EXHIBIT 10.3
PROTECTION OF BUSINESS AGREEMENT
THIS PROTECTION OF BUSINESS AGREEMENT (this "Agreement") is entered into as
of ________ __, 1997, by and among Security Capital Atlantic Incorporated, a
Maryland corporation ("ATLANTIC"), and Security Capital Group Incorporated, a
Maryland corporation ("Security Capital").
WHEREAS, on the date hereof the parties are consummating a series of
related transactions as described in that certain Merger and Issuance Agreement,
dated as of March __, 1997, between ATLANTIC and Security Capital (the "Merger
Agreement"), pursuant to which, among other things, Security Capital will cause
its subsidiaries engaged in the conduct of the real estate investment trust
("REIT") management and property management businesses relating to the
Multifamily Property business of ATLANTIC to be merged with and into a
subsidiary of ATLANTIC;
WHEREAS, ATLANTIC, Security Capital and their respective affiliates will
continue to engage in certain businesses after the date hereof; and
WHEREAS, as a condition to the consummation of the transactions
contemplated by the Merger Agreement, the parties hereto desire to enter into
certain agreements restricting the activities of Security Capital and its
affiliates.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
Section 1. Definitions. Capitalized terms used herein shall have the
meanings set forth below:
"Affiliate" with regard to any Person, means (a) any Person directly or
indirectly controlling, controlled by or under common control with such Person,
(b) any Person directly or indirectly owning or controlling 10% or more of the
outstanding voting interests of such Person or (c) any Person of which such
Person directly or indirectly owns or controls 10% or more of the voting
interests. The term "Affiliates" and "Affiliated" shall have correlative
meanings. For purposes of this Agreement, the term "Affiliate" shall not
include Security Capital U.S. Realty, a Luxembourg corporation, or any Person
controlled by Security Capital U.S. Realty and no party hereto shall be deemed
to be an Affiliate of any other party hereto.
"Multifamily Property" means real property that is or is planned to be used
primarily for garden style multifamily dwellings which are generally leased for
six-month to twelve-month periods and require security deposits, including real
property that is or is planned to be used primarily for master-planned apartment
neighborhoods.
"Person" means an individual or any corporation, partnership, trust,
unincorporated association or any other legal entity.
"Restricted Area" means the United States.
Section 2. Agreement not to Engage in Certain Activities. During the term
provided in Section 5 hereof, neither Security Capital nor any REIT management
company (or companies) or property management company (or companies) Affiliated
with it will, directly or indirectly, provide substantially the same advice and
services as those provided by Security Capital (Atlantic) Incorporated pursuant
to the Second Amended and Restated REIT Management Agreement, dated as of June
30, 1996, or by SCG Realty Services Atlantic Incorporated pursuant to the
Management Agreement, dated September 1, 1995, on the day preceding the date of
this Agreement, to any Person owning or operating Multifamily Properties
anywhere within the Restricted Area.
Section 3. Limitations on Protection of Business. Notwithstanding
anything to the contrary contained in this Agreement, each of Security Capital
and its Affiliates may be an owner of securities of any class of ATLANTIC or
Security Capital Pacific Trust.
Section 4. Reasonable and Necessary Restrictions. Each of the parties
hereto acknowledges that the restrictions, prohibitions and other provisions
hereof are reasonable, fair and equitable in scope, terms and duration, are
necessary to protect the legitimate business interests of each of the other
parties hereto, and are a material inducement to such party to enter into the
transactions contemplated by the Merger Agreement.
Section 5. Term.
5.1 General. Subject to earlier termination pursuant to Section 5.2, this
Agreement shall be effective from and after the date hereof and shall continue
in effect until the third anniversary of the date hereof.
5.2 Change in Control. Notwithstanding anything to the contrary contained
herein, the provisions of Section 2 of this Agreement shall terminate and be of
no further force or effect upon the occurrence of a Change in Control. As used
herein, "Change in Control" means the acquisition, directly or indirectly (other
than by purchase from Security Capital or any of its Affiliates), by any Person
(or group of Persons acting in concert), other than Security Capital or its
Affiliates, of the greater of (i) 25% or more of the outstanding shares of
voting securities of ATLANTIC and (ii) the percentage of outstanding voting
securities of ATLANTIC owned directly or indirectly by Security Capital and its
Affiliates, in either case without the prior written consent of the Board of
Directors of ATLANTIC.
Section 6. Specific Performance. Security Capital acknowledges that the
obligations undertaken by it pursuant to this Agreement are unique and that
ATLANTIC will not have an
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adequate remedy at law if Security Capital shall fail to perform any of its
obligations hereunder, and Security Capital therefore confirms that the right of
ATLANTIC to specific performance of the terms of this Agreement is essential to
protect the rights and interests of ATLANTIC. Accordingly, in addition to any
other remedies that ATLANTIC may have at law or in equity, ATLANTIC shall have
the right to have all obligations, covenants, agreements and other provisions of
this Agreement specifically performed by Security Capital, and ATLANTIC shall
have the right to obtain preliminary and permanent injunctive relief to secure
specific performance and to prevent a breach or contemplated breach of this
Agreement by Security Capital.
Section 7. Operations of Affiliated Parties. Security Capital agrees that
it will refrain from authorizing or permitting any Affiliated party to perform
any activities that would be prohibited by the terms of this Agreement if such
activities were performed by it.
Section 8. Ancillary Agreements. Nothing contained in this Agreement
shall in any way restrict or impair the obligations and rights of any party
under the terms of any agreement entered into in connection with the
transactions contemplated by the Merger Agreement.
Section 9. Miscellaneous Provisions.
9.1 Interpretation. The parties hereto acknowledge that the fundamental
policies of this Agreement are to protect ATLANTIC's interest in its respective
business and to eliminate potential conflicts of interest that may exist as a
result of actions taken or proposed to be taken by Security Capital, and this
Agreement shall be construed and enforced in a manner consistent with and in
furtherance of these policies.
9.2 Binding Effect. Subject to any provisions hereof restricting
assignment, all covenants and agreements in this Agreement by or on behalf of
any of the parties hereto shall bind and inure to the benefit of their
respective successors, assigns, heirs, and personal representatives.
9.3 Assignment. None of the parties hereto may assign any of its rights
under this Agreement, or attempt to have any other entity or individual assume
any of its obligations hereunder.
9.4 Severability. If performance of any provision of this Agreement, at
the time such performance shall be due, shall transcend the limit of validity
prescribed by law, then the obligation to be performed shall be reduced to the
limit of such validity; and if any clause or provision contained in this
Agreement operates or would operate to invalidate this Agreement, in whole or in
part, then such clause or provision only shall be held ineffective, as though
not herein contained, and the remainder of this Agreement shall remain operative
and in full force and effect. The parties shall negotiate in good faith a
replacement clause or provision as consistent with the ineffective clause or
provision as is practicable under law.
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9.5 Governing Law. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto shall be governed by
and construed in accordance with the laws of the State of Maryland, not
including the choice-of-law rules thereof.
9.6 Amendment. Except as otherwise expressly provided in this Agreement,
no amendment, modification or discharge of this Agreement shall be valid or
binding unless set forth in writing and duly executed by each of the parties
hereto.
9.7 Waiver. Any waiver by any party or consent by any party to any
variation from any provision of this Agreement shall be valid only if in writing
and only in the specific instance in which it is given, and such waiver or
consent shall not be construed as a waiver of any other provision or as a
consent with respect to any similar instance or circumstance.
9.8 Headings. Section and subsection headings contained in this Agreement
are inserted for convenience of reference only, shall not be deemed to be a part
of this Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
9.9 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.
9.10 Execution in Counterparts. This Agreement may be executed in one or
more counterparts, none of which need contain the signatures of each of the
parties hereto and each of which shall be deemed an original.
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IN WITNESS WHEREOF, each of the undersigned has executed this Agreement, or
caused this Agreement to be duly executed on its behalf, as of the date first
set forth above.
SECURITY CAPITAL ATLANTIC INCORPORATED
By:
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Xxxxxxxxx X. Xxxxx
Co-Chairman
SECURITY CAPITAL GROUP INCORPORATED
By:
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Xxxxxxx X. Xxxxx
Senior Vice President
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