become effective, (2) of any request by the SEC for amendments or supplements to the Registration Statement or the Prospectus or for additional information, (3) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, (4) if at any time the representations and warranties of the Company contemplated by paragraph (n) below cease to be true and correct, (5) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and (6) of the happening of any event which makes any statement made in the Registration Statement, the Prospectus or any document incorporated therein by reference untrue or which requires the making of any changes in the Registration Statement, the Prospectus or any document incorporated therein by reference in order to make the statements therein not misleading; (d) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement at the earliest possible moment; 6 7 (e) if reasonably requested by the managing underwriter or underwriters or USAA, promptly incorporate in a Prospectus supplement or post-effective amendment such information as the managing underwriters and USAA agree should be included therein relating to the sale of the Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being sold to such underwriters, the purchase price being paid therefor by such underwriters and with respect to any other terms of the Underwritten (or best efforts underwritten) Offering of the Registrable Securities to be sold in such offering; and make all required filings of such Prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such Prospectus supplement or post-effective amendment; (f) prior to the filing of any document which is to be incorporated by reference into the Registration Statement or the Prospectus (after initial filing of the Registration Statement), make available representatives of the Company for discussion of such document and make such changes in such document prior to the filing thereof as USAA or the underwriters may reasonably request; (g) furnish to USAA and each managing underwriter, if any, without charge, at least one signed copy of the Registration Statement and any post-effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference); (h) deliver to USAA and the underwriters, if any, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons may reasonably request; the Company consents to the use of the Prospectus or any amendment or supplement thereto by USAA and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto; (i) prior to any public offering of Registrable Securities, register or qualify or cooperate with USAA, the underwriters, if any, and their respective counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions as USAA or any underwriter reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the Registration Statement; (j) cooperate with USAA and the managing underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and enable such Registrable Securities to be in such denominations and registered in such names as the managing underwriters may request at least two business days prior to any sale of Registrable Securities to the underwriters; (k) cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable USAA or the underwriters, if any, to consummate the disposition of such Registrable Securities; 7 8 (l) upon the occurrence of any event contemplated by Section 4(c)(6) above, prepare a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; (m) cause all Registrable Securities covered by the Registration Statement to be listed on each securities exchange on which similar securities issued by the Company are then listed; (n) enter into such agreements (including an underwriting agreement) and take all such other actions in connection therewith in order to expedite or facilitate the disposition of such Registrable Securities and in connection therewith, whether or not an underwriting agreement is entered into and whether or not the registration is an Underwritten Registration, (1) make such representations and warranties to USAA and the underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in primary underwritten offerings; (2) obtain opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the managing underwriters, if any, and USAA, covering the matters customarily covered in opinions requested in Underwritten Offerings and such other matters as may be reasonably requested by USAA and the underwriters, if any); (3) obtain "cold comfort" letters and updates thereof from the Company's independent certified public accountants addressed to USAA and the underwriters, if any, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters by underwriters in connection with primary Underwritten Offerings; (4) if an underwriting agreement is entered into, the same shall set forth in full the indemnification provisions and procedures of Section 6 hereof with respect to all parties to be indemnified pursuant to said Section ; and (5) the Company shall deliver such documents and certificates as may be requested by USAA and the managing underwriters, if any, to evidence compliance with clause (1) above and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. The above shall be done at each closing under such underwriting or similar agreement or as and to the extent required thereunder; (o) make available for inspection by a representative of USAA, any underwriter participating in any disposition pursuant to such registration, and any attorney or accountant retained by USAA or any underwriter, all financial and other records, pertinent corporate documents and properties of the Company and cause the Company's officers, trust managers and employees to supply all information reasonably requested by any such representative, underwriter, attorney or accountant in connection with such registration; provided that any records, information or documents that are designated by the Company in writing as confidential shall be kept confidential by such Persons unless disclosure of such records, information or documents is required by court or administrative order; 8 9 (p) otherwise use its commercially reasonable efforts to comply with all applicable rules and regulations of the SEC, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering a period of 12 months, beginning within three months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of section 11(a) of the Securities Act; and (q) cooperate with USAA and each underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD"). The Company may require USAA to furnish to the Company such information regarding the distribution of Registrable Securities as the Company may from time to time reasonably request in writing. USAA agrees by acquisition of such Registrable Securities that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(l) hereof, USAA will forthwith discontinue disposition of Registrable Securities until USAA's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 4(l) hereof, or until it is advised in writing (the "ADVICE") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the Prospectus, and, if so directed by the Company, USAA will deliver to the Company (at the Company's expense), all copies, other than permanent file copies then in USAA's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. In the event the Company shall give any such notice, the time periods regarding the effectiveness of Registration Statements set forth in Section 2 hereof and Section 4(b) hereof shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to Section 4(c)(6) hereof to the date when USAA shall receive copies of the supplemented or amended prospectus contemplated by Section 4(l) hereof or the Advice. 5. Registration Expenses. All expenses incident to the Company's performance of or compliance with this Agreement, including without limitation: all registration and filing fees; fees with respect to filings required to be made with the NASD; fees and expenses of compliance with securities or blue sky laws (including fees and disbursements of counsel for the underwriters or USAA in connection with blue sky qualifications of the Registrable Securities and determination of their eligibility for investment under the laws of such jurisdictions as the managing underwriters or USAA may designate); printing expenses, messenger, telephone and delivery expenses; fees and disbursements of counsel for the Company and fees and expenses for independent certified public accountants retained by the Company (including the expenses of any comfort letters or costs associated with the delivery by independent certified public accountants of a comfort letter or comfort letters requested pursuant to Section 4(n) hereof); securities acts liability insurance, if the Company so desires; all internal expenses of the Company (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties); the expense of any annual audit; the fees and expenses incurred in connection with the listing of the securities to 9 10 be registered on each securities exchange on which similar securities issued by the Company are then listed; and the fees and expenses of any Person, including special experts, retained by the Company (all such expenses being herein called "REGISTRATION EXPENSES") will be borne by the Company regardless of whether the Registration Statement becomes effective. The Company shall not have any obligation to pay any underwriting fees, discounts, or commissions attributable to the sale of Registrable Securities, or any legal fees and expenses of counsel to USAA. 6. Indemnification; Contribution. (a) Indemnification by Company. The Company agrees to indemnify and hold harmless USAA and its partners, and their respective partners, officers, directors, employees and agents, and each Person who controls such Person (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) against all losses, claims, damages, liabilities and expenses arising out of or based upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, Prospectus or preliminary prospectus or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by USAA expressly for use therein. The Company will also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers and trust managers and each Person who controls such Persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of USAA, if requested. (b) Indemnification by Holder of Registrable Securities. USAA agrees to indemnify and hold harmless the Company and its trust managers, officers, employees and agents, and each Person who controls the Company (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue statement of a material fact or any omission of a material fact required to be stated in the Registration Statement or Prospectus or preliminary prospectus or necessary to make the statements therein not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in any information or affidavit so furnished in writing by USAA to the Company specifically for inclusion in such Registration Statement or Prospectus. In no event shall the liability of USAA hereunder be greater in amount than the dollar amount of the proceeds received by USAA upon the sale of the Registrable Securities giving rise to such indemnification obligation. The Company shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above with respect to information so furnished in writing by such Persons specifically for inclusion in any Prospectus or Registration Statement. 10 11 (c) Conduct of Indemnification Proceedings. Any Person entitled to indemnification hereunder will (i) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided, however that any Person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person unless (a) the indemnifying party has agreed to pay such fees or expenses, (b) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such Person or (c) based upon written advice of counsel to such Person, there shall be one or more defenses available to such Person that are not available to the indemnifying party or there shall exist conflicts of interest pursuant to applicable rules of professional conduct between such Person and the indemnifying party (in which case, if the Person notifies the indemnifying party in writing that such Person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such Person), in each of which events the fees and expenses of such counsel shall be at the expense of the indemnifying party. The indemnifying party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld), but if settled with its written consent, or if there be a final judgment for the plaintiff in any such action or proceeding, the indemnifying party shall indemnify and hold harmless the indemnified parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. No indemnified party will be required to consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Contribution. If for any reason the indemnification provided for in the preceding clauses (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless as contemplated by the preceding clauses (a) and (b), then the indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the indemnified party and the indemnifying party, but also the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations, provided, that USAA shall not be required to contribute an amount greater than the dollar amount of the proceeds received by USAA with respect to the sale of the Registrable Securities giving rise to such indemnification obligation. The relative fault of the Company on the one hand and of USAA on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 10(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentations. 11 12 7. Rule 144. The Company hereby agrees that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if the Company is not required to file such reports, it will, upon the request of USAA, make publicly available other information so long as necessary to permit sales pursuant to Rule 144 under the Securities Act), and it will take such further action as USAA may reasonably request, all to the extent required from time to time to enable USAA to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon the request of USAA, the Company will deliver to USAA a written statement as to whether it has complied with such information and requirements. 8. Participation in Underwritten Registrations. (a) If any of the Registrable Securities covered by the Shelf Registration are to be sold in an Underwritten Offering, the investment banker or investment bankers and manager or managers that will administer the offering will be selected by USAA; provided, that such investment bankers and managers must be reasonably satisfactory to the Company. (b) No Person may participate in any Underwritten Registration hereunder unless such Person (i) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. Nothing in this Section 8 shall be construed to create any additional rights regarding the registration of Registrable Securities in any Person otherwise than as set forth herein. 9. Miscellaneous. (a) Remedies. Each party hereto, in addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement to the extent available under applicable law. Each party hereto agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) Additional Registration Rights. The Company will not on or after the date of this Agreement, enter into any agreement granting registration rights to any other Person with respect to the securities of the Company that are not junior or subordinate to the rights granted to USAA hereunder without the written consent of USAA. The Company has not previously entered into any agreement with respect to its securities granting any registration rights to any Person. 12 13 (c) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given without the written consent of the Company and USAA. (d) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telecopier, or air courier guaranteeing overnight delivery: (i) if to USAA, at the most current address given by USAA to the Company in accordance with the provisions of this subsection, which address initially is 8000 Robert F. McDermott Freeway, IH-10, Suite 600, San Antonio, Texas 78230-3884, Attention: David Holmes. (ii) if to the Company, initially at 6220 Beltline Road, Suite 205, Irving, Texas 75063-2656, Attention: Charles W. Wolcott, President and Chief Executive Officer, and thereafter at such other address as may be designated from time to time by notice given in accordance with the provisions of this Section 9(d). (e) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent holders of Registrable Securities, it being understood that the registration rights granted to USAA hereunder shall also be for the benefit of, and enforceable by, the single first transferee of 100% of USAA's remaining registrable securities and, provided further, that the Company cannot assign its rights hereunder except pursuant to a merger. (f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) Governing Law. THIS AGREEMENT, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO, SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAWS. (i) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 13 14 (j) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. In any proceeding brought to enforce any provision of this Agreement the successful party shall be entitled to recover reasonable attorneys' fees in addition to its costs and expenses and any other available remedy. IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date first written above. "COMPANY" AMERICAN INDUSTRIAL PROPERTIES REIT By:_____________________________________ Charles W. Wolcott President and Chief Executive Officer "USAA" USAA REAL ESTATE COMPANY By:_____________________________________ T. Patrick Duncan Senior Vice President - Operations 14 EX-10.8 9 AGREEMENT FOR JOINT FILING 1 EXHIBIT 10.8 AGREEMENT FOR JOINT FILING In connection with the beneficial ownership of Shares of Beneficial Interest, par value $.10 per share, of USAA Real Estate Company, USAA Capital Corporation and United Services Automobile Association hereby agree to the joint filing on behalf of such persons all filings, including the filing of a Schedule 13D and all amendments thereto pursuant to Rule 13d-2(f)(1)(iii) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), required under the Exchange Act pursuant to which joint filing statements are permitted. IN WITNESS WHEREOF, the undersigned have caused this Agreement for Joint Filing to be signed as of this 20th day of December, 1996. USAA REAL ESTATE COMPANY By: /s/ T. PATRICK DUNCAN --------------------------------------- Name: T. Patrick Duncan Title: Senior Vice President -- Operations USAA CAPITAL CORPORATION Signature: /s/ MICHAEL D. WAGNER --------------------------------- Name: Michael D. Wagner Title: Vice President UNITED SERVICES AUTOMOBILE ASSOCIATION Signature: /s/ MICHAEL D. WAGNER --------------------------------- Name: Michael D. Wagner Title: Vice President -----END PRIVACY-ENHANCED MESSAGE-----