Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF APRIL 1, 1998
BY AND BETWEEN
SECURITY CAPITAL PACIFIC TRUST
AND
SECURITY CAPITAL ATLANTIC INCORPORATED
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS...................................................... 1
SECTION 1.1 DEFINITIONS.............................................. 1
ARTICLE II THE MERGER...................................................... 6
SECTION 2.1 THE MERGER............................................... 6
SECTION 2.2 THE CLOSING.............................................. 6
SECTION 2.3 EFFECTIVE TIME........................................... 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF EAST......................... 6
SECTION 3.1 ORGANIZATION AND QUALIFICATION........................... 7
SECTION 3.2 CAPITALIZATION........................................... 7
SECTION 3.3 AUTHORITY; NON-CONTRAVENTION; APPROVALS.................. 8
SECTION 3.4 DISCLOSURE AND FINANCIAL STATEMENTS...................... 10
SECTION 3.5 ABSENCE OF CERTAIN CHANGES OR EVENTS..................... 10
SECTION 3.6 REGISTRATION STATEMENT AND PROXY STATEMENT
AND PROSPECTUS........................................... 11
SECTION 3.7 TAXES.................................................... 11
SECTION 3.8 ABSENCE OF UNDISCLOSED LIABILITIES....................... 13
SECTION 3.9 LITIGATION............................................... 13
SECTION 3.10 NO VIOLATION OF LAW...................................... 13
SECTION 3.11 EAST PROPERTIES.......................................... 14
SECTION 3.12 LABOR MATTERS............................................ 15
SECTION 3.13 EMPLOYEE BENEFIT PLANS................................... 15
SECTION 3.14 INTELLECTUAL PROPERTY.................................... 15
SECTION 3.15 EAST MATERIAL CONTRACTS.................................. 16
SECTION 3.16 ENVIRONMENTAL MATTERS.................................... 16
SECTION 3.17 INSURANCE................................................ 16
SECTION 3.18 BROKERS AND FINDERS...................................... 17
SECTION 3.19 INVESTMENT COMPANY ACT................................... 17
SECTION 3.20 HSR ACT.................................................. 17
SECTION 3.21 EAST RIGHTS AGREEMENT.................................... 17
SECTION 3.22 STATE ANTITAKEOVER LAWS NOT APPLICABLE................... 17
SECTION 3.23 REQUIRED EAST VOTE....................................... 18
SECTION 3.24 BOARD RECOMMENDATION..................................... 18
SECTION 3.25 OPINION OF FINANCIAL ADVISOR............................. 18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF WEST.......................... 18
SECTION 4.1 ORGANIZATION AND QUALIFICATION........................... 18
SECTION 4.2 CAPITALIZATION........................................... 19
SECTION 4.3 AUTHORITY; NON-CONTRAVENTION; APPROVALS.................. 20
SECTION 4.4 DISCLOSURE AND FINANCIAL STATEMENTS...................... 22
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TABLE OF CONTENTS
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SECTION 4.5 ABSENCE OF CERTAIN CHANGES OR EVENTS..................... 22
SECTION 4.6 REGISTRATION STATEMENT AND PROXY STATEMENT
AND PROSPECTUS........................................... 22
SECTION 4.7 TAXES.................................................... 23
SECTION 4.8 ABSENCE OF UNDISCLOSED LIABILITIES....................... 25
SECTION 4.9 LITIGATION............................................... 25
SECTION 4.10 NO VIOLATION OF LAW...................................... 25
SECTION 4.11 WEST PROPERTIES.......................................... 26
SECTION 4.12 LABOR MATTERS............................................ 26
SECTION 4.13 EMPLOYEE BENEFIT PLANS................................... 27
SECTION 4.14 INTELLECTUAL PROPERTY.................................... 27
SECTION 4.15 WEST MATERIAL CONTRACTS.................................. 27
SECTION 4.16 ENVIRONMENTAL MATTERS.................................... 28
SECTION 4.17 INSURANCE................................................ 28
SECTION 4.18 BROKERS AND FINDERS...................................... 28
SECTION 4.19 INVESTMENT COMPANY ACT................................... 29
SECTION 4.20 HSR ACT.................................................. 29
SECTION 4.21 WEST RIGHTS AGREEMENT.................................... 29
SECTION 4.22 STATE ANTITAKEOVER LAWS NOT APPLICABLE................... 29
SECTION 4.23 REQUIRED WEST VOTE....................................... 29
SECTION 4.24 BOARD RECOMMENDATION..................................... 29
SECTION 4.25 OPINION OF FINANCIAL ADVISOR............................. 30
ARTICLE V CONDUCT OF BUSINESSES PENDING THE CLOSING........................ 30
SECTION 5.1 CONDUCT OF BUSINESS BY EAST.............................. 30
SECTION 5.2 CONDUCT OF BUSINESS BY WEST.............................. 32
SECTION 5.3 COORDINATION OF DIVIDENDS................................ 34
SECTION 5.4 NO SOLICITATION.......................................... 35
ARTICLE VI ADDITIONAL AGREEMENTS........................................... 37
SECTION 6.1 ACCESS TO INFORMATION.................................... 37
SECTION 6.2 REGISTRATION STATEMENTS AND PROXY STATEMENT
AND PROSPECTUS........................................... 37
SECTION 6.3 LETTERS OF ACCOUNTANTS................................... 38
SECTION 6.4 SHAREHOLDERS APPROVAL.................................... 38
SECTION 6.5 AFFILIATE AGREEMENTS..................................... 38
SECTION 6.6 EXCHANGE................................................. 39
SECTION 6.7 EXPENSES................................................. 39
SECTION 6.8 AGREEMENT TO COOPERATE................................... 39
SECTION 6.9 PUBLIC STATEMENTS........................................ 39
SECTION 6.10 CORRECTIONS TO THE PROXY STATEMENT AND
PROSPECTUS AND REGISTRATION STATEMENT.................... 40
SECTION 6.11 UPDATED SCHEDULES........................................ 40
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SECTION 6.12 STANDSTILL AGREEMENTS; CONFIDENTIALITY AGREEMENTS........ 40
SECTION 6.13 INDEMNIFICATION.......................................... 40
ARTICLE VII CONDITIONS..................................................... 41
SECTION 7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS................... 41
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER............................. 42
SECTION 8.1 TERMINATION.............................................. 42
SECTION 8.2 EFFECT OF TERMINATION.................................... 43
SECTION 8.3 PAYMENT UPON CERTAIN TERMINATIONS........................ 43
SECTION 8.4 PAYMENT OF TERMINATION AMOUNT............................ 45
SECTION 8.5 AMENDMENT................................................ 46
ARTICLE IX GENERAL PROVISIONS.............................................. 46
SECTION 9.1 NONSURVIVAL OF REPRESENTATIONS AND
WARRANTIES............................................... 46
SECTION 9.2 NOTICES.................................................. 47
SECTION 9.3 INTERPRETATION........................................... 48
SECTION 9.4 MISCELLANEOUS............................................ 48
SECTION 9.5 COUNTERPARTS............................................. 48
SECTION 9.6 PARTIES IN INTEREST...................................... 48
SECTION 9.7 LIMITATION OF LIABILITY.................................. 48
SECTION 9.8 NO PRESUMPTION AGAINST DRAFTER........................... 49
EXHIBIT A ARTICLES OF MERGER
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of
April 1, 1998 by and between SECURITY CAPITAL PACIFIC TRUST, a Maryland real
estate investment trust ("West"), and SECURITY CAPITAL ATLANTIC INCORPORATED, a
Maryland corporation ("East").
WHEREAS, the Board of Trustees of West and the Board of Directors of East
have approved, and deem it advisable and in the best interests of their
respective companies and shareholders to consummate, a merger of East with and
into West (the "Merger"), with West as the successor in the Merger, upon the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, the Merger and this Agreement and the matters contemplated hereby
require the vote of two thirds of the outstanding common shares of beneficial
interest, $1.00 par value per share, of West ("West Common Stock") entitled to
vote thereon, and the vote of a majority of the outstanding shares of common
stock, $.01 par value per share, of East ("East Common Stock") entitled to vote
thereon, for the approval thereof (the "West Shareholders Approval" and "East
Shareholders Approval," respectively);
WHEREAS, concurrently with the execution of this Agreement, Security
Capital Group Incorporated, a Maryland corporation ("Shareholder"), is entering
into an agreement with East and West providing, among other things, that
Shareholder will vote or cause to be voted at the shareholder meetings at which
the East Shareholders Approval and West Shareholders Approval are solicited all
of the shares of East Common Stock and West Common Stock beneficially owned by
Shareholder at such time in favor of the Merger; and
WHEREAS, for United States federal income tax purposes it is intended that
the Merger shall qualify as a reorganization under the provisions of Section 368
of the Internal Revenue Code of 1986, as amended (the "Code"), and this
Agreement is intended to be and is adopted as a plan of reorganization within
the meaning of Section 368 of the Code.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
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"Amended and Restated Declaration of Trust" shall mean the amended and
restated Declaration of Trust of West substantially in the form of Exhibit B.
"Articles of Merger" shall have the meaning set forth in Section 2.1.
"Closing" and "Closing Date" shall have the respective meanings set forth
in Section 2.2.
"East Affiliated Group" shall have the meaning set forth in Section 3.7.
"East Benefit Plans" shall have the meaning set forth in Section 3.13.
"East Board" shall mean the Board of Directors of East.
"East Common Stock" shall have the meaning set forth in the Recitals.
"East Disclosure Schedule" shall mean the schedule of disclosures,
delivered by East to West prior to the execution of this Agreement, setting
forth those items the disclosure of which is necessary or appropriate in
relation to any or all of East's representations and warranties herein.
"East Investor Agreement" shall mean that certain Amended and Restated
Investor Agreement dated September 9, 1997 between East and Shareholder.
"East Junior Preferred Stock" shall mean the Series A Junior Participating
Preferred Stock of East.
"East License Agreement" shall mean that certain License Agreement dated
September 9, 1997 between East and Shareholder.
"East Required Statutory Approvals" shall have the meaning set forth in
Section 3.3(c).
"East Rights" shall mean the rights, issued pursuant to East Rights
Agreement, to purchase East Junior Preferred Stock.
"East Rights Agreement" shall mean the Rights Agreement dated as of March
12, 1996 between East and The First National Bank of Boston, as Rights Agent (as
such agreement may be amended).
"East SEC Documents" shall have the meaning set forth in Section 3.4.
"East SEC Financial Statements" shall have the meaning set forth in Section
3.4.
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"East Series A Preferred Stock" shall mean the Series A Cumulative
Redeemable Preferred Stock of East.
"East Shareholders Approval" shall have the meaning set forth in the
Recitals.
"East Stock Options" shall mean options to purchase East Common Stock
granted pursuant to East's Share Option Plan for Outside Directors or East's
1997 Long-Term Incentive Plan.
"East Stock Purchase Plan" shall mean the stock purchase plan that is a
part of East's 1997 Long Term Incentive Plan.
"East Subsidiaries" shall mean the entities listed as East's subsidiaries
in the East Disclosure Schedule.
"Effective Time" shall have the meaning set forth in Section 2.3.
"Environmental Laws" shall mean the Resource Conservation and Recovery Act,
as amended, and the Comprehensive Environmental Response Compensation and
Liability Act, as amended, and other federal laws governing the environment as
in effect on the date of this Agreement, together with their implementing
regulations as of the date of this Agreement, and all state, regional, county,
municipal and other local laws, regulations and ordinances as in effect on the
date hereof that are equivalent or similar to such federal laws or that purport
to regulate Hazardous Materials.
"Exchange" shall mean the New York Stock Exchange.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Ratio" shall have the meaning set forth in the Articles of
Merger.
"Hazardous Materials" shall mean (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
polychlorinated biphenyls and, only to the extent it exists at levels which are
considered hazardous to human health, radon gas and (b) any chemicals, materials
or substances defined as or included in the definition of "hazardous
substances," "toxic substances," "toxic pollutants," "contaminants" or
"pollutants" or words of similar import, under any applicable Environmental
Laws.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Intellectual Property" shall mean all United States and foreign patents,
patent applications, patent licenses, trade names, trademarks, trade names and
trademark registrations
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(and applications therefor), copyrights and copyright registrations (and
applications therefor), trade secrets, inventions, processes, designs, know-how
and formulae.
"Liens" shall mean pledges, claims, liens, charges, encumbrances, and
security interests of any kind or nature.
"Merger" shall have the meaning set forth in the Recitals.
"MGCL" shall have the meaning set forth in Section 2.3.
"Proxy Statement and Prospectus" shall mean the definitive joint proxy
statement and prospectus to be filed with the Commission as a part of the
Registration Statement.
"Registration Statement" shall mean the registration statement on Form S-4
of West, of which the Proxy Statement and Prospectus will form a part, to be
filed with the Commission in connection with the transactions contemplated
hereby.
"Representatives" shall have the meaning set forth in Section 6.1.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Taxes" shall mean all taxes, charges, fees, levies or other assessments,
including, without limitation, income, gross receipts, excise, property, sales,
withholding, social security, occupation, use, service, service use, license,
payroll, franchise, transfer and recording taxes, fees and charges, imposed by
the United States, or any state, local or foreign government or subdivision or
agency thereof whether computed on a separate, consolidated, unitary, combined
or any other basis; and such term shall include any interest, fines, penalties
or additional amounts attributable or imposed on or with respect to any such
taxes, charges, fees, levies or other assessments.
"Tax Returns" shall mean any return, report or other document or
information required to be supplied to a taxing authority in connection with
Taxes.
"Termination Date" shall have the meaning set forth in Section 8.1(b).
"West Affiliated Group" shall have the meaning set forth in Section 4.7.
"West Benefit Plans" shall have the meaning set forth in Section 4.13.
"West Board" shall mean the Board of Trustees of West.
"West Common Stock" shall have the meaning set forth in the Recitals.
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"West Disclosure Schedule" shall mean the schedule of disclosures,
delivered by West to East prior to the execution of this Agreement, setting
forth those items the disclosure of which is necessary or appropriate in
relation to any or all of West's representations and warranties herein.
"West Investor Agreement" shall mean that certain Third Amended and
Restated Investor Agreement dated September 9, 1997 between West and
Shareholder.
"West Junior Preferred Stock" shall mean the Junior Participating Preferred
Shares of West.
"West License Agreement" shall mean that certain License Agreement dated
September 9, 1997 between West and Shareholder.
"West New Preferred Stock" shall mean the Series C Cumulative Redeemable
Preferred Shares of Beneficial Interest, $1.00 per value per share, of West
issued in exchange for East Series A Preferred Stock, as set forth in the
Articles of Merger.
"West Required Statutory Approvals" shall have the meaning set forth in
Section 4.3(c).
"West Rights" shall mean the rights, issued pursuant to the West Rights
Agreement, to purchase West Junior Preferred Stock.
"West Rights Agreement" shall mean the Rights Agreement dated as of July
21, 1994 between West and Chemical Bank, as Rights Agent (as such agreement may
be amended).
"West SEC Documents" shall have the meaning set forth in Section 4.4.
"West SEC Financial Statements" shall have the meaning set forth in
Section 4.4.
"West Series A Preferred Stock" shall mean the Series A Cumulative
Convertible Redeemable Preferred Shares of Beneficial Interest of West.
"West Series B Preferred Stock" shall mean the Series B Cumulative
Redeemable Preferred Shares of Beneficial Interest of West.
"West Shareholders Approval" shall have the meaning set forth in the
Recitals.
"West Stock Options" shall mean options to purchase West Common Stock
pursuant to West's Share Option Plan for Outside Trustees, 1996 Share Option
Plan for Outside Trustees or West's 1997 Long-Term Incentive Plan.
"West Stock Purchase Plan" shall mean the stock purchase plan that is a
part of West's 1997 Long-Term Incentive Plan.
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"West Subsidiaries" shall mean the entities listed as West's subsidiaries
in the West Disclosure Schedule.
ARTICLE II
THE MERGER
SECTION 2.1 THE MERGER. Upon the terms and subject to the conditions of
this Agreement, West and East shall each take all actions necessary to cause
East to be merged with and into West, which shall be the successor in the
Merger, on the terms and conditions set forth in articles of merger
substantially in the form of Exhibit A hereto (the "Articles of Merger").
SECTION 2.2 THE CLOSING. Unless this Agreement shall have been terminated
and the transactions herein contemplated shall have been abandoned pursuant to
Section 8.1, and subject to the satisfaction or waiver of the conditions set
forth in Article VII, the closing of the Merger (the "Closing") will take place
at 10:00 a.m. local time as soon as practicable after satisfaction of the
conditions set forth in Section 7.1 (or, if not satisfied or waived at that
time, as soon as practicable thereafter following satisfaction or waiver of the
conditions set forth in Section 7.2) (the "Closing Date"), at the offices of
Xxxxx, Xxxxx & Xxxxx, 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx, unless
another date, time or place is agreed to in writing by the parties hereto.
SECTION 2.3 EFFECTIVE TIME. On the Closing Date, the parties shall file
the Articles of Merger executed in accordance with the relevant provisions of
the Maryland General Corporation Law (the "MGCL") and Title 8 of the
Corporations and Associations Article of the Annotated Code of Maryland (the
"Maryland REIT Law") and shall make all other filings or recordings required
under the MGCL and the Maryland REIT Law. The Merger shall become effective at
such time as the Articles of Merger are duly filed with and accepted for record
by the State Department of Assessments and Taxation of the State of Maryland
(the "SDAT"), or at such other time as is permissible in accordance with the
MGCL and the Maryland REIT Law and as West and East shall agree and specify in
the Articles of Merger (the time when the Merger becomes effective being the
"Effective Time").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF EAST
East represents and warrants to West as follows:
SECTION 3.1 ORGANIZATION AND QUALIFICATION. East and each of the East
Subsidiaries is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization and each has the requisite power,
corporate or otherwise, and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted and as it
is proposed by it to be conducted. East and each East Subsidiary
6
is qualified to do business and is in good standing in each jurisdiction in
which the properties owned, leased or operated by it or the nature of the
business conducted by it makes such qualification necessary, except where the
failure to be so qualified and in good standing would not, alone or in the
aggregate, reasonably be expected to have a material adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of East and the East Subsidiaries, taken as a
whole, or prevent, hinder or materially delay the ability of East to consummate
the transactions contemplated by this Agreement. True, accurate and complete
copies of each of the Second Amended and Restated Articles of Incorporation, as
amended (the "East Articles of Incorporation") and Bylaws of East, as in effect
on the date hereof, including all amendments thereto, have heretofore been
delivered to West.
SECTION 3.2 CAPITALIZATION.
(a) The authorized capital stock of East consists of 250,000,000 shares.
As of the date of this Agreement, except as set forth in the East Disclosure
Schedule, there are (i) 47,760,912 shares of East Common Stock and 2,000,000
shares of East Series A Preferred Stock issued and outstanding, (ii) no shares
of East Common Stock or East Series A Preferred Stock held by any East
Subsidiary; (iii) 1,261,251 shares of East Common Stock reserved for issuance
upon exercise of authorized but unissued East Stock Options; (iv) 1,255,925
shares of East Common Stock issuable upon exercise of outstanding East Stock
Options; (v) 582,824 shares of East Common Stock issued and outstanding (and
included in the number stated in clause (i) above) subject to restrictions under
the East Stock Purchase Plan; (vi) 115,000 shares of East Common Stock reserved
for issuance as employer matching contributions under East's 401(k) Savings
Plan; and (vii) 746,032 shares of East Junior Preferred Stock, none of which is
outstanding, authorized for issuance and purchasable upon exercise of East
Rights. Except as set forth above or on the East Disclosure Schedule, no shares
of capital stock or other equity securities of East are issued, reserved for
issuance, or outstanding. All of the issued and outstanding shares of East
Common Stock and East Series A Preferred Stock are duly authorized, validly
issued, fully paid, nonassessable, and free of preemptive rights.
(b) Except as set forth in Section 3.2(a), as contemplated by this
Agreement, or as set forth in the East Disclosure Schedule, as of the date
hereof there are no outstanding subscriptions, options, calls, contracts,
commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement obligating East to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or
obligating East to grant, extend or enter into any such agreement or commitment.
Except for the East Investor Agreement, there are no voting trusts, proxies or
other agreements or understandings to which East is a party or by which East is
bound with respect to the voting of any East Common Stock. There are no
outstanding bonds, debentures, notes or other indebtedness or other securities
of East having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which shareholders of
East may vote. Other than East Stock Options, there are no outstanding
contractual obligations, commitments, understandings or arrangements of East or
any East Subsidiary to repurchase, redeem or otherwise acquire or make any
payment in respect of or
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measured or determined based on the value or market price of any shares of
capital stock of East or any East Subsidiary. Except as set forth in the East
Disclosure Schedule, there are no agreements or arrangements pursuant to which
East is or could be required to register shares of East Common Stock or other
securities under the Securities Act, on behalf of any person other than
Shareholder. East has delivered or made available to West a complete and
correct copy of the East Rights Agreement, as amended to the date of this
Agreement.
(c) All of the outstanding shares of capital stock of the East
Subsidiaries have been validly issued and are fully paid and nonassessable and
are owned by East free and clear of all Liens. Except for shares of East
Subsidiaries or as set forth in the East Disclosure Schedule, East does not own,
directly or indirectly, any capital stock or other equity or ownership interest
in any entities. East owns good and marketable title to the stock of each East
Subsidiary owned by it and each East Subsidiary owns good and marketable title
to the securities of each other East Subsidiary owned by it, in each case free
and clear of all Liens.
(d) Except as set forth in the East Disclosure Schedule, there are no
outstanding subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement obligating East or any East Subsidiary to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock of any East Subsidiary or obligating East or any East Subsidiary to grant,
extend or enter into any such agreement or commitment. There are no voting
trusts, proxies or other agreements or understandings to which East or any East
Subsidiary is a party or is bound with respect to the voting of any shares of
the East Subsidiaries.
SECTION 3.3 AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) East has full corporate power and authority to enter into this
Agreement and, subject to the East Shareholders Approval and East Required
Statutory Approvals, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation by East of the
transactions contemplated hereby have been duly authorized by the East Board and
no other proceedings on the part of East are necessary to authorize the
execution and delivery of this Agreement by East and the consummation by East of
the transactions contemplated hereby, except for the obtaining of the East
Shareholders Approval and East Required Statutory Approvals. This Agreement has
been duly and validly executed and delivered by East, and, assuming the due
authorization, execution and delivery hereof by West, constitutes a valid and
binding agreement of East enforceable against East in accordance with its terms,
except that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally or (ii) general equitable principles.
(b) The execution and delivery of this Agreement by East do not, and the
consummation by East of the transactions contemplated hereby will not, violate,
conflict with or result in a breach of any provision of, or constitute a default
(or an event which, with notice
8
or lapse of time or both, would constitute a default) under, or result in the
termination of, or accelerate the performance required by, or result in a right
of termination or acceleration or any "put" right under, or result in the
creation of any Lien upon any of the properties or assets of East under any of
the terms, conditions or provisions of, (i) subject to obtaining the East
Shareholders Approval, East's Articles of Incorporation or Bylaws, (ii) subject
to obtaining the East Shareholders Approval and East Required Statutory
Approvals, any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any court or governmental
authority applicable to East or any East Subsidiary or any of their respective
properties, or (iii) subject to obtaining any consent or waiver set forth in the
East Disclosure Schedule (the "East Required Consents"), any loan or credit
agreement, note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, concession, contract, lease or other instrument, obligation or agreement
of any kind to which East or any East Subsidiary is now a party or by which East
or any East Subsidiary may be bound, excluding from the foregoing clauses (ii)
and (iii) such violations, conflicts, breaches, defaults, terminations,
accelerations, put rights, or creations of Liens that would not, alone or in the
aggregate, be reasonably expected to have a material adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of East and the East Subsidiaries, taken as a
whole, or prevent, hinder or materially delay the ability of East to consummate
the transactions contemplated by this Agreement.
(c) Except for (i) any filings by the parties hereto that may be required
by the HSR Act, (ii) the filing of the Registration Statement, including the
Proxy Statement and Prospectus, with the SEC pursuant to the Securities Act and
the Exchange Act, and the declaration of the effectiveness thereof by the SEC
and any filings that may be required with various state blue sky authorities,
(iii) the filing of the Articles of Merger with, and the acceptance thereof for
recording by, the SDAT, (iv) any required filings with or approvals from
applicable federal or state environmental authorities and (v) any required
filings with or approvals from applicable federal or state housing authorities
(the filings and approvals referred to in clauses (i) through (v) are
collectively referred to as the "East Required Statutory Approvals"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by East or the
consummation by East of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, would not, alone or in the aggregate,
be reasonably expected to have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of East and the East Subsidiaries, taken as a whole or
prevent, hinder or materially delay the ability of East to consummate the
transactions contemplated by this Agreement.
SECTION 3.4 DISCLOSURE AND FINANCIAL STATEMENTS. East has filed all
required reports, schedules, forms, registration statements and other documents
with the SEC since October 11, 1996 (collectively, and in each case including
all exhibits and schedules thereto and documents incorporated by reference
therein, the "East SEC Documents"). As of their respective dates, the East SEC
Documents complied in all material respects with the
9
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the SEC promulgated thereunder applicable to the
East SEC Documents, and none of the East SEC Documents (including any and all
financial statements included therein) as of such dates contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The consolidated
financial statements of East included in the East SEC Documents (the "East SEC
Financial Statements") comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of unaudited consolidated
quarterly statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of East
and its consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited quarterly statements, to normal year-end audit
adjustments).
SECTION 3.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1997 through the date hereof, except as set forth in the East Disclosure
Schedule or disclosed in any East SEC Documents there has not been (a) any
material adverse change or any event which would reasonably be expected to
result in a material adverse change, individually or in the aggregate, in the
business, operations, properties, assets, liabilities, condition (financial or
other), results of operations or prospects of East and the East Subsidiaries,
taken as a whole; provided, however, that a material adverse change shall not
include any (i) changes, effects, conditions, events or circumstances that
affect the real estate industry generally (including tax, legal and regulatory
changes) or (ii) changes arising from the consummation of the Merger or the
announcement of the execution of this Agreement; or (b) any event which, if it
had taken place after the date hereof, would not have been permitted by Section
5.1 without the prior consent of West.
SECTION 3.6 REGISTRATION STATEMENT AND PROXY STATEMENT AND PROSPECTUS.
None of the information supplied or to be supplied by East for inclusion or
incorporation by reference in (a) the Registration Statement or (b) the Proxy
Statement and Prospectus will, in the case of the Proxy Statement and Prospectus
or any amendments thereof or supplements thereto, at the time of the mailing of
the Proxy Statement and Prospectus and any amendments thereof or supplements
thereto, and at the time of the meetings of the shareholders of East and West to
be held in connection with the transactions contemplated by this Agreement or,
in the case of the Registration Statement, as amended or supplemented, at the
time it becomes effective and at the time of such meetings, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by East with respect to information supplied by West for
inclusion or incorporation therein. The Proxy Statement and Prospectus
10
will comply as to form in all material respects with all applicable laws,
including the provisions of the Securities Act and Exchange Act and the rules
and regulations promulgated thereunder.
SECTION 3.7 TAXES. Except as set forth in the East Disclosure Schedule:
(a) Each of East and the East Subsidiaries has timely filed, or shall
timely file, with the appropriate governmental authorities all Tax Returns
required to be filed by it (either separately or as a member of any affiliated
group within the meaning of Section 1504 of the Code or any similar group
defined under a similar provision of state, local or foreign law (an "East
Affiliated Group")) for all periods ending on or prior to the Closing Date,
except to the extent of any Tax Returns for which an extension of time for
filing has been properly filed. Each such return and filing is complete and
correct in all material respects. All Taxes shown on a Tax Return as owed by
East or the East Subsidiaries have been paid. No material issues have been
raised in any examination by any taxing authority with respect to the businesses
and operations of East or the East Subsidiaries which (i) reasonably could be
expected to result in an adjustment to the liability for Taxes for such period
examined or (ii), by application of similar principles, reasonably could be
expected to result in an adjustment to the liability for Taxes for any other
period not so examined. All Taxes which East or the East Subsidiaries are
required by law to withhold or collect, including Taxes required to have been
withheld in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party and sales, gross
receipts and use taxes, have been duly withheld or collected and, to the extent
required, have been paid over to the proper governmental authorities or are held
in separate bank accounts for such purpose. There are no Liens for Taxes upon
the assets of East or the East Subsidiaries except for statutory Liens for Taxes
not yet due.
(b) None of East, the East Subsidiaries or the East Affiliated Group has
filed for an extension of a statute of limitations with respect to any Tax and
no governmental authorities have requested an extension of the statute of
limitations with respect to any Tax. The Tax Returns of East, the East
Subsidiaries and the East Affiliated Group are not being and have not been
examined or audited by any taxing authority for any past year or periods. None
of East, the East Subsidiaries or the East Affiliated Group is a party to any
pending action or any formal or informal proceeding by any taxing authority for
a deficiency, assessment or collection of Taxes, and no claim for any
deficiency, assessment or collection of Taxes has been asserted, or, to the
knowledge of East, threatened against it, including claims by any taxing
authority in a jurisdiction where East and the East Subsidiaries do not file tax
returns that any of them is or may be subject to taxation in that jurisdiction.
(c) Each of East and the East Subsidiaries has properly accrued on its
respective financial statements all Taxes due for which East or the East
Subsidiaries may be liable, whether or not shown on any Tax Return as being due
(including by reason of being a member of an East Affiliated Group or as a
transferee of the assets of, or successor to, any corporation, person,
association, partnership, joint venture or other entity). East and the East
Subsidiaries have established (and until the Closing Date shall continue to
establish and maintain) on its
11
books and records reserves that are adequate for the payment of all Taxes not
yet due and payable.
(d) Neither East nor the East Subsidiaries (i) has filed a consent under
Section 341(f) of the Code concerning collapsible corporations, or (ii) is a
party to any Tax allocation or sharing agreement other than a tax sharing
agreement between the East Subsidiaries and East, which such agreement will be
terminated as of the Closing Date.
(e) The East Affiliated Group of which East and any East Subsidiary is or
was a member has duly and timely filed all Tax Returns that it was required to
file for each taxable period during which East and any such East Subsidiary was
a member of the group. All such Tax Returns were complete and correct in all
material respects and all Taxes owed by the East Affiliated Group, whether or
not shown on any Tax Return, have been paid for each taxable period during which
East and any East Subsidiary was a member of the group.
(f) Except as set forth in the East Disclosure Schedule, East does not have
any liability for the Taxes of any person other than East and the East
Subsidiaries and the East Subsidiaries do not have any liability for the Taxes
of any person other than East and the East Subsidiaries (A) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), (B) as a transferee or successor, (C) by contract, or (D) otherwise.
(g) Neither East nor the East Subsidiaries has made any payments, is
obligated to make any payments, or is a party to an agreement that could
obligate it to make any payments that will not be deductible under Section 280G
of the Code. East and the East Subsidiaries have disclosed to the IRS all
positions taken on its federal income tax returns which could give rise to a
substantial understatement of tax under Section 6662 of the Code.
(h) For all taxable years commencing with the taxable year ended December
31, 1994 through the taxable year ended December 31, 1997, East has been
organized in conformity with the qualifications as a REIT (within the meaning of
the Code) and has satisfied all requirements to qualify as a REIT for such
years. East has operated, and intends to continue to operate, in such a manner
as to qualify as a REIT for the tax period ending on the Closing Date, and has
not taken or omitted to take any action which would reasonably be expected to
result in a challenge to its status as a REIT, and no such challenge is pending
or, to East's knowledge, threatened. Each East Subsidiary that is a partnership,
joint venture or limited liability company has been treated during and since its
formation and continues to be treated for federal income tax purposes as a
partnership and not as a corporation or an association taxable as a corporation.
Each East Subsidiary that is both (i) a corporation for federal income tax
purposes and (ii) with respect to which all of the outstanding capital stock is
owned solely by East (or solely by an East Subsidiary that is a corporation
wholly owned by East) is a "qualified REIT subsidiary" as defined in Section
856(i) of the Code.
SECTION 3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Neither East nor any East
Subsidiary had, at December 31, 1997, and neither has incurred since that date,
any
12
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
of any nature (other than ordinary and recurring operating expenses consistent
with past practices) except (a) liabilities, obligations or contingencies which
are accrued or reserved against in the East SEC Financial Statements or
reflected in the notes thereto, (b) as incurred in connection with the
transactions contemplated by this Agreement, and (c) any liabilities,
obligations or contingencies which (i) would not, alone or in the aggregate, be
reasonably expected to have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of East and the East Subsidiaries, taken as a whole, or
prevent, hinder or materially delay the ability of East to consummate the
transactions contemplated by this Agreement or (ii) have been discharged or paid
in full prior to the date hereof.
SECTION 3.9 LITIGATION. Except as disclosed in the East SEC Documents or
the East Disclosure Schedule, there are no claims, suits, actions or proceedings
pending or, to East's knowledge, threatened, against, relating to or affecting
East or any East Subsidiary or any of their respective properties or assets
before or by any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that would reasonably be
expected to have, alone or in the aggregate with all such claims, actions or
proceedings, a material adverse effect on the business, operations, properties,
assets, condition (financial or other), results of operations or prospects of
East and the East Subsidiaries, taken as a whole, or to prevent, hinder or
materially delay the ability of East to consummate the transactions contemplated
by this Agreement. Neither East nor any East Subsidiary is subject to any
judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or authority, or any arbitrator
which prohibits or restricts the consummation of the transactions contemplated
hereby or would have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of East and the East Subsidiaries, taken as a whole or prevent, hinder
or materially delay the ability of, East to consummate the transactions
contemplated by this Agreement.
SECTION 3.10 NO VIOLATION OF LAW. Neither East nor any East Subsidiary is
in violation of or has been given notice or been charged with any violation of
any law, statute, order, rule, regulation, ordinance or judgment (including any
applicable environmental law, ordinance or regulation) of any governmental or
regulatory body or authority, except for violations which, alone or in the
aggregate, would not reasonably be expected to have a material adverse effect on
the business, operations, properties, assets, condition (financial or other),
results of operations or prospects of East and the East Subsidiaries, taken as a
whole or prevent, hinder or materially delay the ability of, East to consummate
the transactions contemplated by this Agreement. Neither East nor any East
Subsidiary is in violation or has been given notice or been charged with any
violation of any law, statute, order, rule, regulation, ordinance or judgment
(including any applicable environmental law, ordinance or regulation) of any
governmental or regulatory body or authority, except for violations which, alone
or in the aggregate, would not reasonably be expected to have a material adverse
effect on the business, operations, properties, assets, condition (financial or
other), results of operations or prospects of East and the East Subsidiaries,
taken as a whole or prevent, hinder or materially delay the
13
ability of, East to consummate the transactions contemplated by this Agreement.
No investigation or review of East or any East Subsidiary by any governmental or
regulatory body or authority is pending or, to the knowledge of East,
threatened, nor has any governmental or regulatory body or authority indicated
to East or any East Subsidiary an intention to conduct the same, other than, in
each case, those the outcome of which, as far as reasonably can be foreseen,
would not reasonably be expected to have a material adverse effect on the
business, operations, properties, assets, condition (financial or other),
results of operations or prospects of East and the East Subsidiaries, taken as a
whole or prevent, hinder or materially delay the ability of, East to consummate
the transactions contemplated by this Agreement. Each of East and the East
Subsidiaries has all permits, licenses, franchises, variances, exemptions,
orders and other governmental authorizations, consents and approvals necessary
to conduct its business as presently conducted and as proposed by East or any
East Subsidiary to be conducted, except for permits, licenses, franchises,
variances, exemptions, orders, authorizations, consents and approvals the
absence of which, alone or in the aggregate, would not reasonably be expected to
have a Material Adverse Effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of East and
the East Subsidiaries, taken as a whole or prevent, hinder or materially delay
the ability of, East to consummate the transactions contemplated by this
Agreement.
SECTION 3.11 EAST PROPERTIES. Except as disclosed in the East SEC
Documents, each of East and the East Subsidiaries (i) has good and marketable
title to all the properties and assets reflected in the latest audited balance
sheet included in the East SEC Documents as being owned by East or one of the
East Subsidiaries or acquired after the date thereof which are, alone or in the
aggregate, material to East's business on a consolidated basis (except
properties sold or otherwise disposed of since the date thereof in the ordinary
course of business), free and clear of (A) all Liens except (1) statutory Liens
securing payments not yet due and (2) such imperfections or irregularities of
title or other Liens (other than real property mortgages or deeds of trust) as
do not materially affect the use of the properties or assets subject thereto or
affected thereby or otherwise materially impair the business operations
presently conducted at such properties, and (B) all real property mortgages and
deeds of trust, and (ii) is the lessee of all leasehold estates reflected in the
latest audited financial statements included in the East SEC Documents or
acquired after the date thereof which are, alone or in the aggregate, material
to its business on a consolidated basis and is in possession of the properties
purported to be leased thereunder, and each such lease is valid without default
thereunder by the lessee or, to East's knowledge, the lessor.
SECTION 3.12 LABOR MATTERS. Neither East nor any East Subsidiary is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is East
or any East Subsidiary the subject of any proceeding asserting that it or any
subsidiary has committed an unfair labor practice or seeking to compel it to
bargain with any labor organization as to wages or conditions of employment nor
is there any strike, work stoppage or other labor dispute involving East or any
East Subsidiary pending, or, to East's knowledge, threatened, any of which
would, alone or in the aggregate, reasonably be expected to have a material
adverse effect on the business,
14
operations, properties, assets, condition (financial or other), results of
operations or prospects of East and the East Subsidiaries, taken as a whole or
prevent, hinder or materially delay the ability of, East to consummate the
transactions contemplated by this Agreement.
SECTION 3.13 EMPLOYEE BENEFIT PLANS. East has previously provided or
made available to West a copy or description of each employee benefit plan
maintained by East or any East Subsidiary that provides retirement, pension,
health care, long-term disability income, workers compensation, life insurance
and any other postretirement benefits that, as of the date hereof, covers any
employee of East or the East Subsidiaries and a copy or description of each
employment, severance, bonus, profit sharing, compensation, termination, stock
option, stock appreciation right, restricted stock, phantom stock, performance
unit, change-in-control, or other similar agreement (collectively, the "East
Benefit Plans") with any director or employee of East or the East Subsidiaries.
Each East Benefit Plan complies and has been administered in form and in
operation in all material respects with all requirements of law to the extent
applicable and no notice has been issued by any governmental authority
questioning or challenging such compliance. Except as set forth in the East
Disclosure Schedule, neither the execution or delivery of this Agreement nor the
consummation of the transactions contemplated hereby constitutes or will
constitute an event under any East Benefit Plan that may result in any payment
by East or any East Subsidiary, any restriction or limitation upon the assets of
any East Benefit Plan, any acceleration of payment or vesting, increase in
benefits or compensation, or forgiveness of any loan from or other commitment to
East or any East Subsidiary.
SECTION 3.14 INTELLECTUAL PROPERTY. East and the East Subsidiaries own,
free of Liens, or have a valid license to use, all of the Intellectual Property
used in the conduct of the businesses of East and the East Subsidiaries, subject
to the terms and conditions of the East License Agreement with respect to the
Intellectual Property that is the subject matter thereof. None of such
Intellectual Property has been or is the subject of any pending, or to the
knowledge of East, threatened adverse claim, litigation or claim of infringement
based on the use thereof by East or any East Subsidiary or a third party.
Neither East nor any East Subsidiary has received any notice contesting East's
or the East Subsidiaries' right to use any of such Intellectual Property and, to
the knowledge of East, neither East nor any East Subsidiary has infringed upon
or misappropriated any intellectual property rights of third parties. The
consummation of the Merger will not result in the loss of any rights by East or
any East Subsidiaries of any of its or their rights in such Intellectual
Property.
SECTION 3.15 EAST MATERIAL CONTRACTS. Except as disclosed in the East SEC
Documents filed prior to the date hereof, neither East nor any East Subsidiary:
is a party to or bound by (a) any "material contract" (as such term is defined
in Item 601(b)(10) of Regulation S-K of the SEC), or (b) any non-competition
agreement or any other agreement or obligation that purports to limit in any
respect the manner in which, or the localities in which, all or any substantial
portion of the business of East or the East Subsidiaries would be conducted.
15
SECTION 3.16 ENVIRONMENTAL MATTERS. Except as set forth in the East SEC
Documents, East has no knowledge of (a) any violation of Environmental Laws
relating to any property of East or any East Subsidiary, (b) the release or
potential release of Hazardous Materials on or from any such property, in
violation of any Environmental Laws, (c) underground storage tanks located on
any property, or (d) asbestos in or on any such property which would, alone or
in the aggregate, reasonably be expected to have a material adverse effect on
the business, operations, properties, assets, condition (financial or
otherwise), results of operations or prospects of East and the East
Subsidiaries, taken as a whole, or prevent, hinder or materially delay the
ability of East to consummate the transactions contemplated by this Agreement.
Except as set forth in the East Disclosure Schedule, neither East nor any East
Subsidiary has manufactured, introduced, released or discharged from or onto any
such property any Hazardous Materials or any toxic wastes, substances or
materials (including asbestos) in violation of any Environmental Laws, and
neither East nor any East Subsidiary has used any such property or any part
thereof for the generation, treatment, storage, handling or disposal of any
Hazardous Materials, in violation of any Environmental Laws which would, alone
or in the aggregate, reasonably be expected to have a material adverse effect on
the business, operations, properties, assets, condition (financial or
otherwise), results of operations or prospects of East and the East
Subsidiaries, taken as a whole, or prevent, hinder or materially delay the
ability of East to consummate the transactions contemplated by this Agreement.
SECTION 3.17 INSURANCE. East or the East Subsidiaries maintain insurance
coverage for East and the East Subsidiaries and their respective properties and
assets of a type and in amounts typical of similar companies engaged in the
respective businesses in which East and the East Subsidiaries are engaged. All
such insurance policies are (a) in full force and effect, and with respect to
all policies neither of East nor any East Subsidiary is delinquent in the
payment of any premiums thereon, and no notice of cancellation or termination
has been received with respect to any such policy, and (b) are sufficient for
compliance with all requirements of law and of all agreements to which East or
the East Subsidiaries are a party or otherwise bound and are valid, outstanding,
collectable, and enforceable policies and will remain in full force and effect
through the Closing Date, except, and the case of either clause (a) or (b), in
such manner as would not, alone or in the aggregate, be reasonably expected to
have a material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of East and
the East Subsidiaries, taken as a whole, or prevent, hinder or materially delay
the ability of East to consummate the transactions contemplated by this
Agreement. Neither East nor any East Subsidiary has received written notice
within the last 12 months from any insurance company or board of fire
underwriters of any defects or inadequacies that would materially adversely
affect the insurability of, or cause any material increase in the premiums for,
insurance covering, either East or any East Subsidiary or any of their
respective properties or assets that have not been cured or repaired to the
satisfaction of the party issuing the notice.
SECTION 3.18 BROKERS AND FINDERS. East has not employed any broker,
finder, other intermediary, or financial advisor in connection with the
transactions contemplated by this Agreement which would be entitled to any
brokerage, finder's or similar fee or commission, or
16
financial advisory fee, in connection with this Agreement or the transactions
contemplated hereby, other than Xxxxxx Xxxxxxx & Co. Incorporated, the fees and
expenses of which will be paid by East (pursuant to fee agreement, a copy of
which has been provided to West).
SECTION 3.19 INVESTMENT COMPANY ACT. Neither East nor any of the East
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, nor an "investment adviser" within the meaning
of the Investment Advisers Act of 1940, as amended.
SECTION 3.20 HSR ACT. For purposes of determining compliance with the HSR
Act, East confirms that the conduct of its businesses consists solely of
investing in, owning, operating and developing real estate for the benefit of
its shareholders.
SECTION 3.21 EAST RIGHTS AGREEMENT. East has taken all action required so
that the entering into of this Agreement and the consummation of the
transactions contemplated hereby do not and will not enable or require the East
Rights to be separated from the shares of East Common Stock with which the East
Rights are associated, or to be distributed, exercisable, exercised, or
nonredeemable.
SECTION 3.22 STATE ANTITAKEOVER LAWS NOT APPLICABLE. By virtue of
provisions in East's Articles of Incorporation or Bylaws validly adopted under
Section 3-603(e)(1)(iii) or Section 3-702(b) of the MGCL, neither Section 3-602
of the MGCL nor Subtitle 7 of the MGCL (Sections 3-701 through 3-709 of the
MGCL) applies to this Agreement or the Merger or the other transactions
contemplated hereby. Other than Section 3-602 and Subtitle 7 of the MGCL, no
state takeover statute or similar statute or regulation of the State of Maryland
(and, to the knowledge of East, of any other state or jurisdiction) applies or
purports to apply to this Agreement or the Merger or other transactions
contemplated hereby and no provision of the Articles of Incorporation, Bylaws or
other governing instruments of East or any East Subsidiary or the terms of any
rights plan or agreement of East (other than the East Rights Agreement) would,
directly or indirectly, restrict or impair the ability of West to vote, or
otherwise to exercise the rights of a shareholder with respect to, securities of
East and the East Subsidiaries that may be acquired or controlled by West or
permit any shareholder to acquire securities of East, any East Subsidiary, West,
or any West Subsidiary on a basis not available to West in the event that West
were to acquire securities of East.
SECTION 3.23 REQUIRED EAST VOTE. The East Shareholders Approval, being the
affirmative vote of a majority of the outstanding shares of East Common Stock
entitled to vote, voting separately as a class, is the only vote of the holders
of any class or series of East's securities necessary to approve this Agreement,
the Merger and the other transactions contemplated hereby.
SECTION 3.24 BOARD RECOMMENDATION. The East Board, at a meeting duly
called and held, has by a unanimous vote of those directors present (who
constituted 100% of the directors then in office), including the unanimous vote
of the "Independent Directors" (as
17
defined in East's Articles of Incorporation), (i) determined and declared that
this Agreement and the transactions contemplated hereby, including the Merger,
are advisable and fair to and in the best interests of East and the shareholders
of East, and (ii) resolved to recommend that the holders of East Common Stock
approve this Agreement and the transactions contemplated herein, including the
Merger.
SECTION 3.25 OPINION OF FINANCIAL ADVISOR. A special committee of the East
Board has received the opinion of Xxxxxx Xxxxxxx & Co. Incorporated, dated the
date of this Agreement, to the effect that the Exchange Ratio is fair, from a
financial point of view, to the holders of East Common Stock other than the
Shareholder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WEST
West represents and warrants to East as follows:
SECTION 4.1 ORGANIZATION AND QUALIFICATION. West and each of the West
Subsidiaries is duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization and has the requisite power, corporate
or otherwise, and authority to own, lease and operate its assets and properties
and to carry on its business as it is now being conducted and as it is proposed
by it to be conducted. Each of West and the West Subsidiaries is qualified to do
business and is in good standing in each jurisdiction in which the properties
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary, except where the failure to be so qualified
and in good standing would, alone or in the aggregate, not reasonably be
expected to have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of West and the West Subsidiaries, taken as a whole, or prevent,
hinder or materially delay the ability of West to consummate the transactions
contemplated by this Agreement. True, accurate and complete copies of each of
the Restated Declaration of Trust and Bylaws of West, as in effect on the date
hereof, including all amendments thereto, have heretofore been delivered to
East.
SECTION 4.2 CAPITALIZATION.
(a) The authorized capital of West consists of 150,000,000 shares of
beneficial interest. As of the date of this Agreement, except as set forth in
the West Disclosure Schedule, there are (i) 93,005,031.92 shares of West Common
Stock, 5,133,215 shares of West Series A Preferred Stock, and 4,200,000 shares
of West Series B Preferred Stock issued and outstanding, (ii) no shares of West
Common Stock, West Series A Preferred Stock, or West Series B Preferred Stock
held in the treasury of West or held by any West Subsidiary; (iii) 3,879,791
shares of West Common Stock reserved for issuance upon exercise of authorized
but unissued West Stock Options; (iv) 1,898,209 shares of West Common Stock
issuable upon exercise of outstanding West Stock Options; (v) 820,132 shares of
West Common Stock issued and outstanding (and included in the number stated in
clause (i) above) subject to restrictions under
18
the West Stock Purchase Plan; (vi) 200,000 shares of West Common Stock reserved
for issuance as employer matching contributions under West's 401(k) Savings
Plan; (vii) 930,050 shares of West Junior Preferred Stock, none of which is
outstanding, authorized for issuance and purchasable upon exercise of West
Rights. Except as set forth above or in the West Disclosure Schedule, no shares
of capital stock or other equity securities of West are issued, reserved for
issuance, or outstanding. All of the issued and outstanding shares of West
Common Stock, West Series A Preferred Stock, and West Series B Preferred Stock
are, and all shares of West Common Stock and West New Preferred Stock issued
pursuant to this Agreement will be when so issued, duly authorized, validly
issued, fully paid, and, except as set forth in the West Disclosure Schedule,
nonassessable and free of preemptive rights. All shares of West Common Stock and
West New Preferred Stock issued pursuant to this Agreement will be, when so
issued, registered under the Securities Act for such issuance and registered
under the Exchange Act, registered or exempt from registration under any
applicable state securities laws for such issuance, and listed on the Exchange,
subject to official notice of issuance.
(b) Except as set forth in Section 4.2(a), or as contemplated by this
Agreement, or as set forth in the West Disclosure Schedule, as of the date
hereof there are no outstanding subscriptions, options, calls, contracts,
commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement obligating West to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or
obligating West to grant, extend or enter into any such agreement or commitment;
provided, however, that the foregoing shall not apply to the adoption by West of
any incentive plan providing for grants of options or restricted shares to
directors and employees nor to any grant of options or restricted shares
thereunder. Except for the West Investor Agreement or as contemplated by this
Agreement, there are no voting trusts, proxies or other agreements or
understandings to which West is a party or by which West is bound with respect
to the voting of any West Common Shares. There are no outstanding bonds,
debentures, notes or other indebtedness or other securities of West having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which shareholders of West may vote. Other than
the West Stock Options, there are no outstanding contractual obligations,
commitments, understandings or arrangements of West or any West Subsidiary to
repurchase, redeem or otherwise acquire or make any payment in respect of or
measured or determined based on the value or market price of any shares of
capital stock of the West or any West Subsidiary. Except as set forth in the
West Disclosure Schedule, there are no agreements or arrangements pursuant to
which West is or could be required to register shares of West Common Stock or
other securities under the Securities Act on behalf of any person other than
Shareholder. West has delivered or made available to East a complete and correct
copy of the West Rights Agreement, as amended to the date of this Agreement.
(c) All of the outstanding shares of capital stock of the West
Subsidiaries have been validly issued and are fully paid and, except as set
forth in the West Disclosure Schedule, nonassessable, and are owned by West free
and clear of all Liens. Except for shares of the West Subsidiaries or as set
forth in the West Disclosure Schedule, West does not own, directly or
indirectly, any capital stock or other equity or ownership interest in any
entities. West owns
19
good and marketable title to the stock of each of the West Subsidiaries owned by
it and each West Subsidiary owns good and marketable title to the securities of
each other West Subsidiary owned by it, in each case free and clear of all
Liens.
(d) Except as set forth in the West Disclosure Schedule, there are no
outstanding subscriptions, options, calls, contracts, commitments,
understandings, restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security, instrument or
other agreement obligating West or the West Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of the West
Subsidiaries or obligating West or the West Subsidiaries to grant, extend or
enter into any such agreement or commitment. There are no voting trusts, proxies
or other agreements or understandings to which West or the West Subsidiaries is
a party or is bound with respect to the voting of any shares of the West
Subsidiaries.
SECTION 4.3 AUTHORITY; NON-CONTRAVENTION; APPROVALS.
(a) West has full power, trust or otherwise, and authority to enter into
this Agreement and, subject to the West Shareholders Approval and West Required
Statutory Approvals, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation by West of the
transactions contemplated hereby have been duly authorized by the West Board and
no other proceedings on the part of West are necessary to authorize the
execution and delivery of this Agreement by West and the consummation by West of
the transactions contemplated hereby, except for the obtaining of the West
Shareholders Approval and the West Required Statutory Approvals. This Agreement
has been duly and validly executed and delivered by West, and, assuming the due
authorization, execution and delivery hereof by East, constitutes a valid and
binding agreement of West enforceable against West in accordance with its terms,
except that such enforcement may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally or (ii) general equitable principles.
(b) The execution and delivery of this Agreement by West do not, and the
consummation by West of the transactions contemplated hereby will not, violate,
conflict with or result in a breach of any provision of, or constitute a default
(or an event which, with notice or lapse of time or both, would constitute a
default) under, or result in the termination of, or accelerate the performance
required by, or result in a right of termination or acceleration under, or
result in the creation of any Lien upon any of the properties or assets of West
under any of the terms, conditions or provisions of, (i) subject to obtaining
the West Shareholders Approval, West's Declaration of Trust or Bylaws, (ii)
subject to obtaining the West Required Statutory Approvals and West Shareholders
Approval, any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any court or governmental
authority applicable to West or any West Subsidiary or any of their respective
properties or (iii) subject to obtaining any consent or waiver set forth in the
West Disclosure Schedule (the "West Required Consents"), any loan or credit
agreement, note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, concession, contract, lease or other instrument,
20
obligation or agreement of any kind to which West or any West Subsidiary is now
a party or by which West or any West Subsidiary may be bound, excluding from the
foregoing clauses (ii) and (iii) such violations, conflicts, breaches, defaults,
terminations, accelerations, put rights, or creations of Liens that would not,
alone or in the aggregate, be reasonably expected to have a material adverse
effect on the business, operations, properties, assets, condition (financial or
other), results of operations or prospects of West and the West Subsidiaries,
taken as a whole, or prevent, hinder or materially delay the ability of West to
consummate the transactions contemplated by this Agreement.
(c) Except for (i) any filings by the parties hereto that may be required
by the HSR Act, (ii) the filing of the Registration Statement, including the
Proxy Statement and Prospectus, with the SEC pursuant to the Securities Act and
the Exchange Act, and the declaration of the effectiveness thereof by the SEC
and any filings that may be required with various state blue sky authorities,
(iii) the filing of the Articles of Merger with, and the acceptance thereof for
recording by, the SDAT, (iv) any required filings with or approvals from
applicable federal or state environmental authorities and (v) any required
filings with or approvals from applicable federal or state housing authorities
(the filings and approvals referred to in clauses (i) through (v) are
collectively referred to as the "West Required Statutory Approvals"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Agreement by West or the
consummation by West of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not, alone
or in the aggregate, be reasonably expected to have a material adverse effect on
the business, operations, properties, assets, condition (financial or other),
results of operations or prospects of West and the West Subsidiaries, taken as a
whole, or prevent, hinder or materially delay the ability of West to consummate
the transactions contemplated by this Agreement.
SECTION 4.4 DISCLOSURE AND FINANCIAL STATEMENTS. West has filed all
required reports, schedules, forms, registration statements and other documents
with the SEC since January 1, 1996 (collectively, and in each case including all
exhibits and schedules thereto and documents incorporated by reference therein,
the "West SEC Documents"). As of their respective dates, the West SEC Documents
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such West SEC Documents, and none of the
West SEC Documents (including any and all financial statements included therein)
as of such dates contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of West included in
the West SEC Documents (the "West SEC Financial Statements") comply as to form
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with generally accepted accounting principles (except, in
the case of unaudited consolidated quarterly statements, as permitted by Form
10-Q of the SEC) applied on a
21
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial position of West
and its consolidated subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited quarterly statements, to normal year-end audit
adjustments).
SECTION 4.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1997
through the date hereof, and except as set forth in the West Disclosure Schedule
or disclosed in any West SEC Documents, there has not been (a) any material
adverse change or any event which would reasonably be expected to result in a
material adverse change, individually or in the aggregate, in the business,
operations, properties, assets, liabilities, condition (financial or other),
results of operations or prospects of West and the West Subsidiaries, taken as a
whole, provided, however, that a material adverse change shall not include any
(i) changes, effects, conditions, events or circumstances that affect the real
estate industry generally (including tax, legal and regulatory changes) or (ii)
changes arising from the consummation of the Merger or the announcement of the
execution of this Agreement; or (b) any event which, if it had taken place after
the date hereof, would not have been permitted by Section 5.2 without the prior
consent of East.
SECTION 4.6 REGISTRATION STATEMENT AND PROXY STATEMENT AND PROSPECTUS.
None of the information supplied or to be supplied by West for inclusion or
incorporation by reference in (a) the Registration Statement or (b) the Proxy
Statement and Prospectus will, in the case of the Proxy Statement and Prospectus
or any amendments thereof or supplements thereto, at the time of the mailing of
the Proxy Statement and Prospectus and any amendments thereof or supplements
thereto, and at the time of the meetings of the shareholders of East and West to
be held in connection with the transactions contemplated by this Agreement or,
in the case of the Registration Statement, as amended or supplemented, at the
time it becomes effective and at the time of such meetings, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
representation is made by West with respect to information supplied by East for
inclusion or incorporation therein. The Registration Statement and Proxy
Statement and Prospectus will comply as to form in all material respects with
all applicable laws, including the provisions of the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder.
SECTION 4.7 TAXES. Except as set forth in the West Disclosure Schedule:
(a) Each of West and the West Subsidiaries has timely filed, or shall
timely file, with the appropriate governmental authorities all Tax Returns
required to be filed by it (either separately or as a member of any affiliated
group within the meaning of Section 1504 of the Code or any similar group
defined under a similar provision of state, local or foreign law (a "West
Affiliated Group")) for all periods ending on or prior to the Closing, except to
the extent of any Tax Returns for which an extension of time for filing has been
properly filed. Each such
22
return and filing is complete and correct in all material respects. All Taxes
shown on a Tax Return as owed by West or the West Subsidiaries have been paid.
No material issues have been raised in any examination by any taxing authority
with respect to the businesses and operations of West or the West Subsidiaries
which (i) reasonably could be expected to result in an adjustment to the
liability for Taxes such period examined, or (ii) by application of similar
principles, reasonably could be expected to result in an adjustment to the
liability for Taxes for any period not so examined. All Taxes which West or any
West Subsidiary is required by law to withhold or collect, including Taxes
required to have been withheld in connection with amount paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party
and sales, gross receipts and use taxes, have been duly withheld or collected
and, to the extent required, have been paid over to the proper governmental
authorities or are held in separate bank accounts for such purpose. There are no
Liens For Taxes upon the Assets of West or the West Subsidiaries except for
statutory Liens For Taxes not yet due.
(b) None of West, the West Subsidiaries or the West Affiliated Group has
filed for an extension of a statute of limitations with respect to any Tax and
no governmental authorities have requested an extension of the statute of
limitations with respect to any Tax. The Tax Returns of West, the West
Subsidiaries and the West Affiliated Group are not being and have not been
examined or audited by any taxing authority for any past year or periods. None
of West, the West Subsidiaries or the West Affiliated Group is a party to any
pending action or any formal or informal proceeding by any taxing authority for
a deficiency, assessment or collection of Taxes, and no claim for any
deficiency, assessment or collection of Taxes has been asserted, or, to the
knowledge of West, threatened against it, including claims by any taxing
authority in a jurisdiction where West and the West Subsidiaries do not file tax
returns that any of them is or may be subject to taxation in that jurisdiction.
(c) Each of West and the West Subsidiaries has properly accrued on its
respective financial statements all Taxes due for which West or the West
Subsidiaries may be liable, whether or not shown on any Tax Return as being due
(including by reason of being a member of a West Affiliated Group or as a
transferee of the assets of, or successor to, any corporation, person,
association, partnership, joint venture or other entity). West and the West
Subsidiaries have established (and until the Closing Date shall continue to
establish and maintain) on its books and records reserves that are adequate for
the payment of all Taxes not yet due and payable.
(d) Neither West nor the West Subsidiaries (i) has filed a consent under
Section 341(f) of the Code concerning collapsible corporations, or (ii) is a
party to any Tax allocation or sharing agreement other than a tax sharing
agreement between the West Subsidiaries and West.
(e) The West Affiliated Group of which West and any West Subsidiary is or
was a member has duly and timely filed all Tax Returns that it was required to
file for each taxable period during which West and any such West Subsidiary was
a member of the group. All such Tax Returns were complete and correct in all
material respects and all Taxes owed by the West
23
Affiliated Group, whether or not shown on any Tax Return, have been paid for
each taxable period during which West and any West Subsidiary was a member of
the group.
(f) Except as set forth in the West Disclosure Schedule, West does not
have any liability for the Taxes of any person other than West and the West
Subsidiaries and the West Subsidiaries do not have any liability for the Taxes
of any person other than West and the West Subsidiaries (A) under Treasury
Regulation Section 1.1502-6 (or any similar provision of state, local or foreign
law), (B) as a transferee or successor, (C) by contract, or (D) otherwise.
(g) Neither West nor the West Subsidiaries has made any payments, is
obligated to make any payments, or is a party to an agreement that could
obligate it to make any payments that will not be deductible under Section 280G
of the Code. West and the West Subsidiaries have disclosed to the IRS all
positions taken on its federal income tax returns which could give rise to a
substantial understatement of tax under Section 6662 of the Code.
(h) For all taxable years commencing with the taxable year ended December
31, 1963 through the taxable year ended December 31, 1997, West has been
organized in conformity with the qualifications as a REIT (within the meaning of
the Code) and has satisfied all requirements to qualify as a REIT for such
years. West has operated, and intends to continue to operate, in such a manner
as to qualify as a REIT for the tax year ending December 31, 1998, and has not
taken or omitted to take any action which would reasonably be expected to result
in a challenge to its status as a REIT, and no such challenge is pending or, to
West's knowledge, threatened. Each West Subsidiary that is a partnership, joint
venture or limited liability company has been treated during and since its
formation and continues to be treated for federal income tax purposes as a
partnership and not as a corporation or an association taxable as a corporation.
Each West Subsidiary that is both (i) a corporation for federal income tax
purposes and (ii) with respect to which all of the outstanding capital stock is
owned solely by West (or solely by a West Subsidiary that is a corporation
wholly owned by West) is a "qualified REIT subsidiary" as defined in Section
856(i) of the Code.
SECTION 4.8 ABSENCE OF UNDISCLOSED LIABILITIES. Neither West nor any West
Subsidiary had, at December 31, 1997, and neither has incurred since that date,
any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature (other than ordinary and recurring operating expenses)
(a) except liabilities, obligations or contingencies which are accrued or
reserved against in the West SEC Financial Statements or reflected in the notes
thereto, and (b) as incurred in connection with the transactions contemplated by
this Agreement, and (c) except for any liabilities, obligations or contingencies
which (i) would not be, alone or in the aggregate, reasonably expected to have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of West and
the West Subsidiaries, taken as a whole or prevent, hinder or materially delay
the ability of West to consummate the transactions contemplated by this
Agreement, or (ii) have been discharged or paid in full prior to the date
hereof.
24
SECTION 4.9 LITIGATION. Except as disclosed in the West SEC Documents or
the West Disclosure Schedule, there are no claims, suits, actions or proceedings
pending or, to West's knowledge, threatened, against, relating to or affecting
West or any West Subsidiary or any of their respective properties or assets
before or by any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that would reasonably be
expected to have, alone or in the aggregate with all such claims, actions or
proceedings, a material adverse effect on the business, operations, properties,
assets, condition (financial or other) results of operations or prospects of
West or the West Subsidiaries, taken as a whole, or to prevent, hinder or
materially delay the ability of West to consummate the transactions contemplated
by this Agreement. Neither West nor any West Subsidiary is subject to any
judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or authority, or any arbitrator
which prohibits or restricts the consummation of the transactions contemplated
hereby or would have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), results of operations or
prospects of West and the West Subsidiaries, taken as a whole or prevent, hinder
or materially delay the ability of West to consummate the transactions
contemplated by this Agreement.
SECTION 4.10 NO VIOLATION OF LAW. Neither West nor any West Subsidiary is
in violation of or has been given notice or been charged with any violation of
any law, statute, order, rule, regulation, ordinance or judgment (including any
applicable environmental law, ordinance or regulation) of any governmental or
regulatory body or authority, except for violations which, alone or in the
aggregate, would not reasonably be expected to have a material adverse effect on
the business, operations, properties, assets, condition (financial or other),
results of operations or prospects of West and the West Subsidiaries, taken as a
whole or prevent, hinder or materially delay the ability of West to consummate
the transactions contemplated by this Agreement. Neither West nor any of the
West Subsidiaries is in violation or has been given notice or been charged with
any violation of any law, statute, order, rule, regulation, ordinance or
judgment (including any applicable environmental law, ordinance or regulation)
of any governmental or regulatory body or authority, except for violations
which, alone or in the aggregate, would not reasonably be expected to have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of West and
the West Subsidiaries, taken as a whole or prevent, hinder or materially delay
the ability of West to consummate the transactions contemplated by this
Agreement. No investigation or review of West or any West Subsidiary by any
governmental or regulatory body or authority is pending or, to the knowledge of
West, threatened, nor has any governmental or regulatory body or authority
indicated to West or any West Subsidiary an intention to conduct the same, other
than, in each case, those the outcome of which, as far as reasonably can be
foreseen, would not, alone or in the aggregate, reasonably be expected to have a
material adverse effect on the business, operations, properties, assets,
condition (financial or other), results of operations or prospects of West and
the West Subsidiaries, taken as a whole or prevent, hinder or materially delay
the ability of West to consummate the transactions contemplated by this
Agreement. Each of West and the West Subsidiaries have all permits, licenses,
franchises, variances, exemptions, orders and other governmental authorizations,
25
consents and approvals necessary to conduct its business as presently conducted
and as proposed by West or any West Subsidiary to be conducted, except for
permits, licenses, franchises, variances, exemptions, orders, authorizations,
consents and approvals the absence of which, alone or in the aggregate, would
not reasonably be expected to have a material adverse effect on the business,
operations, properties, assets, condition (financial or other), results of
operations or prospects of West and the West Subsidiaries, taken as a whole or
prevent, hinder or materially delay the ability of West to consummate the
transactions contemplated by this Agreement.
SECTION 4.11 WEST PROPERTIES. Except as disclosed in the West SEC
Documents, each of West and the West Subsidiaries (i) has good and marketable
title to all the properties and assets reflected in the latest audited balance
sheet included in such West SEC Documents as being owned by West or one of the
West Subsidiaries or acquired after the date thereof which are, alone or in the
aggregate, material to West's business on a consolidated basis (except
properties sold or otherwise disposed of since the date thereof in the ordinary
course of business), free and clear of (A) all Liens except (1) statutory Liens
securing payments not yet due and (2) such imperfections or irregularities of
title or other Liens (other than real property mortgages or deeds of trust) as
do not materially affect the use of the properties or assets subject thereto or
affected thereby or otherwise materially impair the business operations
presently conducted at such properties, and (B) all real property mortgages and
deeds of trust, and (ii) is the lessee of all leasehold estates reflected in the
latest audited financial statements included in such West SEC Documents or
acquired after the date thereof which are, alone or in the aggregate, material
to its business on a consolidated basis and is in possession of the properties
purported to be leased thereunder, and each such lease is valid without default
thereunder by the lessee or, to West's knowledge, the lessor.
SECTION 4.12 LABOR MATTERS. Neither West nor any West Subsidiary is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is West
or any West Subsidiary the subject of any proceeding asserting that it or any
subsidiary has committed an unfair labor practice or seeking to compel it to
bargain with any labor organization as to wages or conditions of employment nor
is there any strike, work stoppage or other labor dispute involving West or any
West Subsidiary pending, or, to West's knowledge, threatened, any of which
would, alone or in the aggregate, reasonably be expected to have a material
adverse effect on the business, operations, properties, assets, condition
(financial or other), results of operations or prospects of West and the West
Subsidiaries, taken as a whole or prevent, hinder or materially delay the
ability of West to consummate the transactions contemplated by this Agreement.
SECTION 4.13 EMPLOYEE BENEFIT PLANS. Each employee benefit plan maintained
by West or any West Subsidiary ("West Benefit Plans") that provides retirement,
pension, health care, long-term disability income, workers compensation, life
insurance and any other postretirement benefits that, as of the date hereof,
covers any employee of West or the West Subsidiaries complies and has been
administered in form and in operation in all material respects with all
applicable requirements of law and no notice has been issued by any
26
governmental authority questioning or challenging such compliance. Neither the
execution or delivery of this Agreement nor the consummation of the transactions
contemplated hereby constitutes or will constitute an event under any West
Benefit Plan that may result in any payment by West or any West Subsidiary, any
restriction or limitation upon the assets of any West Benefit Plan, any
acceleration of payment or vesting, increase in benefits or compensation, or
forgiveness of any loan or other commitment to West or any West Subsidiary.
SECTION 4.14 INTELLECTUAL PROPERTY. West and the West Subsidiaries own,
free of Liens, or have a valid license to use, all of the Intellectual Property
used in the conduct of the businesses of West and the West Subsidiaries, subject
to the terms and conditions of the West License Agreement with respect to the
Intellectual Property that is the subject matter thereof. None of such
Intellectual Property has been or is the subject of any pending adverse claim,
or to the knowledge of West, any threatened litigation or claim of infringement
based on the use thereof by West or any West Subsidiary or a third party.
Neither West nor any West Subsidiary has received any notice contesting West's
or the West Subsidiaries' right to use any of such Intellectual Property, and,
to the knowledge of West, neither West nor any West Subsidiary has infringed
upon or misappropriated any intellectual property rights of third parties. The
consummation of the Merger will not result in the loss by West or any West
Subsidiaries of any of it or their rights in such Intellectual Property.
SECTION 4.15 WEST MATERIAL CONTRACTS. Except as disclosed in the West SEC
Documents filed prior to the date hereof, neither West nor any West Subsidiary
is a party to or bound by (a) any "material contract" (as such term is defined
in Item 601(b)(10) of Regulation S-K of the SEC), or (b) any non-competition
agreement or any other agreement or obligation that purports to limit in any
respect the manner in which, or the localities in which, all or any substantial
portion of the business of West or the West Subsidiaries would be conducted.
SECTION 4.16 ENVIRONMENTAL MATTERS. Except as set forth in the West SEC
Documents, West has no knowledge of (a) any violation of Environmental Laws
relating to any property of West or any West Subsidiary, (b) the release or
potential release of Hazardous Materials on or from any such property, in
violation of any Environmental Laws, (c) underground storage tanks located on
any property, or (d) asbestos in or on any such property which would, alone or
in the aggregate, reasonably be expected to have a material adverse effect on
the business, operations, properties, assets, condition (financial or
otherwise), results of operations or prospects of East and the East
Subsidiaries, taken as a whole, or prevent, hinder or materially delay the
ability of East to consummate the transactions contemplated by this Agreement.
Except as set forth in West Disclosure Schedule, neither West nor any West
Subsidiary has manufactured, introduced, released or discharged from or onto any
such property any Hazardous Materials or any toxic wastes, substances or
materials (including asbestos) in violation of any Environmental Laws, and
neither West nor any West Subsidiary has used any such property or any part
thereof for the generation, treatment, storage, handling or disposal of any
Hazardous Materials, in violation of any Environmental Laws which would, alone
or in the aggregate, reasonably be expected to have a material adverse effect on
the business, operations,
27
properties, assets, condition (financial or otherwise), results of operations or
prospects of East and the East Subsidiaries, taken as a whole, or prevent,
hinder or materially delay the ability of East to consummate the transactions
contemplated by this Agreement.
SECTION 4.17 INSURANCE. West or the West Subsidiaries maintain insurance
coverage for West and the West Subsidiaries and their respective properties and
assets of the types and in amounts typical of similar companies engaged in the
respective businesses in which West and the West Subsidiaries are engaged. All
such insurance policies are (a) in full force and effect, and with respect to
all policies neither West nor any West Subsidiary is delinquent in the payment
of any premiums thereon, and no notice of cancellation or termination has been
received with respect to any such policy, and (b) are sufficient for compliance
with all requirements of law and of all agreements to which West or the West
Subsidiaries are a party or otherwise bound and are valid, outstanding,
collectable, and enforceable policies and will remain in full force and effect
through their respective policy periods, except, and the case of either clause
(a) or (b), in such manner as would not, alone or in the aggregate, be
reasonably expected to have a material adverse effect on the business,
operations properties, assets, condition (financial or other), results of
operations or prospects of West and West Subsidiaries, taken as a whole or
prevent, hinder or materially delay the ability of West to consummate the
transactions contemplated by this Agreement. Neither West nor any West
Subsidiary has received written notice within the last 12 months from any
insurance company or board of fire underwriters of any defects or inadequacies
that would materially adversely affect the insurability of, or cause any
material increase in the premiums for insurance covering, either West or any
West Subsidiary or any of their respective properties or assets that have not
been cured or repaired to the satisfaction of the party issuing the notice.
SECTION 4.18 BROKERS AND FINDERS. West has not employed any broker,
finder, other intermediary, or financial advisor in connection with the
transactions contemplated by this Agreement that would be entitled to any
brokerage, finder's or similar fee or commission, or financial advisory fee, in
connection with this Agreement or the transactions contemplated hereby, other
than Xxxxxxx, Xxxxx & Co., whose fees and expenses will be paid by West.
SECTION 4.19 INVESTMENT COMPANY ACT. None of West nor any of the West
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, nor an "investment adviser" within the meaning
of the Investment Advisers Act of 1940, as amended.
SECTION 4.20 HSR ACT. For purposes of determining compliance with the HSR
Act, West confirms that conduct of its businesses consists solely of investing
in, owning, operating and developing real estate for the benefit of its
shareholders.
SECTION 4.21 WEST RIGHTS AGREEMENT. West has taken all action so that the
entering into of this Agreement and the consummation of the transactions
contemplated hereby do not and will not enable or require the West Rights to be
separated from the shares of West
28
Common Stock with which the West Rights are associated, or to be distributed,
exercisable, exercised, or nonredeemable.
SECTION 4.22 STATE ANTITAKEOVER LAWS NOT APPLICABLE. By virtue of
provisions in West's Declaration of Trust, Bylaws or resolutions of the West
Board validly adopted under Section 3-603(e)(1) or Section 3-702(b) of the MGCL,
neither Section 3-602s of the MGCL nor Subtitle 7 of the MGCL (Sections 3-701
through 3-709 of the MGCL) applies to this Agreement or the Merger or the other
transactions contemplated hereby. Other than Section 3-602 and Subtitle 7 of the
MGCL, no state takeover statute or similar statute or regulation of the State of
Maryland (and, to the knowledge of West, of any other state or jurisdiction)
applies or purports to apply to this Agreement or the Merger or other
transactions contemplated hereby.
SECTION 4.23 REQUIRED WEST VOTE. The West Shareholders Approval (including
the requisite shareholder approval of West's Amended and Restated Declaration of
Trust necessary to consummate the Merger), being the affirmative vote of two
thirds of the outstanding shares of West Common Stock entitled to vote, voting
separately as a class, is the only vote of the holders of any class or series of
West's securities necessary to approve this Agreement, the Merger and the other
transactions contemplated hereby.
SECTION 4.24 BOARD RECOMMENDATION. The West Board, at a meeting duly
called and held, has by a unanimous vote of those trustees present (who
constituted 100% of the trustees then in office), including the unanimous vote
of the "Independent Trustees" (as defined in West's Declaration of Trust), (i)
determined and declared that this Agreement and the transactions contemplated
hereby, including the Merger, are advisable and fair to and in the best
interests of West and the shareholders of West, and (ii) resolved to recommend
that the holders of West Common Stock approve this Agreement and the
transactions contemplated herein, including the Merger.
SECTION 4.25 OPINION OF FINANCIAL ADVISOR. A special committee of the West
Board has received the opinion of Xxxxxxx, Sachs & Co., dated the date of this
Agreement, to the effect that the Exchange Ratio is fair, from a financial point
of view, to West and to the holders of West Common Stock other than the
Shareholder.
ARTICLE V
CONDUCT OF BUSINESSES PENDING THE CLOSING
SECTION 5.1 CONDUCT OF BUSINESS BY EAST. From the date of this Agreement
to the Effective Time (except as otherwise specifically required by the terms of
this Agreement), East shall, and shall cause the East Subsidiaries to, act and
carry on their respective businesses in the usual, regular and ordinary course
of business consistent with past practice and, to the extent consistent
therewith, use their best efforts to preserve intact their current business
organizations, keep available the services of their current officers and
employees and preserve their relationships with customers, suppliers, lessors,
lessees, and others having business
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dealings with them, to the end that their goodwill and ongoing businesses shall
not be impaired in any material respect at the Effective Time. Without limiting
the generality of the foregoing, from the date of this Agreement to the
Effective Time, East shall not, and shall not permit any of the East
Subsidiaries to, without the prior consent of the West:
(a) (i) except as contemplated by Section 5.3, declare, set aside or pay
any dividends on, or make any other distributions in respect of, any of its
capital stock, other than dividends and distributions by a direct or indirect
wholly owned East Subsidiary to its parent and the declaration and payment by
East of regular quarterly cash dividends on East Common Stock in an amount not
in excess of $.40 per share and regular quarterly cash dividends on East Series
A Preferred Stock in an amount not exceeding $.53906 per share, in each case
with usual record and payment dates for such dividends in accordance with East's
past dividend practices, (ii) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock, or (iii)
purchase, redeem or otherwise acquire any shares of capital stock of East or any
East Subsidiary or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities other than in accordance
with East's 1997 Long-Term Incentive Plan or the redemption of the East Rights
in accordance with the East Rights Agreement;
(b) authorize for issuance, issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock or the capital stock of any East
Subsidiary, any other voting securities or any securities convertible into, or
any rights, warrants or options to acquire, any such shares, voting securities
or convertible securities or any other securities or equity equivalents
(including without limitation stock appreciation rights), or contractual
obligation valued or measured by the value or market price of East Common Stock
(other than (y) the issuance of East Common Stock upon the exercise of East
Stock Options outstanding on the date of this Agreement and in accordance with
their present terms or pursuant to East's 401(k) Savings Plan and in accordance
with its terms or (z) the issuance of East securities pursuant to the East
Rights Agreement, such issuances being referred to herein as "East Permitted
Changes");
(c) amend its articles or certificate of incorporation, by-laws or other
comparable charter or organizational documents;
(d) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the stock or assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association, or other business organization or division thereof;
(e) sell, lease, mortgage or otherwise encumber or subject to any Lien or
otherwise dispose of any of its properties or assets that are material, alone or
in the aggregate, to East and the East Subsidiaries, taken as a whole, except
sales, leases, mortgages, or other encumbrances or Liens of properties or assets
in the ordinary course of business consistent with past practice;
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(f) except in connection with interim financing for the acquisition of
portfolio properties referred to in the East Disclosure Schedule, (i) incur any
indebtedness for borrowed money or guarantee any such indebtedness of another
person, issue or sell any debt securities or warrants or other rights to acquire
any debt securities of East or any East Subsidiary, guarantee any debt
securities of another person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
short-term borrowings incurred in the ordinary course of business consistent
with past practice, or (ii) make any loans, advances or capital contributions
to, or investments in, any other person, other than to East or any direct or
indirect wholly owned East Subsidiary;
(g) acquire or agree to acquire any assets that are material, alone or in
the aggregate, to East and the East Subsidiaries, taken as a whole, or make or
agree to make any capital expenditures except in the ordinary course of business
consistent with past practice or in connection with the acquisition of portfolio
properties referred to in the East Disclosure Schedule; pay, discharge or
satisfy any claims (including claims of shareholders), liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), except for the payment, discharge or satisfaction, of (i)
liabilities or obligations in the ordinary course of business consistent with
past practice or in accordance with their terms as in effect on the date hereof,
(ii) liabilities reflected or reserved against in, or contemplated by, the most
recent consolidated audited financial statements (or the notes thereof) of East
included in the East SEC Documents, or waive, release, grant, or transfer any
rights of material value or modify or change in any material respect any
existing license, lease, contract or other document, other than in the ordinary
course of business consistent with past practice;
(h) adopt or amend in any material respect (except as may be required by
law) any bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan, agreement,
trust, fund or other arrangement for the benefit or welfare of any employee,
director or former director or employee or, other than increases for individuals
(other than officers and directors) in the ordinary course of business
consistent with past practice; increase the compensation or fringe benefits of
any director, employee or former director or employee; pay any benefit not
required by any existing plan, arrangement or agreement, grant any new or
modified severance or termination arrangement or increase or accelerate any
benefits payable under any severance or termination pay policies in effect on
the date hereof, other than any such increase or acceleration provided for under
the East Benefit Plans as in effect on the date of this Agreement;
(i) change any material accounting principle used by it, except for such
changes as may be required to be implemented following the date of this
Agreement pursuant to generally accepted accounting principles or rules and
regulations of the SEC promulgated following the date hereof;
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(j) take any action that would, or is reasonably likely to, result in any
of its representations and warranties in this Agreement becoming untrue, or in
any of the conditions to the Merger set forth in Article VII not being
satisfied;
(k) except in the ordinary course of business and consistent with past
practice, make any tax election or settle or compromise any federal, state,
local or foreign income tax liability; or
(l) authorize any of, or commit or agree to take any of, the foregoing
actions.
SECTION 5.2 CONDUCT OF BUSINESS BY WEST. From the date of this Agreement
to the Effective Time (except as specifically required by the terms of this
Agreement), West shall, and shall cause the West Subsidiaries to, act and carry
on their respective businesses in the usual, regular and ordinary course of
business consistent with past practice and, to the extent consistent therewith,
use their best efforts to preserve intact their current business organizations,
keep available the services of their current officers and employees and preserve
their relationships with customers, suppliers, lessors, lessees, and others
having business dealings with them, to the end that their goodwill and ongoing
businesses shall not be impaired in any material respect at the Effective Time.
Without limiting the generality of the foregoing, from the date of this
Agreement to the Effective Time, West shall not, and shall not permit any of
West Subsidiaries to, without the prior consent of East:
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, other than dividends and
distributions by a direct or indirect wholly owned West Subsidiary to its parent
and the declaration and payment by West of regular quarterly cash dividends on
West Common Stock in an amount not in excess of $.34 per share and regular
quarterly cash dividends on West Series A Preferred Stock and West Series B
Preferred Stock in amounts not exceeding $.457946 and $.5625, respectively, per
share, in each case with usual record and payment dates for such dividends in
accordance with West's past dividend practices, (ii) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (iii) purchase, redeem or otherwise acquire any shares of
capital stock of West or any West Subsidiary or any other securities thereof or
any rights, warrants, or options to acquire any such shares or other securities
other than in accordance with West's 1997 Long-Term Incentive Plan or the
redemption of the West Rights in accordance with the West Rights Agreement;
(b) authorize for issuance, issue, deliver, sell, pledge or otherwise
encumber any shares of its capital stock or the capital stock of any West
Subsidiary, any other voting securities or any securities convertible into, or
any rights, warrants or options to acquire, any such shares, voting securities
or convertible securities or any other securities or equity equivalents
(including without limitation stock appreciation rights), or contractual
obligation valued or measured by the value or market price of West Common Stock
(other than (x) the issuance of West Common Stock in accordance with West's 1998
Dividend Reinvestment and Share Purchase Plan, (y) the
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issuance of West Common Stock upon the exercise of West Stock Options
outstanding on the date of this Agreement and in accordance with their present
terms or pursuant to West's 401(k) Savings Plan and in accordance with its terms
or (z) the issuance of West securities pursuant to the West Rights Agreement,
such issuances being referred to herein as "West Permitted Changes");
(c) amend its Declaration of Trust, except as contemplated by this
Agreement or as required to allow for the consummation of the Merger (including
such amendment as required to create the series of West New Preferred Stock as
contemplated by the Articles of Merger);
(d) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the stock or assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association, or other business organization or division thereof, unless such
transaction would not reasonably be expected to materially delay or impede the
consummation of the Merger;
(e) sell, lease, mortgage or otherwise encumber or subject to any Lien or
otherwise dispose of any of its properties or assets that are material, alone or
in the aggregate, to West and the West Subsidiaries, taken as a whole, except
sales, leases, mortgages, or other encumbrances or Liens of properties or assets
in the ordinary course of business consistent with past practice;
(f) (i) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or warrants or
other rights to acquire any debt securities of West or any West Subsidiary,
guarantee any debt securities of another person, enter into any "keep well" or
other agreement to maintain any financial statement condition of another person
or enter into any arrangement having the economic effect of any of the
foregoing, except for short-term borrowings incurred in the ordinary course of
business consistent with past practice, or (ii) make any loans, advances or
capital contributions to, or investments in, any other person, other than to
West or any direct or indirect wholly owned West Subsidiary;
(g) acquire or agree to acquire any assets that are material, alone or in
the aggregate, to West and the West Subsidiaries, taken as a whole, or make or
agree to make any capital expenditures except in the ordinary course of business
consistent with past practice; pay, discharge or satisfy any claims (including
claims of shareholders), liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), except for the payment, discharge or
satisfaction, of (i) liabilities or obligations in the ordinary course of
business consistent with past practice or in accordance with their terms as in
effect on the date hereof, (ii) liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated audited financial statements (or
the notes thereof) of West included in the West SEC Documents, or waive,
release, grant, or transfer any rights of material value or modify or change in
any material respect any existing license, lease, contract or other document,
other than in the ordinary course of business consistent with past practice;
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(h) adopt or amend in any material respect (except as may be required by
law) any bonus, profit sharing, compensation, share option, pension, retirement,
deferred compensation, employment or other employee benefit plan, agreement,
trust, fund or other arrangement for the benefit or welfare of any employee,
director, trustee, or former director, trustee, or employee or, other than
increases for individuals (other than officers and directors) in the ordinary
course of business consistent with past practice; increase the compensation or
fringe benefits of any director, trustee, employee or former director, trustee
or employee; pay any benefit not required by any existing plan, arrangement or
agreement, grant any new or modified severance or termination arrangement or
increase or accelerate any benefits payable under any severance or termination
pay policies in effect on the date hereof, other than any such increase or
acceleration provided for under the West Benefit Plans as in effect on the date
of this Agreement;
(i) change any material accounting principle used by it, except for such
changes as may be required to be implemented following the date of this
Agreement pursuant to generally accepted accounting principles or rules and
regulations of the SEC promulgated following the date hereof;
(j) take any action that would, or is reasonably likely to, result in any
of its representations and warranties in this Agreement becoming untrue, or in
any of the conditions to the Merger set forth in Article VII not being
satisfied;
(k) except in the ordinary course of business and consistent with past
practice, make any tax election or settle or compromise any federal, state,
local or foreign income tax liability; or
(l) authorize any of, or commit or agree to take any of, the foregoing
actions.
SECTION 5.3 COORDINATION OF DIVIDENDS. The first customary quarterly
dividend to be paid by West on West Common Stock after the Effective Time shall
be in the amount of $.355 per share. West and East shall coordinate with each
other the payment of dividends with respect to West Common Stock and East Common
Stock after the date hereof, it being the intention of the parties that holders
of West Common Stock and East Common Stock shall not receive two dividends, or
fail to receive one dividend, for any single calendar quarter with respect to
their shares of West Common Stock or East Common Stock or any shares of West
Common Stock that any such holder receives in exchange for shares of East Common
Stock in the Merger.
SECTION 5.4 NO SOLICITATION.
(a) Neither East nor any of the East Subsidiaries shall, nor shall East or
any of the East Subsidiaries authorize or permit any of its or their officers,
directors, agents, representatives, advisors or subsidiaries to, directly or
indirectly (a) solicit, initiate or encourage (including by way of furnishing
information), or take any other action to facilitate the submission
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of inquiries, proposals or offers from any person relating to any acquisition or
purchase of a substantial amount of assets of East or any of the East
Subsidiaries (other than in the ordinary course of business) or of over 9.8% of
any class of equity securities of East or any of the East Subsidiaries or any
tender offer (including a self tender offer) or exchange offer that if
consummated would result in any person beneficially owning 9.8% or more of any
class of equity securities of East or any of the East Subsidiaries, or any
merger, consolidation, business combination, sale of substantially all assets,
recapitalization, liquidation, dissolution or similar transaction involving East
or any of the East Subsidiaries, other than the transactions contemplated by
this Agreement, or any other transaction the consummation of which would or
could reasonably be expected to impede, interfere with, prevent or materially
delay the Merger (collectively, "East Alternative Proposals") or agree to or
endorse any East Alternative Proposal, or (b) enter into or participate in any
discussions or negotiations regarding any of the foregoing, or furnish to any
other person any information with respect to its business, properties or assets
or any of the foregoing, or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing; provided, however, that the foregoing
shall not prohibit East from (i) furnishing information concerning East and its
businesses, properties or assets (pursuant to an appropriate confidentiality
agreement customary under the circumstances) to a third party who has made an
unsolicited East Alternative Proposal, (ii) engaging in discussions or
negotiations with a third party who has made an unsolicited East Alternative
Proposal, (iii) following receipt of an unsolicited East Alternative Proposal,
taking and disclosing to its shareholders a position contemplated by Rule 14e-
2(a) under the Exchange Act or otherwise making disclosure to its shareholders,
(iv) following receipt of an unsolicited East Alternative Proposal, failing to
make or withdrawing or modifying its recommendation referred to in Section 3.24,
and/or (v) engaging in discussions or negotiations with Shareholder regarding an
unsolicited East Alterative Proposal from a third party, but in each case
referred to in the foregoing clauses (i) through (iv) (not in the case of the
foregoing clause (v)) only if and to the extent that the East Board shall have
concluded in good faith, after consulting with and considering the advice of
outside counsel, that such action is required by the East Board in the exercise
of its fiduciary duties to the shareholders of East under applicable law;
provided, further, that the Board of Directors of East shall not take any of the
foregoing actions referred to in clauses (i) through (iv) (but not clause (v))
until after giving at least one business day's advance notice to West with
respect to any of the actions specified in the foregoing clauses (i) through
(iv) that it shall take. In addition, if the East Board receives an unsolicited
East Alternative Proposal, then East shall promptly inform West in writing of
the material terms of such proposal and the identity of the person (or group)
making it. East will immediately cease and cause to be terminated all existing
activities, discussions or negotiations, if any, with any parties (other than
Shareholder) conducted heretofore with respect to any of the foregoing. Without
limiting the foregoing, it is understood that any violation of the restrictions
set forth in this Section 5.4(a) by any director or executive officer of East or
any of its subsidiaries or by any investment banker, financial adviser,
attorney, accountant, or other representative of East or any of its subsidiaries
shall be deemed to be a breach of this Section by East.
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(b) Neither West nor any of the West Subsidiaries shall, nor shall West or
any of the West Subsidiaries authorize or permit any of its or their officers,
trustees, directors, agents, representatives, advisors or subsidiaries to,
directly or indirectly (a) solicit, initiate or encourage (including by way of
furnishing information), or take any other action to facilitate the submission
of inquiries, proposals or offers from any person relating to any acquisition or
purchase of a substantial amount of assets of West or any of the West
Subsidiaries (other than in the ordinary course of business) or of over 9.8% of
any class of equity securities of West or any of the West Subsidiaries or any
tender offer (including a self tender offer) or exchange offer that if
consummated would result in any person beneficially owning 9.8% or more of any
class of equity securities of West or any of the West Subsidiaries, or any
merger, consolidation, business combination, sale of substantially all assets,
recapitalization, liquidation, dissolution or similar transaction involving West
or any of the West Subsidiaries, other than the transactions contemplated by
this Agreement, or any other transaction the consummation of which would or
could reasonably be expected to impede, interfere with, prevent or materially
delay the Merger (collectively, "West Alternative Proposals") or agree to or
endorse any West Alternative Proposal, or (b) enter into or participate in any
discussions or negotiations regarding any of the foregoing, or furnish to any
other person any information with respect to its business, properties or assets
or any of the foregoing, or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing; provided, however, that the foregoing
shall not prohibit West from (i) furnishing information concerning West and its
businesses, properties or assets (pursuant to an appropriate confidentiality
agreement customary under the circumstances) to a third party who has made an
unsolicited West Alternative Proposal, (ii) engaging in discussions or
negotiations with a third party who has made an unsolicited West Alternative
Proposal, (iii) following receipt of an unsolicited West Alternative Proposal,
taking and disclosing to its shareholders a position contemplated by Rule 14e-
2(a) under the Exchange Act or otherwise making disclosure to its shareholders,
(iv) following receipt of an unsolicited West Alternative Proposal, failing to
make or withdrawing or modifying its recommendation referred to in Section 4.24,
and/or (v) engaging in discussions or negotiations with Shareholder regarding an
unsolicited West Alterative Proposal from a third party, but in each case
referred to in the foregoing clauses (i) through (iv) (not in the case of the
foregoing clause (v)) only if and to the extent that the West Board shall have
concluded in good faith, after consulting with and considering the advice of
outside counsel, that such action is required by the West Board in the exercise
of its fiduciary duties to the shareholders of West under applicable law;
provided, further, that the West Board shall not take any of the foregoing
actions referred to in clauses (i) through (iv) (but not clause (v)) until after
giving at least one business day's advance notice to East with respect to any of
the actions specified in the foregoing clauses (i) through (iv) that it shall
take. In addition, if the Board of Trustees of West receives an unsolicited West
Alternative Proposal, then West shall promptly inform East in writing of the
material terms of such proposal and the identity of the person (or group) making
it. West will immediately cease and cause to be terminated existing activities,
discussions or negotiations, if any, with any parties (other than Shareholder)
conducted heretofore with respect to any of the foregoing. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
this Section 5.4(b) by any trustee or executive officer of West or any of its
subsidiaries or by any investment banker, financial adviser,
36
attorney, accountant, or other representative of West or any of its subsidiaries
shall be deemed to be a breach of this Section by West.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 ACCESS TO INFORMATION. Each of the parties shall afford to
the other party and its respective accountants, counsel, financial advisors and
other representatives (the "Representatives") full access during normal business
hours throughout the period prior to the Closing to all properties, books,
contracts, commitments and records (including, but not limited to, Tax Returns)
of such party, as appropriate, and, during such period, each shall furnish
promptly to the other (a) a copy of each report, schedule and other document
filed or received pursuant to the requirements of federal or state securities
laws or filed with the SEC in connection with the transactions contemplated by
this Agreement, and (b) such other information concerning its business,
properties and personnel as shall be reasonably requested; provided that no
investigation pursuant to this Section 6.1 shall affect any representation or
warranty made herein or the respective conditions to the obligations of the
parties hereto to consummate the transactions contemplated hereby. Each party
shall promptly advise each other party in writing of any change or the
occurrence of any event after the date of this Agreement having, or which,
insofar as can reasonably be foreseen, in the future may have, a material
adverse effect on the business, operations, properties, assets, condition
(financial or other), results of operations or prospects of such party or its
subsidiaries taken as a whole.
SECTION 6.2 REGISTRATION STATEMENTS AND PROXY STATEMENT AND PROSPECTUS.
West and East shall file with the SEC as soon as is reasonably practicable after
the date hereof the Proxy Statement and Prospectus, shall use all reasonable
efforts to have the Registration Statement declared effective by the SEC as
promptly as practicable, and shall take any action required to be taken under
applicable state blue sky or securities laws in connection with the Merger. West
and East shall promptly furnish to each other all information, and take such
other actions as may reasonably be requested in connection with any action by
either of them in connection with this Section and shall cooperate with one
another and use their respective best efforts to facilitate the expeditious
consummation of the transactions contemplated by this Agreement. West shall also
file with the SEC a registration statement on Form 8-A under the Exchange Act to
register the West New Preferred Stock as soon as reasonably practicable after
the date thereof and shall use all reasonable efforts to have such registration
statement declared effective prior to the Closing Date.
SECTION 6.3 LETTERS OF ACCOUNTANTS.
(a) East shall use its best efforts to cause to be delivered to West two
letters of Ernst & Young, East's independent public accountants, one dated a
date within two business days before the date on which the Registration
Statement shall become effective and one dated a date within two business days
before the Closing Date, each addressed to West, in form and substance
reasonably satisfactory to West and customary in scope and substance for comfort
37
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
(b) West shall use its best efforts to cause to be delivered to East two
letters of KPMG Peat Marwick LLP, West's independent public accountants, one
dated a date within two business days before the date on which the Registration
Statement shall become effective and one dated a date within two business days
before the Closing Date, each addressed to East, in form and substance
reasonably satisfactory to East and customary in scope and substance for comfort
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
SECTION 6.4 SHAREHOLDERS APPROVAL. As soon as practicable following the
date upon which the Registration Statement is declared effective by the SEC,
West shall use its best efforts to obtain the West Shareholders Approval,
including the requisite shareholder approval of amendments to West's Declaration
of Trust necessary to consummate the Merger, and East shall use its best efforts
to obtain the East Shareholders Approval. The West Board and East Board shall
recommend to their respective shareholders the approval of this Agreement and
the Merger and the other transactions contemplated hereby; provided, however,
that (a) prior to the meeting of shareholders of East, the East Board may
withdraw, modify or amend such recommendation to the extent permitted by the
first proviso to Section 5.4(a) and subject to compliance with Section 5.4(a),
and (b) prior to the meeting of shareholders of West, the West Board may
withdraw, modify or amend such recommendation to the extent permitted by the
first proviso to Section 5.4(b) and subject to compliance with Section 5.4(b).
SECTION 6.5 AFFILIATE AGREEMENTS. East shall use its best efforts to
cause each principal executive officer, each director, and each other person who
is an "affiliate," as that term is used in paragraphs (c) and (d) of Rule 145
under the Securities Act (including Shareholder), of East to deliver to West on
or prior to the Closing Date a written agreement (an "Affiliate Agreement") to
the effect that such person will not offer to sell, sell or otherwise dispose of
any West Stock or West New Preferred Stock issued in the Merger, except, in each
case, pursuant to an effective registration statement or in compliance with Rule
145, as amended from time to time, or in a transaction which, in the opinion of
legal counsel satisfactory to West, is exempt from the registration requirements
of the Securities Act.
SECTION 6.6 EXCHANGE. West shall use its best efforts to effect, at or
before the Closing Date, authorization for listing on the Exchange, upon
official notice of issuance, the West Common Stock and West New Preferred Stock
to be issued in the Merger.
SECTION 6.7 EXPENSES. Except as provided in Section 8.3, whether or not
the Merger is consummated, all fees and expenses (including financial advisory
and other professional services fees) incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses, except that those fees and expenses incurred in connection with
filing, printing and distributing the Proxy Statement and Prospectus shall be
shared equally by West and East.
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SECTION 6.8 AGREEMENT TO COOPERATE. Subject to the terms and conditions
herein provided, the parties hereto shall cooperate and use its respective best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations, and under contracts giving rise to the East Required Consents or
West Required Consents, to consummate and make effective the transactions
contemplated by this Agreement, including using its best efforts to identify and
obtain all necessary or appropriate waivers, consents and approvals, to effect
all necessary registrations, filings and submissions (including, but not limited
to, the East Required Statutory Approvals, West Required Statutory Approvals,
any filings under federal and state securities laws and the HSR Act) and to lift
any injunction or other legal bar to the transactions contemplated hereby (and,
in such case, to proceed with such transactions as expeditiously as possible),
subject, however, to obtaining the East Shareholders Approval and West
Shareholders Approval. West agrees to expressly assume as of the Effective Time
the obligations of East under the Indenture dated August 14, 1997 between East
and State Street Bank and Trust Company, as trustee, by executing and delivering
a supplemental indenture in accordance with the terms of such Indenture. In
addition, each of West and East agrees to use all reasonable efforts to cause
the Merger to qualify as a reorganization within the meaning of Section 368 of
the Code, to maintain the status of West as a "real estate investment trust"
under the Code, and to obtain the tax opinions contemplated in Sections 7.1(e)
and 7.1(f) from Xxxxx, Xxxxx & Xxxxx (including using all reasonable efforts to
cause shareholders of East who own 5% or more of the outstanding East Common
Stock to make such factual representations to Xxxxx, Xxxxx & Xxxxx as that firm
may request in connection with its tax opinions).
SECTION 6.9 PUBLIC STATEMENTS. The parties shall consult with each other
prior to issuing any press release or any written public statement with respect
to this Agreement or the transactions contemplated hereby and shall not issue
any such press release or written public statement prior to review and approval
by the other parties, except that prior review and approval shall not be
required if, in the reasonable judgment of the party seeking to issue such
release or public statement, prior review and approval would prevent the timely
dissemination of such release or announcement in violation of any applicable
law, rule, regulation or policy of the Exchange.
SECTION 6.10 CORRECTIONS TO THE PROXY STATEMENT AND PROSPECTUS AND
REGISTRATION STATEMENT. Prior to the date of the East Shareholders Approval and
West Shareholders Approval, each of West and East shall correct promptly any
information provided by it to be used specifically in the Proxy Statement and
Prospectus and Registration Statement or relating to it and incorporated by
reference into the Proxy Statement and Prospectus and Registration Statement
that shall have become false or misleading in any material respect and shall
take all steps necessary to file with the SEC and have declared effective or
cleared by the SEC any amendment or supplement to the Proxy Statement and
Prospectus or the Registration Statement so as to correct the same and to cause
the Proxy Statement and Prospectus as so corrected to be disseminated to the
shareholders of East and West, in each case to the extent required by applicable
law.
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SECTION 6.11 UPDATED SCHEDULES. Each party shall deliver to the other
party at least two days prior to the Closing Date updated schedules to this
Agreement reflecting any changes in such party's scheduled items occurring from
the date hereof to the Closing Date.
SECTION 6.12 STANDSTILL AGREEMENTS; CONFIDENTIALITY AGREEMENTS. During the
period from the date of this Agreement through the Effective Time, each of West
and East shall not terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it or any of its subsidiaries
is a party. During such period, each of West and East shall enforce, to the
fullest extent permitted under applicable law, the provisions of any such
agreement, including by obtaining injunctions to prevent any breaches of such
agreements and to enforce specifically the terms and provisions thereof in any
federal or state court having jurisdiction.
SECTION 6.13 INDEMNIFICATION.
(a) West agrees that all rights to indemnification from liabilities or
acts or omissions occurring at or prior to the Effective Time now existing in
favor of the current or former directors or officers of East and the East
Subsidiaries as provided in their respective articles of incorporation or bylaws
(or comparable organizational documents) and any indemnification agreements or
arrangements of East and the East Subsidiaries shall survive the Merger and
shall continue in full force and effect in accordance with their terms with
respect to matters arising before the Effective Time. West shall pay any
expenses of any indemnified person under this Section 6.13 in advance of the
final disposition of any action, proceeding or claim relating to any such act or
omission to the fullest extent permitted under the MGCL upon receipt from the
applicable indemnified person to whom advances are to be advanced of any
undertaking to repay such advances required under the MGCL. In addition, from
and after the Effective Time, directors or officers of East who become trustees
or officers of West will be entitled to the same indemnity rights and
protections as are afforded to other trustees and officers of West.
(b) In the event that West or any of its successors or assigns (i)
consolidates with or merges into any other person and is not the continuing or
surviving corporation or entity of such consolidation or merger or (ii)
transfers or conveys all or substantially all of its properties and assets to
any person, then, and in each such case, proper provision will be made so that
the successors and assigns of West will assume the obligations set forth in this
Section.
(c) The provisions of this Section 6.13 are intended to be for the benefit
of, and will be enforceable by, each indemnified party, his or her heirs and his
or her representatives and are in addition to, and not in substitution for, any
other rights to indemnification or contribution that any such person may have by
contract or otherwise.
40
ARTICLE VII
CONDITIONS
SECTION 7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each party to effect the Merger shall be subject to the
fulfillment or waiver at or prior to the Closing of the following conditions:
(a) The other party shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior to
the Closing and the representations and warranties of the other party shall be
true and correct in all material respects on and as of (i) the date made and
(ii) the Closing Date with the same effect as if made on that date; and the
other party shall have delivered a certificate of its chief executive officer or
a co-chairman to that effect;
(b) Each of the West Shareholders Approval (including the requisite
approval of West's shareholders to West's Amended and Restated Declaration of
Trust) and the East Shareholders Approval shall have been obtained;
(c) The Form 8-A registration statement of West for the West New Preferred
Stock shall have been declared effective by the SEC and the Registration
Statement shall have become effective in accordance with the Securities Act, and
no stop order suspending such effectiveness shall have been issued and remain in
effect and no proceeding for that purpose shall have been initiated or
threatened by the Commission;
(d) The shares of West Common Stock and West New Preferred Stock issuable
in the Merger shall have been approved for listing on the Exchange, subject to
notice of issuance;
(e) Each of West and East shall have received a favorable opinion (in form
and substance reasonably satisfactory to West and East, respectively) from
Xxxxx, Xxxxx & Xxxxx (who may rely upon factual representations made by West,
East, and shareholders of East who hold 5% or more of the outstanding East
Common Stock) to the effect that for United States federal income tax purposes
the Merger shall qualify as a reorganization within the meaning of Section 368
of the Code and that each of West and East will be a party to the reorganization
within the meaning of Section 368(b) of the Code;
(f) Each of West and East shall have received a favorable opinion (in form
and substance reasonably satisfactory to West and East, respectively) from
Xxxxx, Xxxxx & Xxxxx (who may rely upon factual representations made by West and
East) to the effect that the consummation of the Merger and the performance of
this Agreement will not jeopardize the status of West as a "real estate
investment trust" under the Code;
(g) No preliminary or permanent injunction or other order or decree by any
federal or state court which prevents the consummation of the Merger shall have
been issued and remain
41
in effect (each party agreeing to use its best efforts to have any such
injunction, order or decree lifted); and
(h) Each of the East Required Statutory Approvals described in Section
3.3(c)(i) and (ii) and West Required Statutory Approvals described in Section
4.3(c)(i) and (ii) shall have been obtained and be in effect at the Closing, and
the East Required Consents and West Required Consents shall have been obtained
and be in effect at the Closing.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
shareholders of West and East:
(a) by mutual written consent of West and East;
(b) by West or East, if the Merger shall not have been consummated on or
before October 31, 1998 (the "Termination Date") (other than by reason of a
breach by the party seeking to terminate this Agreement of its obligations
hereunder);
(c) by West or East, if an injunction, order or decree described in
Section 7.1(g) shall be in effect and shall have become final and nonappealable,
provided that the party seeking to terminate this Agreement has used its best
efforts to have such injunction, order, or decree lifted;
(d) unilaterally by West or East (i) if the other party (A) fails to
perform any covenant or agreement in this Agreement in any material respect, and
does not cure the failure in all material respects within 15 business days after
the terminating party delivers written notice of the alleged failure or (B)
fails to fulfill or complete a condition to the obligations of the terminating
party (which condition is not waived) by reason of a breach by the non-
terminating party of its obligations hereunder or (ii) if any condition to the
obligations of the terminating party is not satisfied (other than by reason of a
breach by that party of its obligations hereunder), and it reasonably appears
that the condition cannot be satisfied prior to the Termination Date;
(e) by West, if (1) East shall have exercised a right specified in the
first proviso to Section 5.4 (a) with respect to an East Alternative Proposal
and shall, directly or through Representatives, continue discussions with any
third party concerning such East Alternative Proposal for more than 15 business
days after the date of receipt of such East Alternative Proposal; or (2) (A) an
East Alternative Proposal that is publicly disclosed shall have been commenced,
publicly proposed or communicated to East which contains a proposal as to price
(without regard to whether such proposal specifies a specific price or a range
of potential prices) and (B) East shall not have rejected such proposal within
15 business days of its receipt or, if sooner, the date its existence first
becomes publicly disclosed;
42
(f) by East, if East validly exercises, pursuant to Section 5.4(a), the
right specified in clause (iv) of the first proviso to Section 5.4(a);
(g) by East, if (1) West shall have exercised a right specified in the
first proviso to Section 5.4(b) with respect to a West Alternative Proposal and
shall, directly or through Representatives, continue discussions with any third
party concerning such West Alternative Proposal for more than 15 business days
afer the date of receipt of such West Alternative Proposal; or (2) (A) a West
Alternative Proposal that is publicly disclosed shall have been commenced,
publicly proposed or communicated to West which contains a proposal as to price
(without regard to whether such proposal specifies a specific price or a range
of potential prices) and (B) West shall not have rejected such proposal within
15 business days of its receipt or, if sooner, the date its existence first
becomes publicly disclosed; or
(h) by West, if West validly exercises, pursuant to Section 5.4(b), the
right specified in clause (iv) of the first proviso to Section 5.4(b);
provided, however, that any termination of this Agreement pursuant to this
Section 8.1 shall require the approval of the Special Committee of the Board of
the terminating party.
SECTION 8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement, as provided in Section 8.1, this Agreement shall forthwith become
void and there shall be no further obligation on the part of any party hereto or
their respective officers or directors or trustees (except as set forth in this
Section 8.2 and in Sections 6.7 and 8.3). Nothing in this Section 8.2 shall
relieve any party from liability for any breach of this Agreement.
SECTION 8.3 PAYMENT UPON CERTAIN TERMINATIONS.
(a) In the event that this Agreement is terminated by East pursuant to
Section 8.1(f) or, after the date hereof but prior to any termination of this
Agreement, East or the East Board shall have taken any action to make the East
Rights Agreement inapplicable (through termination or otherwise) to any person
other than West or Shareholder, then, concurrently with any such termination,
East shall pay West, in accordance with Section 8.4, a fee equal to $25 million
by wire transfer of same day funds, and East shall reimburse West its out-of-
pocket expenses promptly upon request therefor.
(b) In the event that (A) an East Pre-Termination Alternative Proposal
Event (as defined below) shall occur and thereafter this Agreement is terminated
by West pursuant to Section 8.1(e) and (B) prior to the date that is 12 months
after the date of such termination East enters into any letter of intent,
agreement in principle, acquisition agreement or similar agreement relating to
any East Alternative Proposal, then East shall promptly, but in no event later
than two business days after the date such agreement is entered into, pay West,
in accordance with Section 8.4, a fee equal to $25 million by wire transfer of
same day funds, and East shall reimburse West its out-of-pocket expenses
promptly upon request therefor.
43
(c) For purposes of Section 8.3(b), an "East Pre-Termination Alternative
Proposal Event" shall be deemed to occur if an East Alternative Proposal shall
have been made known to East or has been made directly to its shareholders
generally or any person shall have publicly announced an intention (whether or
not conditional) to make an East Alternative Proposal. East acknowledges that
the agreements contained in Section 8.3(a) and (b) are an integral part of the
transactions contemplated by this Agreement, and that the amounts to be paid
pursuant to Section 8.3(a) and (b) constitute liquidated damages and not a
penalty.
(d) In the event that this Agreement is terminated by West pursuant to
Section 8.1(h) or, after the date hereof but prior to any termination of this
Agreement, West or the West Board shall have taken any action to make the West
Rights Agreement inapplicable (through termination or otherwise) to any person
other than East or Shareholder, then, concurrently with any such termination,
West shall pay East, in accordance with Section 8.4, a fee equal to $25 million
by wire transfer of same day funds, and West shall reimburse East its out-of-
pocket expenses promptly upon request therefor.
(e) In the event that (A) a West Pre-Termination Alternative Proposal Event
(as defined below) shall occur and thereafter this Agreement is terminated by
East pursuant to Section 8.1(g) and (B) prior to the date that is 12 months
after the date of such termination West enters into any letter of intent,
agreement in principle, acquisition agreement or similar agreement relating to
any West Alternative Proposal, then West shall (1) promptly, but in no event
later than two business days after the date such agreement is entered into, pay
East, in accordance with Section 8.4, a fee equal to $25 million by wire
transfer of same day funds, and West shall reimburse East its out-of-pocket
expenses promptly upon request therefor.
(f) For purposes of Section 8.3(e), a "West Pre-Termination Alternative
Proposal Event" shall be deemed to occur if a West Alternative Proposal shall
have been made known to West or has been made directly to its shareholders
generally or any person shall have publicly announced an intention (whether or
not conditional) to make a West Alternative Proposal. West acknowledges that
the agreements contained in Section 8.3(d) and (e) are an integral part of the
transactions contemplated by this Agreement, and that the amounts to be paid
pursuant to Section 8.3(d) and (e) constitute liquidated damages and not a
penalty.
SECTION 8.4 PAYMENT OF TERMINATION AMOUNT.
(a) In the event that West or East (for purposes of this Section, the
"Paying Party") is obligated to pay an amount pursuant to Section 8.3 (the
"Section 8.3 Amount"), the Paying Party shall pay to the other party hereto (for
purposes of this Section , the "Receiving Party"), from the applicable Section
8.3 Amount deposited into escrow in accordance with the next sentence, an amount
equal to the lesser of (m) the Section 8.3 Amount or (n) the sum of (1) the
maximum amount that can be paid to the Receiving Party without causing the
Receiving Party to fail to meet the requirements of Sections 856(c)(2) and (3)
of the Code determined as if the payment of such amount did not constitute
income described in Sections 856(c)(2)(A)-(H) or 856(c)(3)(A)-(I) of the Code
("Qualifying Income"), as determined by the Receiving Party's
44
certified public accountants, plus (2) in the event the Receiving Party receives
either (X) a letter from the Receiving Party's counsel indicating that the
Receiving Party has received a ruling from the U.S. Internal Revenue Service
("IRS") described in Section 8.4(b)(ii) or (Y) an opinion from the Receiving
Party's counsel as described in Section 8.4(b)(ii), an amount equal to the
Section 8.3 Amount less the amount payable under clause (1) above. To secure
the Paying Party's obligation to pay these amounts, the Paying Party shall
deposit into escrow an amount in cash equal to the Section 8.3 Amount with an
escrow agent selected by the Receiving Party and on such terms (subject to
Section 8.4(b)) as shall be agreed upon by the Receiving Party and the escrow
agent. The payment of deposit into escrow of the Section 8.3 Amount pursuant to
this Section 8.4(a) shall be made on the date payment is due under Section 8.3
by wire transfer of same day funds.
(b) The escrow agreement shall provide that the Section 8.3 Amount in
escrow or any portion thereof shall not be released to the Receiving Party
unless the escrow agent receives any one or combination of the following: (i) a
letter from the Receiving Party's certified public accountants indicating the
maximum amount that can be paid by the escrow agent to the Receiving Party
without causing the Receiving Party to fail to meet the requirements of Sections
856(c)(2) and (3) of the Code determined as if the payment of such amount did
not constitute Qualifying Income or a subsequent letter from the Receiving
Party's accountants revising that amount, in which case the escrow agent shall
release such amount to the Receiving Party, or (ii) a letter from the Receiving
Party's counsel indicating that the Receiving Party received a ruling from the
IRS holding that the receipt by the Receiving Party of the Section 8.3 Amount
would either constitute Qualifying Income or would be excluded from gross income
within the meaning of Sections 856(c)(2) and (3) of the Code (or alternatively,
the Receiving Party's legal counsel has rendered a legal opinion to the effect
that the receipt by the Receiving Party of the Section 8.3 Amount would either
constitute Qualifying Income or would be excluded from gross income within the
meaning of Section 856(c)(2) and (3) of the Code), in which case the escrow
agent shall release the remainder of the Section 8.3 Amount to the Receiving
Party. The Paying Party agrees to amend this Section 8.4 at the request of the
Receiving Party in order to (x) maximize the portion of the Section 8.3 Amount
that may be distributed to the Receiving Party hereunder without causing the
Receiving Party to fail to meet the requirements of Sections 856(c)(2) and (3)
of the Code, (y) improve the Receiving Party's chances of securing a favorable
ruling described in this Section 8.6(b) or (z) assist the Receiving Party in
obtaining a favorable legal opinion from its counsel as described in this
Section 8.6(b); provided that the Receiving Party's legal counsel has rendered a
legal opinion to the Receiving Party to the effect that such amendment would not
cause the Receiving Party to fail to meet the requirements of Section 856(c)(2)
or (3) of the Code. The escrow agreement shall also provide that any portion of
the Section 8.3 Amount held in escrow for five years shall be released by the
escrow agent to the Paying Party. The Paying Party shall not be a party to such
escrow agreement and shall not bear any cost of or have liability resulting from
the escrow agreement.
(c) Notwithstanding anything to the contrary set forth in this Agreement,
in the event that the Receiving Party is required to file suit to seek all or a
portion of an amount pursuant to Section 8.3, it shall be entitled to all
expenses, including attorneys' fees and expenses, which
45
it has incurred in enforcing its rights hereunder, provided that payment of such
expenses shall be subject to the limitations of Section 8.4(a) (determined as if
such expenses were included in the Section 8.3 Amount).
SECTION 8.5 AMENDMENT AND WAIVER. This Agreement may not be amended
except by an instrument in writing signed on behalf of both of the parties
hereto and in compliance with applicable law; provided, that, (a) this Agreement
may not be amended in any material respect following the West Shareholders
Approval or East Shareholders Approval; (b) at any time prior to the Closing,
the parties hereto may (i) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (ii) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto and (iii) waive compliance with any of the agreements
or conditions contained herein (any agreement on the part of a party hereto to
any such extension or waiver being valid if set forth in an instrument in
writing signed on behalf of such party); and (c) the approval of each of the
Special Committees shall be required for an amendment or modification of this
Agreement and the approval of the Special Committee of the Board of the
extending or waiving party shall be required for any extension by East or West
of the time of the performance of any obligations or other acts of West or East
and any waiver of any of West's or East's obligations under this Agreement.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 9.2 NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally, sent via a
recognized overnight courier with delivery confirmed in writing or sent via
facsimile with confirmed receipt to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) If to West, to:
Security Capital Pacific Trust
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: R. Xxxx Xxxxxxx
Fax: 000-000-0000
46
with a copy to:
Xxxxx, Xxxxx & Xxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Fax: (000) 000-0000
and to:
Xxxxxx, Xxxxxx & Xxxxx LLP
000 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: R. Xxxxxxx Xxxxxx
Fax: (000) 000-0000
(b) If to East, to:
Security Capital Atlantic Incorporated
Six Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxxx
Fax: 000-000-0000
with a copy to:
Xxxxx, Xxxxx & Xxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx
Fax: (000) 000-0000
and
Shearman & Sterling
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx
Fax: 000-000-0000
SECTION 9.3 INTERPRETATION. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
47
SECTION 9.4 MISCELLANEOUS. This Agreement (including the documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof and
thereof; (b) shall not be assigned by operation of law or otherwise; and (c)
shall be governed in all respects, including validity, interpretation and
effect, by the laws of the State of Maryland (without giving effect to the
provisions thereof relating to conflicts of law).
SECTION 9.5 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
SECTION 9.6 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto. Except as provided in Section
6.13, 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.
SECTION 9.7 LIMITATION OF LIABILITY. Any obligation or liability
whatsoever of East or West which may arise at any time under this Agreement or
any obligation or liability which may be incurred by it pursuant to any other
instrument, transaction or undertaking contemplated hereby shall be satisfied,
if at all, only out of East's or West's assets respectively. No such obligation
or liability shall be personally binding upon, nor shall resort for the
enforcement thereof be had to, the property of any of its shareholders,
trustees, officers, employees or agents, regardless of whether such obligation
or liability is in the nature of contract, tort or otherwise.
SECTION 9.8 NO PRESUMPTION AGAINST DRAFTER. Each of the parties hereto
have jointly participated in the negotiation and drafting of this Agreement. In
the event of an ambiguity or a question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by each of the parties hereto
and no presumptions or burdens of proof shall arise favoring any party by virtue
of the authorship of any of the provisions of this Agreement.
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
48
SECURITY CAPITAL PACIFIC TRUST
By: /s/ R. Xxxx Xxxxxxx
---------------------------------------
R. Xxxx Xxxxxxx
Chief Executive Officer and President
SECURITY CAPITAL ATLANTIC INCORPORATED
By: /s/ Xxxxxxxxx X. Xxxxx
---------------------------------------
Xxxxxxxxx X. Xxxxx
Co-Chairman and Chief Operating Officer
49
EXHIBIT A
---------
ARTICLES OF MERGER
Merging
SECURITY CAPITAL ATLANTIC INCORPORATED
(a corporation of the State of Maryland)
Into
SECURITY CAPITAL PACIFIC TRUST
(a real estate investment trust of the State of Maryland)
SECURITY CAPITAL ATLANTIC INCORPORATED, a corporation organized and
existing under the laws of the State of Maryland (the "East"), and SECURITY
CAPITAL PACIFIC TRUST, a real estate investment trust organized and existing
under the laws of the State of Maryland ("West"), agree that East shall be
merged with and into West. The terms and conditions of the merger and the mode
of carrying the same into effect are as herein set forth in these Articles of
Merger.
FIRST: The parties to these Articles of Merger are [West], a real estate
investment trust organized and existing under the laws of the State of Maryland,
and [East], a corporation organized and existing under the laws of the State of
Maryland.
SECOND: East shall be merged with and into West in accordance with the
Corporations and Associations Article of the Annotated Code of Maryland (the
"Maryland Code") and West shall survive the merger and continue under the name
"Archstone Communities Trust" (the "Surviving Entity"). At the effective time of
the merger (the "Effective Time"), the separate existence of East shall cease in
accordance with the provisions of the Maryland Code. From and after the
Effective Time, the Surviving Entity shall continue its existence as a real
estate investment trust under the Maryland Code, shall succeed to all of the
properties, liabilities and other assets and shall be subject to all of the
liabilities and obligations of East without further action by either of the
parties hereto, and will continue to be governed by the laws of the State of
Maryland, including the Maryland Code. At the Effective Time, the declaration of
trust and bylaws of West in effect immediately prior to the Effective Time shall
become the declaration of trust and bylaws of the Surviving Entity. At the
Effective Time, the trustees and officers in office immediately prior the
Effective Time shall be the trustees and officers of the Surviving Entity, and
such persons shall hold such positions until their respective successors are
duly elected or appointed and qualified or until their earlier death,
resignation, or removal, in accordance with the declaration of trust and bylaws
of the Surviving Entity.
1
THIRD: The resident agent and office of each of East and West is located
at 00 Xxxx Xxxxx Xxxxxx, Xxxxxxxxx, Xxxxx xx Xxxxxxxx 00000. The principal
office of West is located at 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxx
00000, and the principal office of East is located at Six Xxxxxxxx Xxxxxx, Xxxxx
000, Xxxxxxx, Xxxxxxx 00000. Neither East nor West owns any interest in land in
any county in the State of Maryland.
FOURTH: The terms and conditions of the transaction set forth in these
Articles of Merger were advised, authorized and approved by each party to these
Articles of Merger in the manner and by the vote required by East's articles of
incorporation or West's declaration of trust, as the case may be, and the laws
of the State of Maryland.
FIFTH: The merger was duly (a) advised by the board of directors of East
by the adoption of a resolution declaring that the merger set forth in these
Articles of Merger was advisable on substantially the terms and conditions set
forth or referred to in the resolution and directing that the proposed merger be
submitted for consideration at a special meeting of the shareholders of East and
(b) approved by the shareholders of East by the vote required by its articles of
incorporation and the Maryland Code.
SIXTH: The merger was duly (a) advised by the board of trustees of West by
the adoption of a resolution declaring that the merger set forth in these
Articles of Merger was advisable on substantially the terms and conditions set
forth or referred to in the resolution and directing that the proposed merger be
submitted for consideration at a special meeting of the shareholders of West and
(b) approved by the shareholders of West by the vote required by its declaration
of trust and the Maryland Code.
SEVENTH: The charter of the Surviving Entity will not be amended as a
result of the Merger.
EIGHTH: The total number of shares of beneficial interest of all classes
which West has authority to issue is two hundred fifty million (250,000,000)
shares of beneficial interest, of the par value of one dollar ($1.00) each, all
such shares having an aggregate par value of two hundred fifty million dollars
($250,000,000). Of such shares of beneficial interest, nine million two hundred
thousand (9,200,000) shares have been classified as Series A Cumulative
Convertible Preferred Shares of Beneficial Interest, four million six hundred
thousand (4,600,000) shares have been classified as Series B Cumulative
Redeemable Preferred Shares, two million (2,000,000) shares have been classified
as Series C Cumulative Redeemable Preferred Shares ("West New Preferred Stock")
and nine hundred thirty thousand fifty (930,050) shares have been classified as
Junior Participating Preferred Shares.
The total number of shares of stock of all classes which East has authority
to issue is two hundred fifty million (250,000,000) shares, all such shares
having an aggregate par value of two million five hundred thousand dollars
($2,500,000). Of such two hundred fifty million shares, two million (2,000,000)
shares have been classified as Series A Cumulative Redeemable
2
Preferred Stock and seven hundred forty six thousand thirty two (746,032) shares
have been classified as Series A Junior Participating Preferred Stock.
NINTH: As of the Effective Time, by virtue of the Merger and without any
action on the part of West, East, or any holder of any of the following
securities:
(a) Cancellation of Treasury Stock and West-Owned East Capital Stock.
Each share of the common stock, $.01 par value per share, of East ("East Common
Stock"), together with the rights (the "East Rights") attached thereto to
purchase Series A Junior Participating Preferred Stock of East (the "East Junior
Preferred Stock") issued pursuant to the Rights Agreement, dated as of March 12,
1996, between East and The First National Bank of Boston, as Rights Agent (as it
may be amended), that is owned by East or any subsidiary of East, and each share
of East Common Stock (with the associated East Rights) that is owned by West or
any subsidiary of West shall automatically be cancelled and retired and shall
cease to exist, and no consideration shall be delivered or deliverable in
exchange therefor. Each share of Series A Cumulative Redeemable Preferred Stock
of East ("East Series A Preferred Stock") that is owned by East or any
subsidiary of East, and each share of East Series A Preferred Stock that is
owned by West or any subsidiary of West shall automatically be cancelled and
retired and shall cease to exist, and no consideration shall be delivered or
deliverable in exchange therefor.
(b) Conversion of East Common Stock. Subject to Article TENTH, each
issued and outstanding share of East Common Stock (with the associated East
Rights), other than shares cancelled pursuant to paragraph (a) of this Article,
shall be converted into the right to receive one (1) (the "Exchange Ratio")
validly issued, fully paid, and nonassessable share of beneficial interest,
$1.00 par value per share, of West ("West Common Stock"), together with the
rights (the "West Rights") attached thereto to purchase Junior Participating
Preferred Stock of West issued pursuant to the Rights Agreement, dated as of
July 9, 1994 between West and Chemical Bank, as Rights Agent (as it may be
amended). The consideration to be issued to the holders of East Common Stock is
referred to herein as the "Merger Consideration."
(c) Conversion of East Series A Preferred Stock. Subject to Article
TENTH, each issued and outstanding share of East Series A Preferred Stock, other
than shares cancelled pursuant to paragraph (a) of this Article, shall be
converted into the right to receive one validly issued, fully paid, and
nonassessable share of West New Preferred Stock.
(d) Cancellation and Retirement of East Capital Stock. All shares of
East Common Stock (with the associated East Rights and any shares of East Junior
Preferred Stock issuable upon exercise thereof) converted into the right to
receive the Merger Consideration pursuant to paragraph (b) of this Article shall
no longer be outstanding and shall automatically be cancelled and retired and
shall cease to exist, and each holder of a certificate representing any such
shares of East Common Stock (with the associated East Rights) shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration in accordance with paragraph (b) of this Article, and any cash in
lieu of fractional shares of West Stock pursuant to paragraph (e) of Article
TENTH, upon surrender of such certificate in accordance
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with Article TENTH. As of the Effective Time, all shares of East Series A
Preferred Stock converted into the right to receive West New Preferred Stock
pursuant to paragraph (c) of this Article shall no longer be outstanding and
shall automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such shares of East Series A Preferred
Stock shall cease to have any rights with respect thereto, except the right to
receive West New Preferred Stock in accordance with paragraph (c) of this
Article upon surrender of such certificate in accordance with Article TENTH.
(e) Conversion of East Stock Options. Each option granted by East to
purchase shares of East Common Stock (an "East Stock Option") which is
outstanding and unexercised immediately prior to the Effective Time shall cease
to represent a right to acquire such shares and shall be converted into an
option to purchase shares of West Common Stock (a "West Stock Option") in an
amount and at an exercise price determined as provided below (and having the
same vesting, exercise, and termination dates that such East Stock Options had
immediately prior to the Effective Time):
(i) The number of shares of West Common Stock to be subject to
the West Stock Option shall be equal to the product of (A) the number of shares
of East Common Stock subject to the East Stock Option immediately prior to the
Effective Time and (B) the ratio of the value per share of East Common Stock
immediately prior to the Effective Time to the value per share of West Common
Stock immediately after the Effective Time.
(ii) The exercise price per share of West Common Stock under the
West Stock Option shall be equal to (A) the value per share of West Common Stock
immediately after the Effective Time multiplied by (B) the ratio of the exercise
price per share of East Common Stock to the value per share of East Common Stock
immediately prior to the Effective Time.
As used in this section, "value per share" shall mean the average of the highest
and lowest sales price per share of the East Common Stock or West Common Stock,
as the case may be, as reported on the NYSE Composite Tape (as reported in The
Wall Street Journal, or, if not reported therein, any other authoritative
source) on the pertinent date.
TENTH:
(a) Exchange Agent. As soon as reasonably practicable after the
Effective Time, West shall deposit the Merger Consideration and the West New
Preferred Stock with a bank or trust company designated by West and reasonably
acceptable to East to act as exchange agent (the "Exchange Agent"), for the
benefit of the holders of shares of East Common Stock and holders of shares of
East Series A Preferred Stock, respectively, for exchange in accordance with
this Article TENTH.
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(b) Exchange Procedures. As soon as practicable after the Effective
Time, the Exchange Agent shall mail to each holder of an outstanding certificate
or certificates which prior thereto represented shares of East Common Stock or
shares of East Series A Preferred Stock (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to such
certificate shall pass, only upon delivery of such certificates to such Exchange
Agent), and (ii) instructions for use in effecting the surrender of such
certificates for the Merger Consideration or West New Preferred Stock, as the
case may be. Upon surrender to the Exchange Agent of such certificates for
cancellation, together with such letter of transmittal, the holder of such
certificates shall be entitled to a certificate or certificates representing the
number of full shares of West Common Stock or West New Preferred Stock, as the
case may be, and the amount of cash, if any, into which the aggregate number of
shares of East Common Stock or East Series A Preferred Stock previously
represented by such certificate or certificates surrendered shall have been
converted pursuant to these Articles of Merger. The Exchange Agent shall accept
such certificates upon compliance with such reasonable terms and conditions as
the Exchange Agent may impose to effect an orderly exchange thereof in
accordance with normal exchange practices. After the Effective Time, there
shall be no further transfer on the records of East or its transfer agent of
certificates representing shares of East Common Stock or East Series A Preferred
Stock and if such certificates are presented to East for transfer, they shall be
cancelled against delivery of certificates for West Common Stock and cash, if
any, or West New Preferred Stock as hereinabove provided. If any certificate
for such West Common Stock or West New Preferred Stock is to be issued in, or if
cash is to be remitted to, a name other than that in which the certificate for
East Common Stock or East Series A Preferred Stock surrendered for exchange is
registered, it shall be a condition of such exchange that the certificate so
surrendered shall be properly endorsed, with signature guaranteed, or otherwise
in proper form for transfer and that the person requesting such exchange shall
pay to West or its transfer agent any transfer or other taxes required by reason
of the issuance of a certificate for such West Common Stock or West New
Preferred Stock in a name other than that of the registered holder of the
certificate surrendered, or establish to the satisfaction of West or its
transfer agent that such tax has been paid or is not applicable. Until
surrendered as contemplated by this paragraph, each certificate for shares of
East Common Stock or East Series A Preferred Stock shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration or West New Preferred Stock, respectively.
No interest will be paid or will accrue on any cash payable in lieu of any
fractional shares of West Common Stock.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions with respect to West Common Stock or West New Preferred
Stock with a record date after the Effective Time shall be paid to the holder of
any unsurrendered certificate for shares of East Common Stock or East New
Preferred Stock with respect to the shares of West Common Stock or West Series A
Preferred Stock represented thereby and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to paragraph (e) of this
Article until the surrender of such certificate in accordance with this Article.
Subject to the effect of applicable laws, following surrender of any such
certificate, there shall be paid to the
5
holder of the certificate representing whole shares of West Common Stock or West
New Preferred Stock issued in exchange therefor, without interest, (i) at the
time of such surrender the amount of any cash payable in lieu of a fractional
share of West Common Stock to which such holder is entitled pursuant to
paragraph (e) of this Article and the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with respect to
such whole shares of West Common Stock or West New Preferred Stock, and (ii) at
the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to such surrender and a
payment date subsequent to such surrender payable with respect to such whole
shares of West Common Stock or West New Preferred Stock.
(d) No Further Ownership Rights in East Capital Stock. All shares of
West Common Stock and West New Preferred Stock issued and all cash paid upon the
surrender for exchange of certificates representing shares of East Common Stock
or East Series A Preferred Stock in accordance with the terms of this Article
(including any cash paid pursuant to paragraph (e) of this Article shall be
deemed to have been issued and paid in full satisfaction of all rights
pertaining to the shares of East Common Stock or East Series A Preferred Stock
theretofore represented by such certificates.
(e) No Fractional Shares of West Common Stock or West New Preferred
---------------------------------------------------------------
Stock.
-----
(i) No certificates or scrip representing fractional shares of
West Common or West New Preferred Stock shall be issued upon the surrender for
exchange of certificates representing shares of East Common Stock, and such
fractional share interests will not entitle the owner thereof to vote or to any
rights of a shareholder of West. Notwithstanding any other provision of these
Articles of Merger, each holder of shares of East Common Stock exchanged
pursuant to the Merger who would have otherwise been entitled to receive a
fraction of a share of West Common Stock (after taking into account all shares
of East Common Stock held of record by such holder at the Effective Time) shall
receive, in lieu of such fraction of a share, cash in an amount determined and
paid as stated in paragraphs 2.2(e)(ii)-(v) of this Article.
(ii) As promptly as practicable after the Effective Time, the
Exchange Agent shall determine the excess (such excess being referred to as the
"Excess Shares") of (A) the aggregate number of whole shares of West Common
Stock issuable pursuant to paragraph (b) of this Article TENTH over (B) the
aggregate number of whole shares of West Common Stock to be distributed to
former holders of East Common Stock pursuant to paragraph (b) of this Article
after taking into account the payment of cash in lieu of fractional shares of
West Common Stock (on the premise that the entitlement of each holder of shares
of East Common Stock to receive cash in lieu of a fractional share of West
Common Stock shall be calculated taking into account all shares of East Common
Stock held of record at the Effective Time by such holder). Following the
Effective Time, the Exchange Agent shall, on behalf of the former
6
holders of East Common Stock, sell the Excess Shares at then-prevailing prices
on the New York Stock Exchange ("NYSE") in the manner provided in paragraph
(e)(iii) of this Article.
(iii) The sale of the Excess Shares by the Exchange Agent shall
be executed on the NYSE through one or more member firms of the NYSE and shall
be executed in round lots to the extent practicable. The Exchange Agent shall
use reasonable efforts to complete the sale of the Excess Shares as promptly
following the Effective Time as, in the Exchange Agent's sole judgment, is
practicable consistent with obtaining the best execution of such sales in light
of prevailing market conditions. Until the net proceeds of such sale or sales
have been distributed to the holders of the certificates formerly representing
East Common Stock, the Exchange Agent shall hold such proceeds in trust for such
holders (the "Common Shares Trust"). West shall pay all commissions, transfer
taxes and other out-of-pocket transactions costs, including the expenses and
compensation of the Exchange Agent incurred in connection with such sale of the
Excess Shares. The Exchange Agent shall determine the portion of the Common
Shares Trust to which each former holder of East Common Stock is entitled, if
any, by multiplying the amount of the aggregate net proceeds comprising the
Common Shares Trust by a fraction, the numerator of which is the amount of the
fractional share interest to which such former holder of East Common Stock is
entitled (after taking into account all shares of East Common Stock held of
record at the Effective Time by such holder) and the denominator of which is the
aggregate amount of fractional share interest to which all former holders of
East Common Stock are entitled.
(iv) Notwithstanding the provisions of paragraphs (e)(ii) and
(iii) of this Article, West may elect at its option, exercised prior to the
Effective Time, in lieu of the issuance and sale of Excess Shares and the making
of the payments hereinabove contemplated, to pay each former holder of East
Common Stock an amount in cash equal to the product obtained by multiplying (A)
the fractional share interest to which such former holder (after taking into
account all shares of East Common Stock held of record at the Effective Time by
such holder) would otherwise be entitled by (B) the closing price of West Common
Stock as reported on the NYSE Composite Tape (as reported in The Wall Street
Journal, or, if not reported therein, any other authoritative source) on the
Closing Date, and, in such case, all references herein to the cash proceeds of
the sale of the Excess Shares and similar references shall be deemed to mean and
refer to the payments calculated as set forth in this paragraph (e)(iv).
(v) As soon as practicable after the determination of the amount
of cash, if any, to be paid to holders of certificates formerly representing
East Common Stock with respect to any fractional share interests, the Exchange
Agent shall make available such amounts to such holders subject to and in
accordance with the terms of paragraph (b) of this Article.
(f) Termination of Exchange Fund. Any portion of the Merger
Consideration or West New Preferred Stock deposited with the Exchange Agent
pursuant to this Article (the "Exchange Fund") which remains undistributed to
the holders of the certificates formerly representing shares of East Common
Stock or East Series A Preferred Stock for twelve
7
months after the Effective Time shall be delivered to West, upon demand, and any
holders of shares of East Common Stock or East Series A Preferred Stock who have
not theretofore complied with this Article shall thereafter look only to West
and only as general creditors thereof for payment of their claim for West Common
Stock, West New Preferred Stock, any cash in lieu of fractional shares of West
Common Stock, and any dividends or distributions with respect to West Common
Stock or West New Preferred Stock to which such holders may be entitled.
(g) No Liability. None of West, East or the Exchange Agent shall be
liable to any person in respect of any shares of West Common Stock or West New
Preferred Stock (or dividends or distributions with respect to either) or cash
from the Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any certificates formerly
representing shares of East Common Stock or East Series A Preferred Stock shall
not have been surrendered prior to five years after the Effective Time (or
immediately prior to such earlier date on which any West Common Stock, West New
Preferred Stock, cash in lieu of fractional shares of West Common Stock or
dividends or distributions with respect to West Common Stock or West New
Preferred Stock in respect of such certificate would otherwise escheat to or
become the property of any governmental entity, any such shares, cash, dividends
or distributions in respect of such certificate shall, to the extent permitted
by applicable law, become the property of West, free and clear of all claims or
interest of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund as directed by West on a daily basis. Any
interest and other income resulting from such investments shall be paid to West.
ELEVENTH: The parties hereto intend that the execution of these Articles
of Merger constitute the adoption of a "plan of reorganization" within the
meaning of Treasury Regulations (S) 1.368-1(c).
IN WITNESS WHEREOF, SECURITY CAPITAL ATLANTIC INCORPORATED, a Maryland
corporation, and SECURITY CAPITAL PACIFIC TRUST, a Maryland real estate
investment trust, the entities parties to the merger, have caused these Articles
of Merger to be signed in their respective names and on their behalf and
witnessed or attested all as of the ____ day of __________, 1998. Each of the
individuals signing these Articles of Merger on behalf of SECURITY CAPITAL
ATLANTIC INCORPORATED or SECURITY CAPITAL PACIFIC TRUST acknowledges these
Articles of Merger to be the act of
8
such respective entity and, as to all other matters or facts required to be
verified under oath, that to the best of his or her knowledge, information and
belief, these matters are true in all material respects and that this statement
is made under the penalties of perjury.
SECURITY CAPITAL ATLANTIC INCORPORATED
a Maryland corporation
By: ____________________________________ (Seal)
President
Attest:
------------------------------
Secretary
SECURITY CAPITAL PACIFIC TRUST
a Maryland real estate investment trust
By: ___________________________________ (Seal)
President
Attest:
------------------------------
Secretary
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