<PAGE> 1
Filed pursuant to Rule
424(b)(3) and Rule 14a-6
File No. 333-45944
[PAN PACIFIC RETAIL PROPERTIES LOGO/Western Properties Logo]
YOUR VOTE ON OUR PROPOSED MERGER IS VERY IMPORTANT
The board of directors of Pan Pacific Retail Properties, Inc. and the board
of trustees of Western Properties Trust have each unanimously approved a
definitive agreement under which Pan Pacific will acquire Western Properties'
business in a stock-for-stock merger. The merger will position the combined
company as the largest publicly-held West Coast neighborhood shopping center
real estate investment trust. We believe merging Western Properties into Pan
Pacific should give the combined company greater market presence, greater
geographic and tenant diversity, a wider universe of potential investment
opportunities and greater growth potential than either company alone. The
combined company will be managed by Pan Pacific's existing senior management
team. We believe the proposed merger will benefit the shareholders of both
companies. We ask for your support in voting for the merger proposals.
When the merger is completed, each Western Properties shareholder will
receive 0.62 of a share of newly issued Pan Pacific common stock for each
Western Properties common share that he or she owns. Pan Pacific stockholders
will continue to own their existing shares. Pan Pacific will issue up to
approximately 11.7 million shares of Pan Pacific common stock to Western
Properties' shareholders in the merger. These newly issued shares of Pan Pacific
common stock would represent 34.2% of the Pan Pacific common stock outstanding
after the merger, assuming the exchange of each company's subsidiary securities.
In connection with the merger, Pan Pacific has agreed to increase its
quarterly dividend in the quarter beginning after the merger from $0.420 per
share to $0.455 per share, in order to approximate Western Properties' current
dividend level, as adjusted for the 0.62 exchange ratio. Pan Pacific has paid a
quarterly dividend every quarter since its initial public offering in August
1997 and intends to maintain or exceed the $0.455 dividend rate after the
merger, subject to the discretion of the Pan Pacific board.
In addition to the merger proposal, Pan Pacific's stockholders will be
asked to approve an amendment to Pan Pacific's 2000 Stock Incentive Plan to
increase the number of shares reserved for issuance under the plan.
Your vote is very important regardless of the number of shares you own.
Whether or not you plan to attend the special meeting, please take the time to
vote by completing and mailing the enclosed proxy card to us. If you do not
vote, the effect will be the same as voting against the merger.
We have each scheduled a special meeting for our shareholders to vote on
the merger and related matters. The date, place and time of the meetings are as
follows:
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FOR PAN PACIFIC STOCKHOLDERS: FOR WESTERN PROPERTIES SHAREHOLDERS:
NOVEMBER 9, 2000, 10:00 A.M. NOVEMBER 9, 2000, 10:00 A.M.
The Hilton San Diego Resort Holiday Inn
1775 East Mission Bay Drive 1800 Powell Street, Gold Room
San Diego, California 92109 Emeryville, California 94608
</TABLE>
This document provides you with detailed information about the proposed
merger and the scheduled shareholders' meetings. We encourage you to read this
entire document carefully. IN PARTICULAR, PLEASE SEE THE SECTION ENTITLED "RISK
FACTORS" BEGINNING ON PAGE 18 OF THIS DOCUMENT FOR A DISCUSSION OF RISKS
ASSOCIATED WITH THE MERGER.
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Sincerely, Sincerely,
/s/ STUART A. TANZ /s/ BRADLEY N. BLAKE
Stuart A. Tanz Bradley N. Blake
Chairman of the Board, President Chairman of the Board, President
and Chief Executive Officer and Chief Executive Officer
Pan Pacific Retail Properties, Inc. Western Properties Trust
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS
JOINT PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This joint proxy statement/prospectus is dated October 3, 2000 and is
expected to be first mailed to Pan Pacific Retail Properties, Inc. stockholders
and Western Properties Trust shareholders on October 5, 2000.
<PAGE> 2
SOURCES OF ADDITIONAL INFORMATION
This joint proxy statement/prospectus incorporates important business and
financial information about Pan Pacific and Western Properties that is not
included or delivered with this document. Such information is available without
charge to Pan Pacific's stockholders and Western Properties' shareholders upon
written or oral request. You can obtain the documents incorporated by reference
in this joint proxy statement/ prospectus by requesting them in writing or by
telephone from the appropriate company at the following addresses and telephone
numbers:
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Pan Pacific Retail Properties, Inc. Western Properties Trust
1631-B South Melrose Drive 2200 Powell Street, Suite 600
Vista, California 92083 Emeryville, California 94608
Attn.: Joseph B. Tyson, Attn.: Dennis D. Ryan,
Executive Vice President, Executive Vice President
Chief Financial Officer and Secretary and Chief Financial Officer
Telephone: (760) 727-1002 Telephone: (888) 831-5770
-------------------------------------------------------------------------------------
</TABLE>
TO OBTAIN TIMELY DELIVERY OF REQUESTED DOCUMENTS PRIOR TO THE SPECIAL
MEETING OF PAN PACIFIC STOCKHOLDERS OR THE SPECIAL MEETING OF WESTERN PROPERTIES
SHAREHOLDERS, YOU MUST REQUEST THEM NO LATER THAN NOVEMBER 2, 2000, WHICH IS
FIVE BUSINESS DAYS PRIOR TO THE DATE OF SUCH MEETINGS.
Also see "Where You Can Find More Information" beginning on page 129 of
this joint proxy statement/prospectus.
<PAGE> 3
PAN PACIFIC RETAIL PROPERTIES, INC.
1631-B SOUTH MELROSE DRIVE
VISTA, CALIFORNIA 92083
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 9, 2000
------------------------
To the stockholders of Pan Pacific Retail Properties, Inc.:
A special meeting of stockholders of Pan Pacific Retail Properties, Inc., a
Maryland corporation, will be held on November 9, 2000, at 10:00 a.m., Pacific
Time, at The Hilton San Diego Resort, 1775 East Mission Bay Drive, San Diego,
California 92109, for the following purposes:
1. To consider and vote upon a proposal to approve the merger of WPT, Inc.,
a California corporation (which will be the successor entity to Western
Properties Trust, a California real estate investment trust), including
the issuance of shares of common stock of Pan Pacific in connection with
the merger, substantially in accordance with the Amended and Restated
Agreement and Plan of Merger, dated as of August 21, 2000, between Pan
Pacific and Western Properties, as described in the accompanying joint
proxy statement/ prospectus. Immediately before the merger, Western
Properties will incorporate and become WPT, Inc. This procedure is
necessary because California law does not specifically allow the merger
of a California real estate investment trust with a corporation, but
does allow corporations to merge with each other. In the merger:
- WPT will be merged into Pan Pacific, with Pan Pacific being the
surviving corporation; and
- each issued and outstanding share of WPT common stock, other than
shares held by Western Properties' shareholders who perfect
dissenters' rights, will be converted into the right to receive 0.62
of a share of common stock of Pan Pacific.
2. To approve an amendment to Pan Pacific's 2000 Stock Incentive Plan,
which amends the plan by increasing the number of shares of Pan Pacific
common stock reserved for issuance under the plan by 1,296,724, from
489,971 shares to 1,786,695 shares.
3. To transact such other business as may properly come before the Pan
Pacific special meeting or any adjournments or postponements of the
meeting.
Our board of directors has unanimously adopted a resolution declaring the
merger advisable and recommends that you vote FOR approval of the merger and FOR
approval of the amendment to Pan Pacific's 2000 Stock Incentive Plan.
We have described the proposed merger in more detail in the accompanying
joint proxy statement/prospectus, which you should read in its entirety before
voting. A copy of the merger agreement is attached as Annex A to the
accompanying joint proxy statement/prospectus.
Only those stockholders whose names appear on our books as owning Pan
Pacific common stock at the close of business on September 29, 2000, are
entitled to notice of, and to vote at, the Pan Pacific special meeting.
The affirmative vote of holders of a majority of the shares of Pan Pacific
common stock issued and outstanding on September 29, 2000 is necessary to
approve the merger. If that vote is not obtained, the merger cannot be
completed.
The affirmative vote of a majority of the votes cast on the proposal to
amend Pan Pacific's 2000 Stock Incentive Plan is required to approve the
amendment proposal, provided that a majority of the outstanding shares of Pan
Pacific common stock cast a vote on the proposal.
All stockholders of Pan Pacific are cordially invited to attend the Pan
Pacific special meeting in person. To ensure your representation at the Pan
Pacific special meeting, you are urged to complete, sign and return the enclosed
proxy card as promptly as possible in the enclosed postage-prepaid envelope. You
may revoke your proxy in the manner described in the accompanying joint proxy
statement/prospectus at any time before it is voted at the Pan Pacific special
meeting.
By Order of the Board of Directors
/s/ JOSEPH B. TYSON
Joseph B. Tyson
Secretary
Vista, California
October 3, 2000
<PAGE> 4
WESTERN PROPERTIES TRUST
2200 POWELL STREET, SUITE 600
EMERYVILLE, CA 94608
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 9, 2000
------------------------
To the shareholders of Western Properties Trust:
A special meeting of shareholders of Western Properties Trust, a California
business trust, will be held at 10:00 a.m., Pacific Time, on November 9, 2000,
at the Holiday Inn, 1800 Powell Street, Gold Room, Emeryville, California 94608
for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the principal
terms of an Amended and Restated Agreement and Plan of Merger dated as
of August 21, 2000 between Western Properties Trust and Pan Pacific
Retail Properties, Inc., and to approve the incorporation of Western
Properties as a California corporation immediately before the merger.
The incorporation is necessary because California law does not
specifically allow the merger of a California real estate investment
trust with a corporation, but does allow corporations to merge with each
other. A copy of the merger agreement is attached as Annex A to the
joint proxy statement/prospectus accompanying this notice. Pursuant to
the merger agreement,
- Western Properties shall incorporate as WPT, Inc., and then merge with
Pan Pacific, with Pan Pacific being the surviving corporation; and
- each issued and outstanding Western Properties common share shall
become one share of WPT, Inc. common stock, which shall then
immediately be converted, except for shares held by shareholders who
perfect dissenters' rights, into the right to receive 0.62 of a share
of Pan Pacific common stock.
2. To transact such other business as may properly come before the Western
Properties special meeting or any adjournments or postponements thereof.
Western Properties' board of trustees has unanimously adopted a resolution
declaring the proposed merger and incorporation advisable and recommends that
you vote FOR approval of the merger and the incorporation.
We have described the merger in more detail in the accompanying joint proxy
statement/prospectus, which you should read in its entirety before voting. A
copy of the merger agreement is attached as Annex A to the accompanying joint
proxy statement/prospectus.
Only those shareholders whose names appear on our books as owning Western
Properties common shares at the close of business on September 29, 2000, are
entitled to notice of, and to vote at, the Western Properties special meeting.
The merger and the incorporation are presented as a single, unified
proposal to be approved or rejected by shareholders in its entirety.
The affirmative vote of holders of a majority of the Western Properties
common shares issued and outstanding on September 29, 2000 is necessary to
approve the merger and the incorporation. If that vote is not obtained, the
merger and the incorporation cannot be completed.
All shareholders of Western Properties are cordially invited to attend the
Western Properties special meeting in person. To ensure your representation at
the Western Properties special meeting, you are urged to complete, sign and
return the enclosed proxy card as promptly as possible in the enclosed
postage-prepaid envelope. You may revoke your proxy in the manner described in
the accompanying joint proxy statement/prospectus at any time before it is voted
at the Western Properties special meeting.
By Order of the Board of Trustees
/s/ BARBARA J. DONHAM
Barbara J. Donham
Secretary
Emeryville, California
October 3, 2000
PLEASE DO NOT SEND IN CERTIFICATES FOR YOUR SHARES AT THIS TIME.
<PAGE> 5
TABLE OF CONTENTS
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PAGE
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QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 4
The Companies............................................. 4
The Meetings.............................................. 5
Shareholders Entitled to Vote............................. 5
Purposes of the Meetings.................................. 5
Votes Required............................................ 6
The Incorporation......................................... 6
The Merger................................................ 6
Risk Factors.............................................. 6
Our Recommendations to Stockholders of Pan Pacific and
Shareholders of Western Properties..................... 6
Opinions of Financial Advisors............................ 7
Conditions to the Merger.................................. 7
Treatment of Western Properties Share Options and
Restricted Shares...................................... 7
Termination; Break-Up Fee and Expenses.................... 7
Interests of Executive Officers and Trustees of Western
Properties in the Merger............................... 8
Accounting Treatment...................................... 9
Material United States Federal Income Tax
Considerations......................................... 9
Regulatory Matters........................................ 9
Appraisal or Dissenters' Rights........................... 9
The Rights of Western Properties' Shareholders Will
Change................................................. 10
Amendment to the 2000 Stock Incentive Plan of Pan
Pacific................................................ 10
Selected Summary Historical and Selected Unaudited Pro
Forma Financial Data................................... 11
Comparative Per Share Data................................ 16
Comparative Per Share Market Price and Dividend
Information............................................ 17
RISK FACTORS................................................ 18
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
STATEMENTS................................................ 23
THE COMPANIES............................................... 25
Pan Pacific............................................... 25
Western Properties........................................ 26
The Combined Company...................................... 27
THE MERGER.................................................. 33
General................................................... 33
Background of the Merger.................................. 33
Recommendation of the Board of Directors of Pan Pacific... 39
Pan Pacific's Reasons for the Merger...................... 39
Recommendation of the Board of Trustees of Western
Properties............................................. 43
Western Properties' Reasons for the Merger................ 43
Accounting Treatment of the Merger........................ 46
Determination of Exchange Ratio........................... 46
Regulatory Matters........................................ 46
Delisting and Deregistration of Western Properties Common
Shares; Listing of Pan Pacific Common Stock Issued in
Connection with the Merger............................. 46
Resales of Pan Pacific Common Stock Issued in Connection
with the Merger; Affiliate Agreements.................. 47
Appraisal or Dissenters' Rights........................... 47
OPINION OF FINANCIAL ADVISOR TO PAN PACIFIC................. 49
Comparable Companies Analysis............................. 51
Comparable Transactions Analysis.......................... 52
</TABLE>
i
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PAGE
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Net Asset Value Analysis.................................. 53
Historical Stock Trading Analysis......................... 53
Contribution Analysis..................................... 53
OPINION OF FINANCIAL ADVISOR TO WESTERN PROPERTIES.......... 55
Summary of Financial Analysis Performed by Donaldson,
Lufkin & Jenrette...................................... 56
Historical Exchange Ratio Analysis........................ 56
Comparable Publicly Traded Company Analysis............... 56
Contribution Analysis..................................... 58
Net Asset Valuation Analysis.............................. 58
POTENTIAL CONFLICTS OF INTEREST; INTERESTS OF EXECUTIVE
OFFICERS AND TRUSTEES OF WESTERN PROPERTIES IN THE
MERGER.................................................... 60
Development Arrangements.................................. 60
Severance Payments; Acceleration of Share Awards.......... 60
Purchases of Western Real Estate Services, Inc. Stock..... 61
Indemnification........................................... 61
Directorships............................................. 62
THE MERGER AGREEMENT........................................ 63
The Incorporation of Western Properties................... 63
The Merger................................................ 63
Closing and Effective Time of the Merger.................. 63
Conversion of Securities.................................. 63
Treatment of Western Properties Share Options............. 64
Exchange of Share Certificates............................ 64
Representations and Warranties............................ 65
Covenants................................................. 66
Additional Agreements..................................... 69
Conditions to Obligations to Complete the Merger.......... 72
Termination; Break-Up Fees and Expenses................... 74
Amendment and Waiver...................................... 75
THE PAN PACIFIC SPECIAL MEETING............................. 76
Date, Time and Place...................................... 76
Purpose................................................... 76
Pan Pacific Board of Directors' Recommendation............ 76
Record Date, Outstanding Shares and Voting Rights......... 76
Vote Required; Quorum; Shares Beneficially Owned by Pan
Pacific Directors and Officers......................... 76
Voting of Proxies......................................... 77
Revocation of Proxies..................................... 77
Solicitation of Proxies; Expenses......................... 78
THE WESTERN PROPERTIES SPECIAL MEETING...................... 79
Date, Time and Place...................................... 79
Purpose................................................... 79
Western Properties Board of Trustees' Recommendation...... 79
Record Date, Outstanding Shares and Voting Rights......... 79
Vote Required; Quorum; Shares Beneficially Owned by
Western Properties Trustees and Officers............... 79
Voting of Proxies......................................... 80
Dissenters' Rights........................................ 80
Revocation of Proxies..................................... 80
Solicitation of Proxies; Expenses......................... 81
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.... 82
Non-Deductibility of Parachute Payments................... 83
Backup Withholding........................................ 84
</TABLE>
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Pan Pacific's Qualification as a Real Estate Investment
Trust.................................................. 84
Taxation of Tax-Exempt Stockholders....................... 96
Taxation of Non-U.S. Stockholders......................... 96
Other Tax Consequences.................................... 97
COMPARISON OF RIGHTS OF STOCKHOLDERS OF PAN PACIFIC AND
SHAREHOLDERS OF WESTERN PROPERTIES........................ 98
General................................................... 98
Certain Material Differences Between the Rights of
Stockholders of Pan Pacific and Shareholders of Western
Properties............................................. 98
DESCRIPTION OF PAN PACIFIC STOCK............................ 117
General................................................... 117
Common Stock.............................................. 117
Power to Reclassify Unissued Shares of Pan Pacific
Stock.................................................. 117
Power to Issue Additional Shares of Common Stock and
Preferred Stock........................................ 118
Restrictions on Ownership and Transfer.................... 118
AMENDMENT TO THE 2000 STOCK INCENTIVE PLAN OF PAN PACIFIC... 121
General................................................... 121
Purpose................................................... 121
Stock Subject to the Stock Incentive Plan................. 121
Awards Under the Stock Incentive Plan..................... 122
Grant and Terms of Options................................ 124
Term and Vesting of Options............................... 125
Exercise of Options....................................... 125
Eligibility............................................... 125
Administration of the Stock Incentive Plans............... 126
Awards not Transferable................................... 126
Certain Restrictions on Resale............................ 126
Amendment and Termination of the Stock Incentive Plan..... 126
Federal Income Tax Consequences Associated with the Stock
Incentive Plan......................................... 126
Required Vote............................................. 128
SHAREHOLDER PROPOSALS....................................... 128
LEGAL MATTERS............................................... 129
EXPERTS..................................................... 129
WHERE YOU CAN FIND MORE INFORMATION......................... 129
INDEX TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS...................................... F-1
Unaudited Pro Forma Condensed Consolidated Financial
Statements............................................. F-2
Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of June 30, 2000.................................... F-3
Unaudited Pro Forma Condensed Consolidated Statement of
Income for the six months ended June 30, 2000.......... F-4
Unaudited Pro Forma Condensed Consolidated Statement of
Income for the year ended December 31, 1999............ F-5
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements................................... F-6
ANNEXES
A. Amended and Restated Agreement and Plan of Merger, dated
as of August 21, 2000, between Pan Pacific Retail
Properties, Inc. and Western Properties Trust
B. Opinion of Prudential Securities Incorporated, dated
August 21, 2000
C. Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation, dated August 21, 2000
D. Chapter 13 of the California General Corporation Law
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iii
<PAGE> 8
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY AM I RECEIVING THESE MATERIALS?
A: Pan Pacific and Western Properties have entered into a merger agreement
pursuant to which Western Properties would incorporate as WPT, Inc., and
then immediately merge into Pan Pacific. The incorporation is necessary
because California law does not specifically allow the merger of a
California real estate investment trust, such as Western Properties, with a
corporation. For the merger to occur, the stockholders of Pan Pacific must
approve the merger and the shareholders of Western Properties must approve
the merger and the incorporation. We are sending you these materials to help
Pan Pacific's stockholders decide whether to vote for the merger and Western
Properties' shareholders decide whether to vote for the merger and the
incorporation.
Q: WHY ARE THE TWO COMPANIES PROPOSING TO MERGE?
A: The companies are proposing to merge because they believe that the combined
company, compared to each company standing alone:
- will have greater geographic and tenant diversification;
- will have greater market presence in key West Coast growth markets;
- will realize economies of scale and greater operating and tenant
synergies;
- will have a larger total market capitalization of approximately $1.3
billion; and
- will have a stronger balance sheet and enhanced financial flexibility.
As a result, the combined company expects to:
- increase funds from operations per share and enhance shareholder value;
- be able to compete more effectively for shopping center property
investments;
- have greater visibility in the capital markets and greater liquidity in
the trading of its public stock;
- be viewed by rating agencies and lenders as having a stronger credit
profile; and
- have greater access to capital in equity and debt markets.
Q: WHAT WILL HAPPEN TO WESTERN PROPERTIES AS A RESULT OF THE MERGER AND THE
INCORPORATION?
A: Upon the completion of the merger and the incorporation, Western Properties
will cease to exist as a separate company.
Q: WHAT WILL I RECEIVE IN THE MERGER AND THE INCORPORATION?
A: Each Western Properties shareholder, other than those who perfect
dissenters' rights, will receive 0.62 of a share of newly issued Pan Pacific
common stock for each Western Properties common share that he or she owns.
Pan Pacific common stock is publicly traded on the New York Stock Exchange
under the symbol "PNP."
The merger will not affect the rights of the existing Pan Pacific common
stock. The number of shares of Pan Pacific common stock outstanding,
assuming the exchange of all outstanding exchangeable securities of
subsidiaries of Pan Pacific and Western Properties, will increase from 22.4
million shares to 34.1 million shares.
The Pan Pacific common stock issued to Western Properties' shareholders in
the merger will represent 34.2% of the outstanding common stock of the
combined company, assuming the exchange of all outstanding exchangeable
securities of subsidiaries of Pan Pacific and Western Properties.
Q: WHAT WILL BE THE EFFECT ON MY CASH DIVIDEND?
A: Pan Pacific has agreed to increase its quarterly cash dividend from $0.420
per share to $0.455 per share of Pan Pacific common stock in the first
quarter following completion of the merger, in order to approximate Western
Properties' current dividend level, as adjusted for the 0.62 exchange ratio.
Pan Pacific has paid a quarterly dividend every quarter since its initial
public offering in August 1997 and intends to maintain or exceed the $0.455
dividend rate after the merger, subject to the
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<PAGE> 9
discretion of the Pan Pacific board of directors.
Q: WHAT DO I NEED TO DO NOW?
A: After you have read this document carefully, please indicate on the enclosed
proxy card how you want to vote. Sign and mail the proxy card in the
enclosed prepaid return envelope as soon as possible. You should indicate
your vote now, even if you expect to attend your special meeting and vote in
person. Indicating your vote now will not prevent you from later canceling
or revoking your proxy and changing your votes at any time before the vote
at your special meeting and will ensure that your shares are voted if you
later find you cannot attend your special meeting.
Q: WHAT SHOULD I DO IF MY BROKER HOLDS MY SHARES IN "STREET NAME"?
A: Please contact your broker to obtain instructions on how to vote your
shares.
Q: CAN MY BROKER VOTE MY SHARES WHICH ARE HELD IN "STREET NAME"?
A: If you do not provide your broker with instructions on how to vote your
shares held in "street name," your broker will not be permitted to vote your
shares on the proposals being presented at your special meeting. Because the
merger proposal of Pan Pacific and the merger and incorporation proposal of
Western Properties require the affirmative vote of the holders of a majority
of the applicable company's outstanding shares, a failure to provide your
broker instructions will have the same effect as a vote against these
proposals. You should therefore be sure to provide your broker with
instructions on how to vote your shares.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE?
A: You may change your vote in three ways:
- by delivering a written notice to the corporate secretary of your company
prior to your special meeting stating that you would like to revoke your
proxy;
- by signing a later-dated proxy card and delivering it to the corporate
secretary of your company prior to the special meeting; or
- by attending your special meeting and voting in person; however, your
attendance alone will not revoke your proxy or change your vote.
If you have instructed a broker how to vote your shares, you must follow the
directions provided by your broker to change those instructions.
Q: WHAT VOTE IS REQUIRED TO APPROVE THE MERGER AND THE INCORPORATION?
A: In order to complete the merger, holders of a majority of the outstanding
shares of Pan Pacific common stock must approve the merger and holders of a
majority of the outstanding Western Properties common shares must approve
the merger and the incorporation. Revenue Properties (U.S.), Inc. and its
wholly-owned subsidiaries, which collectively owned 50.9% of the outstanding
shares of common stock of Pan Pacific as of September 29, 2000, have agreed
to vote in favor of the Pan Pacific merger proposal pursuant to a voting
agreement with Western Properties.
Q: SHOULD I SEND MY CERTIFICATES REPRESENTING MY WESTERN PROPERTIES COMMON
SHARES?
A: No. After we complete the merger and the incorporation, Pan Pacific will
send former holders of Western Properties common shares written instructions
for exchanging their share certificates.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We are working toward completing the merger as quickly as possible. We must
first obtain the approval of Pan Pacific stockholders at the Pan Pacific
special meeting and the approval of Western Properties shareholders at the
Western Properties special meeting. We hope to complete the merger in the
fourth quarter of 2000; however, we cannot assure you as to when, or if, the
merger will occur.
Q: WHERE CAN I FIND MORE INFORMATION ABOUT THE COMPANIES?
A: Western Properties and Pan Pacific file reports and other information with
the SEC. You may read and copy this information at the SEC's public
reference facilities. Please call the SEC at 1-800-SEC-0330 for information
2
<PAGE> 10
about these facilities. This information is also available at the Internet
site the SEC maintains at www.sec.gov and, with respect to Pan Pacific, at
the offices of the New York Stock Exchange and the Internet site Pan Pacific
maintains at www.pprp.com. Information regarding Western Properties is also
available at the offices of the American Stock Exchange and the Internet
site Western Properties maintains at www.westernpropertiestrust.com.
Information contained on each company's website, other than the reports
specifically incorporated by reference in this joint proxy statement/
prospectus, does not constitute a part of this joint proxy
statement/prospectus. You can also request copies of these documents from
us. See "Where You Can Find More Information" on page 129.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you are a Western Properties shareholder and you have more questions
about the incorporation or the merger, you can contact Western Properties'
proxy solicitor:
Jennifer M. Shotwell
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
Telephone: (212) 750-5833
Facsimile: (212) 750-5799
You can also contact:
Dennis D. Ryan
Executive Vice President
and Chief Financial Officer
Western Properties Trust
2200 Powell Street, Suite 600
Emeryville, CA 94608
Telephone: (888) 831-5770
Facsimile: (510) 547-7841
If you are a Pan Pacific stockholder and you have more questions about the
merger, you can contact:
Carol Merriman
Investor Relations
Pan Pacific Retail Properties, Inc.
1631-B South Melrose Drive
Vista, California 92083
Telephone: (760) 727-1002
Facsimile: (760) 727-1430
If you would like additional copies of this joint proxy statement/prospectus,
you should contact:
Sandra Brown
The Bank of New York
101 Barclay Street -- 12W
New York, New York 10286
Telephone: (212) 815-2302
Facsimile: (212) 815-3201
3
<PAGE> 11
SUMMARY
This summary highlights selected information from this document. It may not
contain all of the information that is important to you. To understand the
merger fully and for a more complete description of the legal terms of the
merger, you should read carefully this entire document and the documents to
which we have referred you. See "Where You Can Find More Information" on page
129. We have included page references parenthetically to direct you to a more
complete description of the topics in this summary. References in this document
to "WPT" refer to WPT, Inc., a California corporation which will be formed upon
the incorporation of, and succeed to all of the assets and liabilities of,
Western Properties Trust immediately before the merger.
THE COMPANIES
(Page 25)
Pan Pacific Retail Properties, Inc.
1631-B South Melrose Drive
Vista, California 92083
(760) 727-1002
Pan Pacific is a self-administered and self-managed equity real estate
investment trust that owns and operates community and neighborhood shopping
centers, predominately grocery-anchored, located in the western United States.
Pan Pacific's objective is to provide stockholders with long-term, stable cash
flow by maintaining a diverse portfolio and tenant base, and achieving
consistent growth through its acquisition, property management and leasing
programs. Pan Pacific completed its initial public offering in August 1997 and
its shares are traded on the New York Stock Exchange under the symbol "PNP."
From its initial public offering through June 30, 2000, Pan Pacific acquired 36
shopping centers, encompassing 5.0 million square feet, for an aggregate
investment of approximately $408 million. As of June 30, 2000, Pan Pacific's
portfolio totaled 59 properties, encompassing 9.3 million square feet, and was
97.7% leased to 1,418 tenants. The portfolio is diversified across five Western
U.S. markets: Northern California, Southern California, Oregon, Washington, and
Nevada.
Since its initial public offering, Pan Pacific has increased its quarterly
funds from operations per share by 48.8%, from $0.41 per share for the three
months ended September 30, 1997 to $0.61 per share for the three months ended
June 30, 2000. Pan Pacific has increased its quarterly cash dividend each year
since its initial public offering, for a total increase of 16%, from a $0.3625
per share dividend paid for the quarter ended September 30, 1997 to a $0.420 per
share dividend paid for the quarter ended June 30, 2000. Subject to the
completion of the merger, Pan Pacific has agreed to increase its quarterly
dividend from $0.420 per share to $0.455 per share in the first quarter after
the merger, in order to approximate Western Properties' current dividend level,
as adjusted for the 0.62 exchange ratio. Pan Pacific expects to maintain or
exceed the $0.455 dividend rate in subsequent quarters, subject to the
discretion of the Pan Pacific board.
Pan Pacific is a full-service, fully-integrated real estate company with
in-house expertise in shopping center acquisitions, redevelopment, leasing,
property management, marketing and accounting. Pan Pacific is headquartered in
Vista, California, and has five regional offices located in Sacramento,
California; Chino, California; Kent, Washington; Portland, Oregon; and Las
Vegas, Nevada.
Western Properties Trust
2200 Powell Street, Suite 600
Emeryville, California 94608
(888) 831-5770
Western Properties is a self-administered and self-managed equity real
estate investment trust focused on owning, redeveloping, developing and
operating community and neighborhood shopping centers in the western United
States.
As of June 30, 2000, Western Properties held interests in 58 property
investments, primarily shopping centers anchored by supermarkets and drugstores,
encompassing 5.4 million square feet, and was 93.0% leased to approximately 800
tenants. Western Properties' portfolio is predominately located in Northern
California (including in the San Francisco Bay Area and the greater Sacramento
region) and secondarily in Oregon, Nevada and Washington.
Western Properties was founded in 1962 and commenced real estate operations
in 1964. Its shares have been traded on the American Stock Exchange under the
symbol "WIR" since 1984.
4
<PAGE> 12
Western Properties' headquarters are located in Emeryville, California.
The Combined Company
Upon completion of the merger, Pan Pacific is expected to be the largest
publicly-held West Coast neighborhood shopping center real estate investment
trust with a total market capitalization of $1.3 billion, based on the closing
price of Pan Pacific common stock as of September 29, 2000 ($20.06), the pro
forma number of shares of Pan Pacific common stock outstanding as of September
29, 2000 and the pro forma outstanding indebtedness of Pan Pacific as of June
30, 2000. After the merger, Pan Pacific expects to own and operate 110
properties, encompassing 15.1 million square feet, with a broad geographic
representation in key West Coast growth markets. As of June 30, 2000, the
combined pro forma portfolio was 95.5% leased to 2,194 retailers. Of the 110
properties, 74 properties are shopping centers anchored by national or regional
supermarkets such as Raley's Supermarkets, Von's, Safeway, Albertson's and
Quality Food Centers.
Upon completion of the merger, Pan Pacific will expand its board of
directors to seven members, adding two independent trustees from Western
Properties' board of trustees. With the additional independent directors, five
of the seven Pan Pacific board members will be independent. Pan Pacific will
continue to be led by its existing senior management team, including Stuart A.
Tanz as President and Chief Executive Officer, Joseph B. Tyson as Chief
Financial Officer and Jeffrey S. Stauffer as Chief Operating Officer.
THE MEETINGS
(Pages 76 and 79)
The Pan Pacific special meeting will be held on November 9, 2000, at The
Hilton San Diego Resort, 1775 East Mission Bay Drive, San Diego, California
92109, starting at 10:00 a.m., Pacific Time.
The Western Properties special meeting will be held on November 9, 2000, at
the Holiday Inn, 1800 Powell Street, Gold Room, Emeryville, California 94608,
starting at 10:00 a.m., Pacific Time.
SHAREHOLDERS ENTITLED TO VOTE
(Pages 76 and 79)
Holders of record of shares of Pan Pacific common stock at the close of
business on Pan Pacific's record date, September 29, 2000, are entitled to
notice of, and to vote at, the Pan Pacific special meeting. On the record date,
there were 21,252,512 shares of Pan Pacific common stock outstanding, each of
which will be entitled to one vote on each matter to be acted upon at the Pan
Pacific special meeting.
Holders of record of shares of Western Properties common shares at the
close of business on Western Properties' record date, September 29, 2000, are
entitled to notice of, and to vote at, the Western Properties special meeting.
On the record date, there were 17,347,250 Western Properties common shares
outstanding, each of which will be entitled to one vote on each matter to be
acted upon at the Western Properties special meeting.
PURPOSES OF THE MEETINGS
(Pages 76 and 79)
Pan Pacific Special Meeting
At the Pan Pacific special meeting, Pan Pacific stockholders will be asked
to consider and vote upon:
- the merger;
- an amendment to Pan Pacific's 2000 Stock Incentive Plan to increase the
number of shares of Pan Pacific common stock reserved for issuance under
the plan by 1,296,724, from 489,971 to 1,786,695; and
- any other matters that are properly brought before the Pan Pacific
special meeting or any adjournment or postponement of the meeting.
Western Properties Special Meeting
At the Western Properties special meeting, Western Properties shareholders
will be asked to consider and vote upon:
- the incorporation and the principal terms of the merger agreement; and
- any other matters that are properly brought before the Western Properties
special meeting or any adjournment or postponement of the meeting.
5
<PAGE> 13
VOTES REQUIRED
(Pages 76 and 79)
The Pan Pacific merger proposal requires the approval of the holders of a
majority of the outstanding shares of Pan Pacific common stock held of record on
the record date. The Pan Pacific proposal to amend its 2000 Stock Incentive Plan
requires the affirmative vote of a majority of the votes cast on the proposal at
the Pan Pacific special meeting, provided that a majority of the outstanding
shares of Pan Pacific common stock cast a vote on the proposal.
As of the record date for Pan Pacific, the directors and executive officers
of Pan Pacific and their affiliates, as a group, owned 0.9% of the outstanding
shares of Pan Pacific common stock. Pan Pacific currently expects that all of
these holders will vote in favor of the merger. In addition, Revenue Properties
(U.S.), Inc. and its wholly-owned subsidiaries, which collectively owned 50.9%
of the outstanding shares of common stock of Pan Pacific as of the record date
for Pan Pacific, have agreed to vote in favor of the merger pursuant to a voting
agreement with Western Properties.
The Western Properties merger and incorporation proposal requires the
approval of the holders of a majority of the outstanding Western
Properties common shares held of record on the record date.
As of the record date for Western Properties, the trustees and executive
officers of Western Properties and their affiliates, as a group, beneficially
owned 2.4% of the outstanding Western Properties common shares. Western
Properties currently expects that all of these holders will vote in favor of the
merger and incorporation proposal.
THE INCORPORATION
(Page 63)
The merger agreement provides that immediately before the merger, Western
Properties will incorporate and become WPT, Inc. This incorporation procedure is
necessary because California law does not specifically allow the merger of a
real estate investment trust with a corporation, but does allow corporations to
merge with each other. As a result of the incorporation, WPT will succeed to all
of the assets and liabilities of Western Properties and each outstanding common
share of Western Properties will become one share of common stock of WPT. The
incorporation will occur only if the merger occurs.
THE MERGER
(Page 33)
In the merger, WPT will be merged into Pan Pacific, with Pan Pacific
continuing as the surviving corporation. Each share of common stock of WPT
outstanding immediately prior to the merger, other than shares held by Western
Properties shareholders who perfect dissenters' rights, will become the right to
receive 0.62 of a share of Pan Pacific common stock.
Western Properties' shareholders will receive 11.7 million shares of Pan
Pacific common stock in the merger, which will constitute 34.2% of the
outstanding voting power of Pan Pacific following the merger, assuming in each
case the exchange of all exchangeable securities of subsidiaries of Pan Pacific
and Western Properties.
The merger agreement is attached to this joint proxy statement/prospectus
as Annex A. We encourage you to read the merger agreement as it is the legal
document that governs the merger.
RISK FACTORS
(Page 18)
In evaluating the merger and the proposals set forth in this joint proxy
statement/prospectus, you should carefully consider the "Risk Factors" beginning
on Page 18.
OUR RECOMMENDATIONS TO STOCKHOLDERS OF PAN PACIFIC AND SHAREHOLDERS OF WESTERN
PROPERTIES
(Pages 76 and 79)
The Pan Pacific board voted unanimously to approve the merger and the
amendment to the 2000 Stock Incentive Plan of Pan Pacific. The Pan Pacific board
believes that the merger and the amendment to the stock incentive plan are in
the best interests of Pan Pacific and its stockholders and recommends that Pan
Pacific stockholders vote FOR the merger and the amendment.
The Western Properties board of trustees voted unanimously to approve the
merger agreement and incorporation. The Western Properties board believes that
the merger agreement and the incorporation are in the best interests of Western
Properties and its shareholders and recommends that Western Properties
shareholders vote FOR the merger agreement and the incorporation.
6
<PAGE> 14
OPINIONS OF FINANCIAL ADVISORS
(Pages 49 and 55)
In deciding to approve the merger, the Pan Pacific board and the Western
Properties board received opinions from their respective financial advisors.
Pan Pacific received an opinion from its financial advisor, Prudential
Securities Incorporated, to the effect that, as of the date of its opinion and
based on and subject to the assumptions, limitations and qualifications set
forth in its opinion, the exchange ratio of 0.62 of a share of Pan Pacific
common stock for each Western Properties common share was fair to Pan Pacific
from a financial point of view. The full text of the opinion is attached as
Annex B to this joint proxy statement/prospectus and should be read carefully in
its entirety.
Western Properties received an opinion from its financial advisor,
Donaldson, Lufkin & Jenrette Securities Corporation to the effect that, as of
the date of its opinion and based on and subject to the assumptions, limitations
and qualifications set forth in its opinion, the exchange ratio was fair to
Western Properties and its shareholders from a financial point of view. The full
text of the opinion is attached as Annex C to this joint proxy
statement/prospectus and should be read carefully in its entirety.
CONDITIONS TO THE MERGER
(Page 72)
The completion of the merger depends upon the satisfaction of a number of
conditions, including:
- the approval of the merger by the stockholders of Pan Pacific and the
approval of the merger and the incorporation by the shareholders of
Western Properties;
- the absence of any law or any injunction that effectively prohibits or
restricts the merger;
- the receipt of all material approvals and consents from third parties;
- the receipt of satisfactory legal opinions regarding Pan Pacific's and
Western Properties' real estate investment trust status for federal
income tax purposes and the treatment of the merger as a reorganization
for federal income tax purposes;
- the average closing price of Pan Pacific's common stock for the ten
trading days preceding the merger closing date is not less than $15.00
per share; and
- exercise of dissenters' rights by less than 5% of Western Properties' or
WPT's shareholders.
Unless prohibited by law, either Pan Pacific or Western Properties could
elect to waive a condition in its favor that has not been satisfied and complete
the merger anyway.
TREATMENT OF WESTERN PROPERTIES SHARE OPTIONS AND RESTRICTED SHARES
(Page 64)
Each option to purchase Western Properties common shares outstanding
immediately before the merger will be converted into options to purchase Pan
Pacific common stock on the same terms as in effect prior to the merger, except
for adjustments to the exercise price and the number of shares purchasable based
on the exchange ratio. Also, Western Properties may offer to purchase
outstanding options from its employees listed on a schedule to the merger
agreement for cash before the merger at prices set forth on that schedule.
Each Western Properties restricted share outstanding immediately before the
merger will become fully vested immediately before the merger.
TERMINATION; BREAK-UP FEE AND EXPENSES
(Page 74)
Either Pan Pacific or Western Properties can terminate the merger
agreement:
- by mutual written consent;
- if the merger has not been completed by February 28, 2001;
- if an order, decree or injunction makes the merger illegal or prohibits
the merger; or
- if either party does not receive the requisite shareholder approval at
its special meeting.
Pan Pacific can also terminate the merger agreement:
- upon a material breach by Western Properties of any covenant or agreement
7
<PAGE> 15
contained in the merger agreement or if any representation or warranty of
Western Properties becomes untrue in any material respect and Western
Properties is not in good faith attempting to cure the breach; or
- upon the occurrence of any of the following (each of which will obligate
Western Properties to pay a $7.0 million break-up fee to Pan Pacific):
(a) Western Properties receives an acquisition proposal from a third
party and, thereafter, the Western Properties board withdraws or
modifies its recommendation of the incorporation and merger proposal;
(b) Western Properties receives a public acquisition proposal from a
third party and, thereafter, Pan Pacific requests that the Western
Properties board publicly reconfirm its recommendation of the
incorporation and merger proposal to Western Properties shareholders
and the Western Properties board fails to do so within 30 business
days after receipt of Pan Pacific's request;
(c) the Western Properties board recommends to Western Properties
shareholders an alternative acquisition, merger or similar
transaction;
(d) a tender offer or exchange offer for 27.5% or more of the outstanding
Western Properties common shares (other than by Western Properties or
an affiliate of Western Properties) is commenced, and the Western
Properties board recommends that Western Properties shareholders
tender their shares in such tender or exchange offer; or
(e) Western Properties receives an acquisition proposal from a third
party and, thereafter, Western Properties fails to call and hold the
Western Properties special meeting by February 28, 2001.
Western Properties can also terminate the merger agreement:
- upon a material breach by Pan Pacific of any covenant or agreement
contained in the merger agreement or if any representation or warranty of
Pan Pacific becomes untrue in any material respect and Pan Pacific is not
in good faith attempting to cure the breach; or
- subject to certain qualifications, the Western Properties board
determines to accept an alternative proposal from a third party that it
determines to be superior to the merger (in which case Western Properties
would be obligated to pay the $7.0 million break-up fee).
Pan Pacific or Western Properties may be obligated to pay up to $2.0
million of the other company's expenses if the merger agreement is terminated by
the other company due to a breach of the merger agreement. However, Western
Properties will not be obligated to pay Pan Pacific's expenses if it is also
obligated to pay the $7.0 million break-up fee.
INTERESTS OF EXECUTIVE OFFICERS AND TRUSTEES OF WESTERN PROPERTIES IN THE MERGER
(Page 60)
In considering the recommendation of the Western Properties board, you
should be aware that members of Western Properties' management and board of
trustees may have interests in the merger that are different from, or in
addition to, your interests as a Western Properties shareholder generally. These
interests exist because of, among other things:
- proposed development arrangements for the completion of Western
Properties' three existing development projects between Pan Pacific and
Bradley N. Blake, Chief Executive Officer of Western Properties, and L.
Gerald Hunt, Chief Operations Officer and Senior Vice President of
Western Properties, which are expected to be entered into following
completion of the merger;
- acceleration of vesting of share options and restricted shares held by
officers and trustees of Western Properties; and
8
<PAGE> 16
- severance arrangements under existing employment agreements and
forgiveness of loans of Western Properties' executive officers.
The members of the Western Properties board were informed of the foregoing
and considered them, when they approved the merger.
DIVIDEND COORDINATION
(Page 70)
Pursuant to the merger agreement, Western Properties has agreed to set a
record date for its regular dividend to be paid in the fourth quarter of 2000
that is on or before the date of the Western Properties special meeting and
before November 26, 2000, which dividend is expected to be in the amount of
$0.28 per share. Also, pursuant to the merger agreement, Pan Pacific will set a
record date for a special dividend that is on or before the date of the Pan
Pacific special meeting, which dividend is expected to be in the amount of $0.28
per share (the equivalent of a two-month dividend at Pan Pacific's current
dividend rate). Pan Pacific has agreed to change the record and payment dates
for its regular quarterly dividend to be paid in the first quarter of 2001 to
February 23, 2001 and March 15, 2001, respectively, and intends to pay
subsequent regular quarterly dividends in mid-March, mid-June, mid-September,
and mid-December of each year.
ACCOUNTING TREATMENT
(Page 46)
The merger will be accounted for under the purchase method of accounting
for financial reporting purposes.
MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS
(Page 82)
As a condition to the completion of the merger, Pan Pacific and Western
Properties will each receive legal opinions that the merger will qualify as a
reorganization under Section 368(a) of the Internal Revenue Code for federal
income tax purposes and that no income or gain will be recognized for federal
income tax purposes by such party or any of its shareholders as a result of the
merger, except with respect to Western Properties shareholders who receive cash
pursuant to the transactions contemplated by the merger agreement. These
opinions are based on, among other things, representations and warranties of
both Pan Pacific and Western Properties. Accordingly, Pan Pacific and Western
Properties expect that none of Pan Pacific, Pan Pacific's stockholders, Western
Properties or Western Properties' shareholders will recognize any gain or loss
for United States federal income tax purposes as a result of the merger, except
with respect to any Western Properties' shareholders who receive cash pursuant
to the transactions contemplated by the merger agreement.
Determining the actual tax consequences of the merger to you as an
individual taxpayer can be complicated. Your tax treatment will depend on your
specific situation and many variables not within either company's control. You
should consult your tax advisor for a full understanding of the tax consequences
of the merger.
REGULATORY MATTERS
Neither Pan Pacific nor Western is aware of any federal or state regulatory
approvals which must be obtained in connection with the merger.
APPRAISAL OR DISSENTERS' RIGHTS
(Page 47)
Because Pan Pacific common stock was listed on the New York Stock Exchange
on the record date, Pan Pacific's stockholders will not have any appraisal
rights under Maryland law in connection with the merger.
If holders of 5% or more of the outstanding Western Properties common
shares entitled to vote at the Western Properties special meeting vote against
the merger agreement and comply with certain procedures and requirements,
Western Properties shareholders who take these actions will be entitled to
exercise dissenters' rights under the provisions of Chapter 13 of the California
General Corporation Law if the merger is completed. In accordance with these
provisions, dissenting Western Properties shareholders will have the right to be
paid in cash the fair market value (excluding any appreciation or depreciation
as a consequence of the merger) of their Western Properties common shares as
agreed upon by Western Properties and the shareholder or, if they cannot agree,
as determined by appraisal, by fully complying with the procedures set forth in
the California General Corporation Law. The failure of a dissenting Western
Properties shareholder to comply timely and properly with these procedures
9
<PAGE> 17
will result in the termination or waiver of the appraisal right. It is a
condition to the merger that holders of less than 5% of Western Properties
common shares or WPT common stock exercise their dissenters' rights.
THE RIGHTS OF WESTERN PROPERTIES' SHAREHOLDERS WILL CHANGE
(Page 98)
The rights of Western Properties shareholders are determined by California
law and by Western Properties' Amended and Restated Declaration of Trust. When
the merger is completed, Western Properties shareholders will become
stockholders of Pan Pacific. The rights of Pan Pacific stockholders are
determined by Maryland General Corporation Law and Pan Pacific's charter and
bylaws. As a result of these different governing laws and organizational
documents, Western Properties shareholders will have different rights as Pan
Pacific stockholders than they currently have as Western Properties
shareholders.
AMENDMENT TO THE 2000 STOCK INCENTIVE PLAN OF PAN PACIFIC
(Page 121)
At the Pan Pacific special meeting, Pan Pacific stockholders will be asked
to approve an amendment to the 2000 Stock Incentive Plan of Pan Pacific which
increases the total number of shares of Pan Pacific common stock reserved for
issuance under the plan by 1,296,724, from 489,971 to 1,786,695. As of the
record date, 344,971 shares of Pan Pacific common stock were available for
issuance under the plan. The amended plan will ensure that an adequate number of
shares of common stock will be available for future grants to provide incentives
to employees of the combined company after the merger. Approval of the amendment
will require the approval of the holders of a majority of the shares of Pan
Pacific common stock cast on the proposal at the Pan Pacific special meeting,
provided that a majority of the outstanding shares of Pan Pacific common stock
cast a vote on the proposal. Approval of the amendment to the plan is not
necessary to complete the merger.
10
<PAGE> 18
SELECTED SUMMARY HISTORICAL AND SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
We are providing the following information to aid you in your analysis of
the financial aspects of the merger. We derived this information from the
audited consolidated financial statements of each of Pan Pacific and Western
Properties for the years 1995 through 1999 and the unaudited consolidated
financial statements for each of Pan Pacific and Western Properties as of and
for the six months ended June 30, 2000 and 1999. This information is only a
summary and you should read it in conjunction with the historical and unaudited
pro forma financial statements and related notes contained in the annual
reports, quarterly reports and other information regarding Pan Pacific and
Western Properties filed with the SEC and incorporated by reference or included
in this joint proxy statement/prospectus. See "Where You Can Find More
Information" on page 129.
Selected Historical Financial Data of Pan Pacific
Pan Pacific's historical consolidated financial data for the annual periods
presented below have been derived from its audited consolidated financial
statements previously filed with the SEC. The selected historical consolidated
financial data for Pan Pacific as of and for the periods ended June 30, 2000 and
1999 are unaudited and were prepared in accordance with generally accepted
accounting principles applied to interim financial information. In the opinion
of Pan Pacific's management, all adjustments necessary for a fair presentation
of results of operations for such interim periods have been included. These
adjustments consist only of normal recurring accruals. Because of seasonal and
other factors, results for interim periods are not necessarily indicative of the
results to be expected for the full year. This information is only a summary and
you should read it together with Pan Pacific's historical financial statements
and related notes contained in the annual reports, quarterly reports and other
information that we have filed with the SEC and incorporated by reference. See
"Where You Can Find More Information" on page 129.
11
<PAGE> 19
PAN PACIFIC RETAIL PROPERTIES, INC.
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- -----------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Base rent................................. $ 43,078 $ 38,376 $ 79,377 $ 62,585 $ 36,839 $ 28,111 $ 23,315
Percentage rent........................... 300 325 760 628 278 239 154
Recoveries from tenants................... 9,624 8,109 17,893 13,728 8,042 6,214 5,478
Net gain on sale of real estate........... -- 75 400 -- -- -- 501
Income (loss) from unconsolidated
partnerships............................ 149 185 341 737 409 109 (32)
Other..................................... 1,277 1,091 2,291 1,575 1,142 950 319
--------- --------- --------- --------- --------- --------- ---------
Total revenue............................... 54,428 48,161 101,062 79,253 46,710 35,623 29,735
--------- --------- --------- --------- --------- --------- ---------
Property operating and property taxes..... 10,384 9,228 19,950 15,548 9,329 7,365 6,789
Depreciation and amortization............. 9,426 8,464 17,476 14,298 8,928 7,693 6,340
Interest.................................. 14,316 11,037 23,939 18,295 14,057 14,671 12,262
General and administrative................ 2,489 2,703 5,315 4,109 3,923 3,228 3,620
Other..................................... 86 113 248 108 964 2,173 1,334
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before minority interests and
extraordinary loss........................ 17,727 16,616 34,134 26,895 9,509 493 (610)
Minority interests.......................... (1,003) (699) (1,558) (261) (153) (44) (5)
Extraordinary loss on early extinguishment
of debt................................... -- -- -- -- (1,043) -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)........................... $ 16,724 $ 15,917 $ 32,576 $ 26,634 $ 8,313 $ 449 $ (615)
========= ========= ========= ========= ========= ========= =========
Basic earnings per share:
Income before extraordinary item.......... $ 0.79 $ 0.75 $ 1.54 $ 1.37 $ 0.56 N/A(1) N/A(1)
Extraordinary item........................ $ -- $ -- $ -- $ -- $ (0.06) N/A(1) N/A(1)
Net income................................ $ 0.79 $ 0.75 $ 1.54 $ 1.37 $ 0.49 N/A(1) N/A(1)
Diluted earnings per share:
Income before extraordinary item.......... $ 0.79 $ 0.75 $ 1.54 $ 1.35 $ 0.55 N/A(1) N/A(1)
Extraordinary item........................ $ -- $ -- $ -- $ -- $ (0.06) N/A(1) N/A(1)
Net income................................ $ 0.79 $ 0.75 $ 1.54 $ 1.35 $ 0.49 N/A(1) N/A(1)
Dividends paid on common shares............. $ 17,852 $ 16,930 $ 33,929 $ 30,514 $ 9,673 N/A(1) N/A(1)
Dividends paid per common share............. $ 0.84 $ 0.80 $ 1.60 $ 1.52 $ 0.58 N/A(1) N/A(1)
BALANCE SHEET DATA:
Properties, net of accumulated
depreciation.............................. $ 757,815 $ 700,949 $ 748,061 $ 667,478 $ 455,514 $ 264,017 $ 251,423
Total assets................................ $ 791,716 $ 732,551 $ 784,537 $ 705,541 $ 487,220 $ 293,186 $ 275,690
Mortgage loans payable & line of credit..... $ 368,350 $ 315,111 $ 357,290 $ 282,524 $ 170,766 $ 192,915 $ 191,302
Total liabilities........................... $ 388,117 $ 333,154 $ 379,324 $ 305,135 $ 184,644 $ 229,839 $ 212,984
Minority interests.......................... $ 22,689 $ 17,322 $ 23,347 $ 17,318 $ 1,521 $ 1,539 $ 1,347
Total equity................................ $ 380,910 $ 382,075 $ 381,866 $ 383,088 $ 301,055 $ 61,808 $ 61,359
OTHER DATA:
Funds from operations(2).................... $ 26,938 $ 24,793 $ 50,798 $ 41,134 $ 18,288 $ 8,182 $ 5,290
Cash flows provided by (used in):
Operating activities...................... $ 24,535 $ 19,928 $ 46,740 $ 39,363 $ 15,242 $ 6,493 $ 5,456
Investing activities...................... $ (18,297) $ (34,504) $ (77,671) $(166,963) $(166,446) $ (18,802) $ (42,815)
Financing activities...................... $ (7,335) $ 13,815 $ 29,269 $ 130,359 $ 142,969 $ 14,966 $ 26,683
Ratio of earnings to fixed charges(3)....... 2.16 2.40 2.34 2.42 1.64 1.01 0.89
Number of operating properties (at end of
period)................................... 59 55 58 54 32 19 18
Gross leaseable area (sq. ft.) (at end of
period)................................... 8,184,533 7,503,809 8,062,368 7,172,756 4,532,707 2,794,307 2,737,577
Occupancy of properties owned (at end of
period)................................... 97.7% 97.5% 97.5% 96.5% 97.5% 95.8% 95.4%
</TABLE>
-------------------------
(1) Per share information is not applicable for the years ended December 31,
1996 and 1995 as Pan Pacific was a wholly owned subsidiary of another
company. Pan Pacific completed its initial public offering in August 1997.
(2) The White Paper on Funds from Operations approved by the Board of Governors
of the National Association of Real Estate Investment Trusts in March 1995
(the "White Paper") defines Funds from Operations as net income (loss)
(computed in accordance with generally accepted accounting principles),
excluding gains (or losses) from debt restructuring and sales of property,
plus real estate related depreciation and amortization and after adjustments
for unconsolidated partnerships and joint ventures. Management considers
Funds from Operations an appropriate measure of performance of an equity
real estate investment trust because it is predicated on cash flow analyses.
Pan Pacific computes Funds from Operations in accordance with standards
established by the White Paper. Pan Pacific's computation of Funds from
Operations may, however, differ from the methodology for calculating Funds
from Operations utilized by other equity real estate investment trusts and,
therefore, may not be comparable to such other real estate investment
trusts. Funds from Operations should not be considered as an alternative to
net income (determined in accordance with generally accepted accounting
principles), as a measure of Pan Pacific's liquidity, nor is it indicative
of funds available to fund Pan Pacific's cash needs, including its ability
to make distributions. The National Association of Real Estate Investment
Trusts' clarification to the definition of Funds from Operations, which
became effective January 1, 2000, had no impact on the calculation of Pan
Pacific's Funds from Operations.
(3) Ratio of earnings to fixed charges is calculated by dividing earnings by
fixed charges. For this purpose, earnings consist of income (loss) before
extraordinary items plus fixed charges (excluding interest costs
capitalized). Fixed charges consist of interest expense (including the
amortization of deferred financing fees). In 1995, fixed charges exceeded
earnings by $1,421.
12
<PAGE> 20
Selected Summary Historical Financial Data of Western Properties
Western Properties' historical consolidated financial data for the annual
periods presented below have been derived from its audited consolidated
financial statements previously filed with the SEC. The selected historical
consolidated financial data for Western Properties for the periods ended June
30, 2000 and 1999 are unaudited and were prepared in accordance with generally
accepted accounting principles applied to interim financial information. In the
opinion of Western Properties' management, all adjustments necessary for a fair
presentation of results of operations for such interim periods have been
included. This information is only a summary and should be read together with
Western Properties' historical financial statements and related notes contained
in the annual reports, quarterly reports and other information that Western
Properties has filed with the SEC and incorporated by reference. See "Where You
Can Find More Information" on page 129.
13
<PAGE> 21
WESTERN PROPERTIES TRUST
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------------------- --------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
----------- ----------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Base rent......................... $ 22,240 $ 22,100 $ 44,567 $ 42,350 $ 37,845 $ 38,373 $ 37,641
Percentage rent................... 435 374 886 539 552 649 559
Recoveries from tenants........... 4,521 4,429 9,698 8,551 8,088 8,138 7,506
Interest income................... 1,124 871 1,756 933 361 25 --
Net gain on sale of real estate... 4,256 2,113 6,854 2,475 4,898 1,115 47
Income from unconsolidated
subsidiary...................... 659 145 466 12 -- -- --
Other............................. 429 430 1,325 969 705 604 584
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenue....................... 33,664 30,462 65,552 55,829 52,449 48,904 46,337
---------- ---------- ---------- ---------- ---------- ---------- ----------
Property operating and property
taxes........................... 4,710 4,761 10,171 9,253 8,798 8,933 8,310
Depreciation and amortization..... 5,069 5,925 11,523 12,401 11,046 11,264 10,893
Interest.......................... 7,507 7,050 14,325 13,414 11,511 11,289 11,537
General and administrative........ 1,828 1,514 3,248 2,733 1,741 1,706 1,691
Other............................. 2,844 2,435 4,867 4,412 3,011 3,481 3,602
Provision for loss on real
estate.......................... 1,745 -- -- -- -- -- --
Management restructuring charge... -- -- -- -- 1,842 -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before minority interests and
extraordinary loss................ 9,961 8,777 21,418 13,616 14,500 12,231 10,304
Minority interests.................. (802) (802) (1,604) -- -- -- --
Extraordinary loss on early
extinguishment of debt............ -- -- -- -- (1,620) -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income.......................... $ 9,159 $ 7,975 $ 19,814 $ 13,616 $ 12,880 $ 12,231 $ 10,304
========== ========== ========== ========== ========== ========== ==========
Basic earnings per share:
Income before extraordinary
item............................ $ 0.53 $ 0.46 $ 1.15 $ 0.79 $ 0.84 $ 0.72 $ 0.61
Extraordinary item................ $ -- $ -- $ -- $ -- $ (0.09) $ -- $ --
Net income........................ $ 0.53 $ 0.46 $ 1.15 $ 0.79 $ 0.75 $ 0.72 $ 0.61
Diluted earnings per share:
Income before extraordinary
item............................ $ 0.53 $ 0.46 $ 1.15 $ 0.78 $ 0.84 $ 0.72 $ 0.61
Extraordinary item................ $ -- $ -- $ -- $ -- $ (0.09) $ -- $ --
Net income........................ $ 0.53 $ 0.46 $ 1.15 $ 0.78 $ 0.75 $ 0.72 $ 0.61
Dividends paid on common shares..... $ 9,686 $ 9,668 $ 19,337 $ 19,300 $ 19,207 $ 19,102 $ 18,882
Dividends paid per common share..... $ 0.56 $ 0.56 $ 1.12 $ 1.12 $ 1.12 $ 1.12 $ 1.12
BALANCE SHEET DATA:
Properties, net of accumulated
depreciation...................... $ 321,044 $ 338,267 $ 346,670 $ 350,359 $ 318,349 $ 328,915 $ 334,551
Total assets........................ $ 421,440 $ 414,625 $ 427,266 $ 426,891 $ 337,521 $ 339,629 $ 344,571
Mortgage loans, unsecured line of
credit, unsecured notes and
convertible debentures............ $ 213,437 $ 209,818 $ 219,150 $ 220,503 $ 143,866 $ 143,457 $ 143,859
Total liabilities................... $ 222,197 $ 218,887 $ 227,938 $ 229,851 $ 151,272 $ 147,681 $ 147,772
Minority interests.................. $ 18,699 $ 17,416 $ 18,699 $ 17,416 $ -- $ -- $ --
Total equity........................ $ 180,544 $ 178,322 $ 180,629 $ 179,624 $ 186,249 $ 191,948 $ 196,799
OTHER DATA:
Funds from operations(1)............ $ 12,856 $ 12,555 $ 26,129 $ 23,435 $ 20,550 $ 22,274 $ 21,017
Cash flows provided by (used in):
Operating activities.............. $ 12,555 $ 11,772 $ 24,347 $ 23,978 $ 23,277 $ 21,956 $ 20,203
Investing activities.............. $ 4,133 $ 9,277 $ (1,028) $ (69,447) $ (3,740) $ (4,225) $ (7,318)
Financing activities.............. $ (16,483) $ (21,459) $ (22,612) $ 45,518 $ (19,026) $ (17,436) $ (12,876)
Ratio of earnings to fixed
charges(2)........................ 1.60 1.75 2.18 1.97 2.12 2.06 1.89
Number of operating properties (at
end of period).................... 58 64 62 66 53 60 62
Gross leaseable area (sq. ft.) (at
end of period).................... 5,387,751 5,641,894 5,589,223 5,697,617 4,720,453 4,806,191 4,799,231
Occupancy of properties owned (at
end of period).................... 94.1% 91.2% 91.6% 85.4% 92.0% 93.7% 93.9%
</TABLE>
-------------------------
(1) The National Association of Real Estate Investment Trusts defines Funds from
Operations as net income calculated in accordance with generally accepted
accounting principles plus depreciation and amortization of assets uniquely
significant to the real estate industry, reduced by gains and increased by
losses on (i) sales of property and (ii) extraordinary and "unusual items."
Effective January 1, 2000, net income will not be adjusted for unusual items
unless they qualify as extraordinary items under generally accepted
accounting principles in calculating Funds from Operations. The revised
definition has been applied to all periods presented. Funds from Operations
does not represent cash flows from operations as defined by generally
accepted accounting principles and should not be considered a substitute for
net income as an indicator of Western Properties' operating performance, or
for cash flows as a measure of liquidity. Furthermore, Funds from Operations
as disclosed by other real estate investment trusts may not be comparable to
Western Properties' calculation of Funds from Operations.
(2) Ratio of earnings to fixed charges is calculated by dividing earnings by
fixed charges. For this purpose, earnings consist of income (loss) before
extraordinary items plus fixed charges (excluding interest costs
capitalized). Fixed charges consist of interest expense (including the
amortization of deferred financing fees).
14
<PAGE> 22
Summary Unaudited Pro Forma Consolidated Financial Information
In the table below, we present pro forma balance sheet information for Pan
Pacific and Western Properties as of June 30, 2000, as if the merger had been
completed on June 30, 2000. We also present pro forma statement of operations
information for Pan Pacific and Western Properties for the fiscal year ended
December 31, 1999 and the six months ended June 30, 2000, as if the merger had
been completed on January 1, 1999. The merger has been accounted for under the
purchase method of accounting in accordance with the Accounting Principles Board
Opinion No. 16.
IT IS IMPORTANT TO REMEMBER THAT THIS INFORMATION IS HYPOTHETICAL, AND DOES
NOT NECESSARILY REFLECT THE FINANCIAL PERFORMANCE THAT WOULD HAVE ACTUALLY
RESULTED IF THE MERGER HAD BEEN COMPLETED ON THOSE DATES. FURTHERMORE, THIS
INFORMATION DOES NOT NECESSARILY REFLECT FUTURE FINANCIAL PERFORMANCE IF THE
MERGER ACTUALLY OCCURS.
See "Pan Pacific Retail Properties, Inc. Unaudited Pro Forma Condensed
Consolidated Financial Statements" attached to this joint proxy
statement/prospectus for a more detailed explanation of this analysis.
<TABLE>
<CAPTION>
PAN PACIFIC PRO FORMA PAN PACIFIC PRO FORMA
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
--------------------- ---------------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.............................................. $ 88,092 $166,614
Net income........................................... $ 29,628 $ 61,069
Net income per share -- basic........................ $ 0.93 $ 1.91
Net income per share -- diluted...................... $ 0.92 $ 1.90
BALANCE SHEET DATA (AT END OF PERIOD):
Real estate properties, net.......................... $1,144,011
Investment in unconsolidated entities................ $ 55,784
Notes receivable..................................... $ 28,246
Accounts receivable.................................. $ 24,548
Total assets......................................... $1,265,855
Notes payable........................................ $ 236,501
Senior notes, net.................................... $ 124,836
Line of credit payable............................... $ 226,289
Minority interests................................... $ 42,078
Total equity......................................... $ 601,424
</TABLE>
15
<PAGE> 23
COMPARATIVE PER SHARE DATA
Set forth below are net income, book value and cash dividends per common
share data for Pan Pacific and Western Properties on a historical basis, for Pan
Pacific and Western Properties on a pro forma basis and on a pro forma basis per
Western Properties equivalent share.
The pro forma data was derived by combining the historical consolidated
financial information of Pan Pacific and Western Properties using purchase
accounting.
The Western Properties equivalent per share pro forma information shows the
effect of the merger from the perspective of an owner of Western Properties
common shares. The information was computed by multiplying the Pan Pacific per
share pro forma information by the 0.62 exchange ratio.
You should read the information below together with our historical
financial statements and related notes contained in the annual reports and other
information that we have filed with the SEC and incorporated by reference. See
"Where You Can Find More Information" on page 129. The unaudited pro forma
combined data below is for illustrative purposes only. The companies might have
performed differently had they always been combined. You should not rely on this
information as being indicative of the historical results that would have been
achieved had the companies always been combined or the future results that the
combined company will experience after the merger.
<TABLE>
<CAPTION>
PAN PACIFIC WESTERN PROPERTIES PAN PACIFIC WESTERN PROPERTIES
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
DATA DATA DATA EQUIVALENT DATA
----------- ------------------ ----------- ------------------
<S> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE
Year ended December 31, 1999........ $ 1.54 $ 1.15 $ 1.91 $ 1.18
Six months ended June 30, 2000...... $ 0.79 $ 0.53 $ 0.93 $ 0.58
NET INCOME PER COMMON SHARE (ASSUMING
DILUTION)
Year ended December 31, 1999........ $ 1.54 $ 1.15 $ 1.90 $ 1.18
Six months ended June 30, 2000...... $ 0.79 $ 0.53 $ 0.92 $ 0.57
BOOK VALUE PER COMMON SHARE
As of December 31, 1999............. $17.97 $10.48
As of June 30, 2000................. $17.92 $10.47 $18.81 $11.66
CASH DIVIDENDS PER COMMON SHARE
Year ended December 31, 1999........ $ 1.60 $ 1.12 $ 1.82 $ 1.13
Six months ended June 30, 2000...... $ 0.84 $ 0.56 $ 0.91 $ 0.56
</TABLE>
16
<PAGE> 24
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
At the close of business on September 29, 2000, the record date for the Pan
Pacific special meeting and the Western Properties special meeting, there were
approximately 86 holders of record of Pan Pacific common stock and 1,705 holders
of record of Western Properties common shares.
Pan Pacific common stock is listed on the New York Stock Exchange under the
symbol "PNP." Western Properties common shares are listed on the American Stock
Exchange under the symbol "WIR."
The following table sets forth the high and low closing prices per share of
Pan Pacific common stock and Western Properties common shares as reported by the
New York Stock Exchange and the American Stock Exchange, respectively, and
dividends declared on Pan Pacific common stock and Western Properties common
shares based on published financial sources for the quarterly periods indicated,
which correspond to the companies' respective quarterly fiscal periods for
financial reporting purposes.
<TABLE>
<CAPTION>
PAN PACIFIC WESTERN PROPERTIES
COMMON STOCK COMMON SHARES
------------------------------ ------------------------------
DECLARED DECLARED
HIGH LOW DIVIDEND HIGH LOW DIVIDEND
------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
1998:
First Quarter...................... $22.562 $21.375 $0.38 $15.188 $13.625 $0.28
Second Quarter..................... $22.688 $19.375 $0.38 $15.000 $12.875 $0.28
Third Quarter...................... $21.875 $17.688 $0.38 $13.938 $11.500 $0.28
Fourth Quarter..................... $20.250 $17.750 $0.38 $12.875 $11.375 $0.28
1999:
First Quarter...................... $20.250 $17.500 $0.40 $12.313 $10.000 $0.28
Second Quarter..................... $20.188 $17.375 $0.40 $12.688 $10.875 $0.28
Third Quarter...................... $20.188 $17.063 $0.40 $11.688 $10.688 $0.28
Fourth Quarter..................... $18.250 $15.125 $0.40 $11.000 $ 9.438 $0.28
2000:
First Quarter...................... $19.125 $16.625 $0.42 $10.625 $ 9.313 $0.28
Second Quarter..................... $20.125 $18.750 $0.42 $11.875 $10.125 $0.28
Third Quarter...................... $20.938 $19.000 $0.42 $12.688 $11.438 $0.28
</TABLE>
Pan Pacific currently plans to continue paying quarterly cash dividends
after completion of the merger and has committed to pay a dividend of $0.455 per
share in the first calendar quarter after completion of the merger. Except for
such dividend, the Pan Pacific board may increase or decrease the per share cash
dividend amount in the future.
The following table presents trading information for Pan Pacific common
stock and Western Properties common shares for August 21, 2000 and September 29,
2000. August 21, 2000 was the last full trading day prior to the public
announcement of the proposed merger. September 29, 2000 was the last practicable
trading day for which information was available prior to the date of the first
mailing of this joint proxy statement/prospectus. Western Properties pro forma
equivalent closing share price is computed by multiplying the Pan Pacific
closing stock price by the exchange ratio of 0.62.
<TABLE>
<CAPTION>
PAN PACIFIC WESTERN PROPERTIES WESTERN PROPERTIES
COMMON STOCK COMMON SHARES PRO FORMA EQUIVALENT
CLOSE CLOSE CLOSE
------------ ------------------ --------------------
<S> <C> <C> <C>
August 21, 2000........................................... $20.563 $12.500 $12.749
September 29, 2000........................................ $20.063 $12.313 $12.439
</TABLE>
The market prices of Pan Pacific common stock and Western Properties common
shares fluctuate. As a result, we urge you to obtain current market quotations
of Pan Pacific common stock and Western Properties common shares.
17
<PAGE> 25
RISK FACTORS
In addition to general investment risks and the other information contained
in or incorporated by reference into this joint proxy statement/prospectus, you
should carefully consider the following factors in evaluating the proposals to
be voted on at the Pan Pacific special meeting and the Western Properties
special meeting.
THE COMBINED COMPANY MAY NOT REALIZE THE EXPECTED BENEFITS FROM THE MERGER, SUCH
AS COST SAVINGS, OPERATING EFFICIENCIES AND OTHER SYNERGIES.
Pan Pacific and Western Properties entered into the merger agreement with
the expectation that the merger would result in a number of benefits to the
combined company, including cost savings, operating efficiencies and other
synergies. Achieving these benefits will depend in large part on our ability to
efficiently integrate the properties of Western Properties into Pan Pacific's
portfolio. Unforeseen difficulties in integrating these portfolios may cause the
disruption of, or a loss of momentum in, the activities of the combined
company's business which could affect its ability to achieve expected cost
savings, operating efficiencies and other synergies, which could materially harm
the combined company's financial performance.
FIXED EXCHANGE RATIO MAY NOT REFLECT CHANGES IN SHARE VALUE.
The number of shares of Pan Pacific common stock into which each Western
Properties common share is to be converted in the merger is fixed at 0.62 of a
share of Pan Pacific common stock for each Western Properties common share. The
market value of Pan Pacific common stock and/or Western Properties common shares
at the effective time of the merger may vary significantly from the price as of
the date the merger agreement was executed, the date of this joint proxy
statement/prospectus or the date on which Pan Pacific stockholders and Western
Properties shareholders vote on the merger. These changes may result from a
number of factors, including:
- market perception of the synergies to be achieved by the merger;
- changes in the business, operations or prospects of Pan Pacific or
Western Properties;
- market assessments of the likelihood that the merger will be completed
and the timing of the merger; and
- general market and economic conditions.
Because the exchange ratio will not be adjusted to reflect changes in the
market value of Pan Pacific common stock or Western Properties common shares,
the market value of Pan Pacific common stock issued in the merger, and the
market value of the Western Properties common shares surrendered in the merger,
may be higher or lower than the value of these shares at the time the merger was
negotiated or approved by the Pan Pacific board and the Western Properties
board. Neither Pan Pacific nor Western Properties is permitted to terminate the
merger agreement or resolicit the vote of its shareholders because of changes in
the market price of Pan Pacific common stock or Western Properties common
shares, except that Western Properties is not obligated to complete the merger
if the average closing price of Pan Pacific common stock for the ten trading
days preceding the closing date of the merger is less than $15.00 per share.
IF THE MERGER DOES NOT OCCUR, THE COMPANIES MAY INCUR PAYMENT OBLIGATIONS TO THE
OTHER PARTY.
If the merger agreement is terminated under certain circumstances, Western
Properties may be required to pay Pan Pacific a $7.0 million break-up fee. If
the merger agreement is terminated in certain other circumstances, either party
may be obligated to pay the other up to $2.0 million as expense reimbursement.
See "The Merger Agreement -- Termination; Break-up Fees and Expenses."
18
<PAGE> 26
AS A RESULT OF THE MERGER, THE COMBINED COMPANY MAY INCUR TRANSACTION COSTS THAT
EXCEED OUR ESTIMATES.
Pan Pacific and Western Properties estimate that, as a result of the
merger, the combined company will incur transaction costs of approximately $14.5
million, including financial advisors, printing, distribution, legal and
accounting fees and severance payments. Actual transaction costs may exceed Pan
Pacific's and Western Properties' estimates.
WESTERN PROPERTIES' OFFICERS HAVE CONFLICTS OF INTEREST THAT MAY INFLUENCE THEM
TO SUPPORT THE MERGER.
The executive officers of Western Properties participate in arrangements
that provide them with interests in the merger that are different from, or in
addition to, the interests of Western Properties' shareholders. In particular,
after completion of the merger, Bradley N. Blake, Chairman, President and Chief
Executive Officer of Western Properties, and L. Gerald Hunt, Chief Operations
Officer and Senior Vice President of Western Properties, expect to participate
in development arrangements with Pan Pacific to complete Western Properties'
three existing development projects. Under these arrangements, an entity formed
by Mr. Blake and Mr. Hunt will receive fees from the combined company for
development services rendered and will have a minority equity interest in one of
the development projects. Also, the employment agreements of Western Properties'
executive officers (Mr. Blake, Mr. Hunt, Mr. Ryan, and Mr. Smith) provide for
severance payments and other benefits to these officers upon completion of the
merger. As a result, these officers could be more likely to support and to vote
to approve the merger proposal than if they did not hold these interests. See
"Potential Conflicts of Interest; Interests of Executive Officers and Trustees
of Western Properties in the Merger."
THE COMBINED COMPANY MAY BE UNABLE TO COMPLETE WESTERN PROPERTIES' DEVELOPMENT
AND REDEVELOPMENT PROJECTS ON ADVANTAGEOUS TERMS.
The real estate development business, including the renovation and
rehabilitation of existing properties, involves significant risks. As of June
30, 2000, Western Properties was involved in two development projects in the San
Francisco Bay Area. These projects will not be completed by the time the merger
is completed. These development projects involve significant risks, including
the following:
- the combined company may not be able to obtain, or the combined company
may experience delays in obtaining, all necessary zoning, land-use,
building, occupancy and other required governmental permits and
authorizations;
- new or renovated properties may perform below anticipated levels,
producing cash flow below budgeted amounts;
- as of June 30, 2000, Western Properties did not have sufficient financing
in place to meet its anticipated commitments to both development
projects; Pan Pacific and Western Properties cannot assure you that
Western Properties or the combined company will be able to obtain
financing on favorable terms for development projects and they may not
complete construction on schedule or within budget, resulting in
increased debt service expense and construction costs and delays in
leasing such properties and generating cash flow; and
- activities that Western Properties or the combined company finances
through construction loans involve the risk that, upon completion of
construction, Western Properties or the combined company may not be able
to obtain permanent financing or may not be able to obtain permanent
financing on advantageous terms.
These risks could have an adverse effect on the combined company's
financial condition, results of operations and cash flow and the combined
company's ability to pay distributions on, and the market price of, the combined
company's common stock.
19
<PAGE> 27
IF PAN PACIFIC OR WESTERN PROPERTIES FAIL TO OBTAIN ALL REQUIRED CONSENTS AND
WAIVERS, THIRD PARTIES MAY TERMINATE OR ALTER EXISTING CONTRACTS.
Pan Pacific is required to obtain the consent of the lenders under its line
of credit to allow for the merger. In addition, Pan Pacific expects to retire
Western Properties' line of credit and expects to repay Western Properties'
outstanding borrowings under its line of credit with a borrowing under Pan
Pacific's line of credit. This borrowing will also require the consent of Pan
Pacific's lenders to increase the maximum borrowing amount currently permitted.
If these consents are not obtained, the line of credit could be declared in
default and any borrowings under the line of credit would become due and
payable. In addition, certain other agreements with tenants, suppliers,
customers or other parties may require Pan Pacific or Western Properties to
obtain the consents or waivers of these parties in connection with the merger.
If Pan Pacific and Western Properties fail to obtain all of the necessary
consents and waivers, such failure could materially harm the combined company's
business after the merger.
REAL PROPERTY INVESTMENTS ARE SUBJECT TO VARYING DEGREES OF RISK THAT MAY
ADVERSELY AFFECT THE BUSINESS AND THE OPERATING RESULTS OF PAN PACIFIC AFTER THE
MERGER.
The combined company's revenue and the value of its properties may be
adversely affected by a number of factors, including:
- the national economic climate;
- the local economic climate;
- local real estate conditions;
- changes in retail expenditures by consumers;
- the perceptions of prospective tenants of the attractiveness of the
properties;
- the combined company's ability to manage and maintain its properties and
secure adequate insurance; and
- increases in operating costs (including real estate taxes and utilities).
In addition, real estate values and income from properties are also
affected by factors such as applicable laws, including tax laws, interest rate
levels and the availability of financing. If the combined company's properties
do not generate revenue sufficient to meet operating expenses, including debt
service, tenant improvements, leasing commissions and other capital
expenditures, it may have to borrow additional amounts to cover fixed costs,
which would harm its ability to make distributions to its stockholders.
AFFILIATES OF PAN PACIFIC WILL HAVE SIGNIFICANT INFLUENCE OVER THE COMBINED
COMPANY, WHICH COULD LIMIT OTHER STOCKHOLDERS' ABILITY TO INFLUENCE CORPORATE
DECISIONS.
Stuart Tanz, the Chairman, President and Chief Executive Officer of Pan
Pacific, through his and his family's ownership interests in Revenue Properties
Company Limited and Revenue Properties Company Limited's ownership of Revenue
Properties (U.S.), Inc., owned or controlled, on a pro forma basis,
approximately 34.3% of outstanding shares of common stock of the combined
company as of the record date. In addition, Revenue Properties (U.S.) has the
right to nominate two directors of Pan Pacific and will have the right to
nominate two directors of the combined company directors. Consequently, although
the Tanz family will not be able to take action on the combined company's behalf
without the concurrence of other stockholders and other members of the combined
company's board of directors, they may be able to exert substantial influence
over the combined company's affairs. This influence might not be consistent with
the interest of other stockholders. In addition, there may be conflicts between
the interests of the public stockholders of Revenue Properties Company Limited
and the combined company's public stockholders.
20
<PAGE> 28
IF KEY TENANTS OR ANCHORS FAIL TO RENEW THEIR LEASES OR ARE UNABLE TO PAY THEIR
OCCUPANCY COSTS, THE COMBINED COMPANY'S BUSINESS MAY SUFFER.
The combined company's income and funds from operations could be adversely
affected in the event of the bankruptcy or insolvency, or a downturn in the
business, of any anchor tenant, or if any anchor tenant does not renew its lease
when it expires. If tenant sales at the combined company's properties were to
decline, tenants might be unable to pay their rent or other occupancy costs. In
the event of default by a tenant, the combined company could experience delays
and costs in enforcing its rights. In addition, the closing of one or more
anchor-occupied stores or lease termination by one or more anchor tenants of a
shopping center, whose leases may permit termination, could harm that property
and result in lease terminations or reductions in rent by other tenants, whose
leases may permit termination or rent reduction in those circumstances. This
could harm our ability to re-lease the space that is vacated. Each of these
developments could adversely affect the combined company's funds from operations
and its ability to service its debt and make expected distributions to
stockholders.
PAN PACIFIC'S CHARTER, WHICH WILL BE THE CHARTER OF THE COMBINED COMPANY,
CONTAINS RESTRICTIONS ON THE OWNERSHIP AND TRANSFER OF PAN PACIFIC COMMON STOCK.
Due to limitations on the concentration of ownership of stock of a real
estate investment trust imposed by the Internal Revenue Code, Pan Pacific's
charter prohibits any stockholder from actually or constructively owning more
than 6.25% of the outstanding Pan Pacific common stock, except for stockholders
who have received a waiver from these ownership limits from the Pan Pacific
board. If a stockholder becomes the actual or constructive owner of more than
6.25% of the outstanding Pan Pacific common stock, by way of transfer or
otherwise, the shares in excess of the ownership limit will be automatically
transferred to a trust for the benefit of a qualified charitable organization.
Within 20 days after receiving notice from Pan Pacific of the transfer of shares
to the trust, the trustee of the trust will sell the excess shares and generally
will distribute to such stockholder an amount equal to the lesser of the price
paid by the stockholder for the excess shares (except in the case of a gift or
similar transfer) or the sales proceeds received by the trust for these shares.
After the automatic transfer of the excess shares to the trust, such stockholder
will have no right to vote these shares or be entitled to dividends or other
distributions with respect to these shares.
Western Properties' Amended and Restated Declaration of Trust does not
contain specific ownership limitations. Although neither Pan Pacific nor Western
Properties is aware of any Western Properties shareholder who will exceed an
ownership limit set forth in Pan Pacific's charter as a result of the merger, it
is possible that one or more Western Properties' shareholders may violate a Pan
Pacific ownership limit as a result of the merger.
IF WESTERN PROPERTIES, PAN PACIFIC OR THE COMBINED COMPANY FAILS TO QUALIFY AS A
REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE, THAT FAILURE COULD
RESULT IN A SIGNIFICANT TAX LIABILITY FOR THE COMBINED COMPANY AND COULD REDUCE
THE VALUE OF THE COMBINED COMPANY'S STOCK.
Each of Western Properties and Pan Pacific believes that it has been
organized and has operated in a manner that qualifies it as a real estate
investment trust under the Internal Revenue Code and each company intends to
operate so as to qualify as a real estate investment trust under the Internal
Revenue Code through and including, and in the case of Pan Pacific, following
the effective time of the merger. However, it is possible that Western
Properties or Pan Pacific has been organized or has operated, or that Western
Properties, Pan Pacific or the combined company will in the future be organized
or operated, in a manner which does not allow it to qualify as a real estate
investment trust. Qualification as a real estate investment trust requires a
company to satisfy numerous requirements established under Internal Revenue Code
provisions for which there are only limited judicial and administrative
interpretations and involves the determination of various factual matters and
circumstances not entirely within the company's control. In addition,
legislation, new regulations, administrative interpretations or court decisions
may adversely affect, possibly retroactively, Western Properties', Pan
Pacific's, or the combined company's ability to qualify as a real estate
investment trust for tax purposes or the tax consequences of this qualification.
21
<PAGE> 29
If a company fails to qualify as a real estate investment trust in any
taxable year, it may, among other things:
- not be allowed a deduction for distributions to shareholders in computing
its taxable income;
- be subject to federal income tax, including any applicable alternative
minimum tax, on its taxable income at regular corporate rates;
- be subject to increased state and local taxes; and
- unless entitled to relief under certain statutory provisions, be
disqualified from treatment as a real estate investment trust for the
taxable year in which it lost its qualification and the four taxable
years following the year during which it lost its qualification.
As a result of these factors, Pan Pacific's or the combined company's
failure to qualify as a real estate investment trust also could impair its
ability to expand its business and raise capital, could substantially reduce the
funds available for distribution to its stockholders, and could reduce the
trading price of the combined company's common stock following the merger. If
the combined company failed to qualify as a real estate investment trust:
- all distributions to stockholders would be subject to tax as ordinary
income to the extent of the combined company's current and accumulated
earnings and profits; and
- the combined company would not be required to make distributions to
stockholders.
If Western Properties failed to qualify as a real estate investment trust
prior to the merger, the combined company would be required to pay any resulting
tax, and such tax could be material.
As a condition to the closing of the merger, O'Melveny & Myers LLP will
render to Pan Pacific a legal opinion to the effect that, commencing with its
taxable year ended December 31, 1992, and without regard to whether this opinion
is true and accurate for any prior period, Western Properties was organized in
conformity with the requirements for qualification and taxation as a real estate
investment trust under the Internal Revenue Code, and its method of operation
has enabled Western Properties to meet, through the effective time of the
merger, the requirements for qualification and taxation as a real estate
investment trust under the Internal Revenue Code. Likewise, as a condition to
the closing of the merger, Latham & Watkins will render to Western Properties a
legal opinion to the effect that, commencing with Pan Pacific's taxable year
ended December 31, 1997, Pan Pacific has been organized and has operated in
conformity with the requirements for qualification and taxation as a real estate
investment trust under the Internal Revenue Code, and Pan Pacific's proposed
method of operation will enable it to continue to meet the requirements for
qualification and taxation as a real estate investment trust under the Internal
Revenue Code. The forms of these opinions are included as exhibits to the merger
agreement which is attached as Annex A to this joint proxy statement/prospectus
and will be subject to the limitations contained in such opinions. An opinion of
counsel is not binding on the Internal Revenue Service or any court, and no
ruling has been or will be sought from the Internal Revenue Service as to
Western Properties' or Pan Pacific's qualification as a real estate investment
trust under the Internal Revenue Code. Accordingly, neither Pan Pacific nor
Western Properties can assure you that the Internal Revenue Service will not
take a position contrary to one or more positions reflected in these opinions or
that these opinions will be upheld by the courts if so challenged. See "Material
United States Federal Income Tax Considerations -- Pan Pacific's Qualification
as a Real Estate Investment Trust -- General" and "-- Tax Liabilities and
Attributes Inherited from Western."
22
<PAGE> 30
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document that are subject
to risks and uncertainties. These statements may be made directly in this
document or may be "incorporated by reference" to other documents filed with the
SEC. Forward-looking statements include information regarding:
- synergies;
- efficiencies;
- cost savings;
- revenue enhancements;
- projected funds from operations;
- asset portfolios; and
- the timetable for completion of the merger.
The sections of this document which contain forward-looking statements
include, among others:
- "Questions and Answers About the Merger;"
- "Summary;"
- "Summary Unaudited Pro Forma Consolidated Financial Information;"
- "The Merger -- Background of the Merger;"
- "The Merger -- Pan Pacific's Reasons for the Merger;"
- "The Merger -- Western Properties' Reasons for the Merger;"
- "Risk Factors;"
- "Opinion of Financial Advisor to Pan Pacific;"
- "Opinion of Financial Advisor to Western Properties;" and
- "Pan Pacific Retail Properties, Inc. Unaudited Pro Forma Condensed
Consolidated Financial Statements" attached hereto.
Our forward-looking statements in this document or those documents
incorporated by reference also include, among other things, statements regarding
the intent, belief or expectations of Pan Pacific or Western Properties and can
be identified by the use of words such as "may," "will," "should," "believes,"
"expects," "anticipates," "intends," "estimates" and other comparable terms. For
those statements, we claim the protection of the safe harbor for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995.
You should understand that the following important factors, in addition to
those discussed elsewhere in this document and in the documents which are
incorporated by reference, could affect the future results of Pan Pacific,
Western Properties, and the combined company after completion of the merger, and
could cause actual results or other outcomes to differ materially from those
expressed in our forward-looking statements:
- legislative, regulatory, or other changes in the real estate industry
which increase the costs of, or otherwise affect the operations of, Pan
Pacific, Western Properties or the combined company following the merger;
- competition for tenants with respect to new leases and the renewal or
rollover of existing leases;
23
<PAGE> 31
- the ability of Pan Pacific's, Western Properties' or the combined
company's tenants to operate their businesses in a manner sufficient to
maintain or increase revenue and to generate sufficient income to make
rent payments;
- changes in national or regional economic conditions, including changes in
interest rates and the availability and cost of capital to Pan Pacific,
Western Properties or the combined company;
- the availability of financing for Pan Pacific's, Western Properties' or
the combined company's proposed acquisitions or for Pan Pacific to retire
Western Properties' revolving line of credit;
- risks associated with shopping centers, such as lower than expected
occupancy levels, a downturn in market lease rates for retail shopping
center space or higher than expected costs associated with the
maintenance and operation of such facilities;
- failure to complete the merger; and
- potential liability under, and change in, environmental, zoning, tax and
other laws.
Pan Pacific stockholders and Western Properties shareholders are cautioned
not to place undue reliance on forward-looking statements, which speak only as
of the date of this document or the date of any document incorporated by
reference.
All subsequent written and oral forward-looking statements attributable to
Pan Pacific or Western Properties or any person acting on their behalf are
expressly qualified in their entirety by the cautionary statements contained or
referred to in this section. Neither Pan Pacific nor Western Properties
undertakes any obligation to release publicly any revisions to the
forward-looking statements in this joint proxy statement/prospectus to reflect
events or circumstances after the date of this document or to reflect the
occurrence of unanticipated events.
24
<PAGE> 32
THE COMPANIES
PAN PACIFIC
Pan Pacific is a self-administered and self-managed equity real estate
investment trust that owns and operates community and neighborhood shopping
centers, predominately grocery-anchored, located in the western United States.
Pan Pacific's objective is to provide stockholders with long-term stable cash
flow balanced with consistent growth. Pan Pacific seeks to achieve this
objective through the following business and growth strategies:
- owning, operating and acquiring shopping centers in select key West Coast
markets with strong economic and demographic characteristics in order to
establish and maintain a diverse, high-quality portfolio of shopping
centers;
- developing local and regional market expertise through the hands-on
participation of senior management in property operations and leasing in
order to capitalize on market trends, retailing trends and acquisition
opportunities; and
- maintaining a diversified and complementary tenant mix with an emphasis
on retailers that provide day-to-day consumer necessities in order to
provide consistent rental revenue.
Pan Pacific implements these strategies by:
- analyzing on an on-going basis regional and submarket demographic,
economic and retailing trends;
- developing relationships with key industry participants such as
retailers, real estate brokers and financial institutions;
- emphasizing tenant satisfaction and retention through its proactive
communication with tenants, community oriented marketing activities and
comprehensive maintenance programs; and
- capitalizing on cost reduction and economy of scale opportunities arising
from the size and proximity of its properties within each region.
Pan Pacific completed its initial public offering in August 1997 and its
shares are traded on the New York Stock Exchange under the symbol "PNP." From
its initial public offering through June 30, 2000, Pan Pacific acquired 36
shopping centers, encompassing 5.0 million square feet, for an aggregate
investment of approximately $408 million. As of June 30, 2000, Pan Pacific's
portfolio totaled 59 properties, encompassing 9.3 million square feet,
diversified across the Northern California, Southern California, Oregon,
Washington, and Nevada markets.
Pan Pacific manages its portfolio through its regional offices under the
strategic central control of its executive officers. All administration
(including the formation and implementation of policies and procedures),
leasing, capital expenditures and construction decisions are centrally
administered at Pan Pacific's corporate headquarters. Pan Pacific employs
property managers at each of its regional offices to oversee and direct the
day-to-day operations of its portfolio, as well as the on-site personnel, which
may include an assistant manager, maintenance personnel and other necessary
staff. Property managers communicate daily with Pan Pacific's corporate
headquarters to implement its policies and procedures.
As a result of Pan Pacific's in-house leasing programs, Pan Pacific's
portfolio benefits from a diversified merchandising mix, including national and
regional anchor tenants, complemented by a carefully planned mix of national,
regional and local non-anchor tenants. To promote stability and attract quality
non-anchor tenants, Pan Pacific generally enters into long-term leases,
typically 15 to 20 years, with anchor tenants which usually contain provisions
permitting anchor tenants to renew their leases at rates that often include
fixed rent increases or consumer price index adjustments. To take advantage of
improving market conditions and changing retail trends, Pan Pacific generally
enters into shorter term leases, typically three to five years, with non-anchor
tenants. Pan Pacific's properties are generally leased on a triple-net basis,
which requires tenants to pay their pro rata share of all real property taxes,
insurance and property operating expenses.
25
<PAGE> 33
As of June 30, 2000, Pan Pacific's portfolio was 97.7% leased to 1,418
diverse tenants including 644 national tenants and 149 regional tenants,
together representing 80.7% of Pan Pacific's total leased square footage.
Pan Pacific seeks to maximize the cash flow from its portfolio by
continuing to enhance the operating performance of each property through its
in-house leasing and property management programs. Pan Pacific's management
believes that maintaining high occupancy rates, and renewing and re-leasing
expiring space at higher base rents are critical measures of management and
leasing performance. Since its initial public offering in 1997, Pan Pacific has
maintained a year-end portfolio occupancy rate at or above 97% and has renewed
or re-leased 2.9 million square feet involving 706 lease transactions, achieving
base rent per square foot increases, on a same-store comparable basis, of 14.5%
in 1998, 18.4% in 1999, and 19.8% for the six months ended June 30, 2000.
Since its initial public offering, Pan Pacific has increased its quarterly
funds from operations per share by 48.8% from $0.41 per share for the three
months ended September 30, 1997 to $0.61 per share for the three months ended
June 30, 2000. Pan Pacific has increased its quarterly dividend each year since
its initial public offering, for a total increase of 15.9% from a $0.3625 per
share dividend paid for the quarter ended September 30, 1997 to a $0.420 per
share dividend paid for the quarter ended June 30, 2000. Pan Pacific has agreed
to increase its quarterly dividend from $0.420 per share to $0.455 per share in
the first quarter following completion of the merger in order to approximate
Western Properties' current dividend level, as adjusted for the 0.62 exchange
ratio. Pan Pacific expects to maintain or exceed this $0.455 dividend rate in
subsequent quarters, subject to the discretion of the Pan Pacific board.
Pan Pacific is a full-service, fully-integrated real estate company with
in-house expertise in shopping center acquisitions, redevelopment, leasing,
property management, marketing and accounting. Pan Pacific is headquartered in
Vista, California, and has five regional offices located in Sacramento,
California; Chino, California; Kent, Washington; Portland, Oregon; and Las
Vegas, Nevada.
WESTERN PROPERTIES
Western Properties is a self-administered and self-managed equity real
estate investment trust focused on owning, redeveloping, developing and
operating community and neighborhood shopping centers and other real estate in a
number of markets in the western United States. Western Properties invests in
retail development opportunities and manages its portfolio to enhance net asset
value. Western Properties has in-house expertise in shopping center
acquisitions, development, redevelopment and property operation. Western
Properties' headquarters is located in Emeryville, California.
Western Properties was founded and organized under the laws of the State of
California in 1962. Western Properties commenced real estate operations in 1964
and its shares have been traded on the American Stock Exchange under the symbol
"WIR" since 1984. On August 19, 1999, Western Properties changed its name from
Western Investment Real Estate Trust to Western Properties Trust. As of June 30,
2000, Western Properties held interests in 58 property investments, primarily
shopping centers anchored by supermarkets and drugstores, encompassing 5.4
million square feet. Western Properties' portfolio is predominantly located in
Northern California (including in the San Francisco Bay Area and the greater
Sacramento region) and secondarily in Oregon, Nevada and Washington.
Western Properties evaluates performance and makes resource-allocation
decisions on an individual property basis. Investments principally consist of
direct investments in real estate and also include four loans secured by real
estate. Western Properties leases a significant portion of its total leased
square footage on a long-term, triple-net basis, which requires tenants to pay
their pro rata share of all real property taxes, insurance and property
operating expenses. Leases with anchor tenants are generally for terms of at
least 15 years and often provide for percentage rent tied to the tenants' gross
sales; whereas, the non-anchor leases are generally for terms of three to five
years and most often provide for scheduled base rent increases or consumer price
index adjusted rent over the terms of the leases.
26
<PAGE> 34
As of June 30, 2000, Western Properties' portfolio was 93.0% leased to 800
diverse tenants, including 249 national tenants and 153 regional tenants,
together representing 81.0% of Western Properties' total leased square footage.
THE COMBINED COMPANY
Upon completion of the merger, Pan Pacific is expected to be the largest
publicly-held West Coast neighborhood shopping center real estate investment
trust with a total market capitalization of $1.3 billion, based on the closing
price of Pan Pacific common stock on September 29, 2000 ($20.06), the pro forma
number of shares of Pan Pacific common stock outstanding on September 29, 2000,
and the pro forma outstanding indebtedness of Pan Pacific as of June 30, 2000.
The information set forth in this "-- The Combined Company" section is on a
pro forma basis and assumes each of the following transactions was completed on
or before June 30, 2000:
- Pan Pacific's acquisition of Sycamore Plaza, Anaheim, California in July
2000;
- Western Properties' disposition of Heritage Oak Shopping Center, Gridley,
California in July 2000;
- Western Properties' disposition of Coalinga Shopping Center, Coalinga,
California, and North Hills Shopping Center, Reno, Nevada in September
2000; and
- Western Properties' proposed disposition of Mercantile Row Shopping
Center, Dinuba, California, expected to close on or before completion of
the merger.
Additionally, the property and tenant information set forth below excludes
two of Western Properties' assets (Lodi ground lease and Old Stratford mortgage
note receivable) and Western Properties' two development projects currently
under construction (Plaza Escuela and Olympic Place). Based on these
adjustments, Pan Pacific's pro forma portfolio consists of 60 properties and
Western Properties' pro forma portfolio consists of 50 properties. Accordingly,
the combined company will, on a pro forma basis, own and operate 110 properties
encompassing 15.1 million square feet with a broad geographic representation in
five key West Coast markets. As of June 30, 2000 the pro forma combined
portfolio was 95.5% leased to 2,194 tenants. Of the 110 properties, 74
properties are shopping centers anchored by national or regional supermarkets,
such as Raley's Supermarkets, Albertson's, Von's, Safeway and Quality Food
Centers.
27
<PAGE> 35
The following tables set forth certain pro forma information for the
properties to be owned by the combined company as of June 30, 2000.
<TABLE>
<CAPTION>
SQUARE FOOTAGE TOTAL
YEAR ----------------------------------- % LEASED NUMBER OF
COMPLETED/ COMPANY TENANT AS OF TENANTS AS
PROPERTY AND LOCATION EXPANDED OWNED OWNED TOTAL 6/30/00 OF 6/30/00
--------------------- ---------- ---------- --------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
NORTHERN CALIFORNIA
Anderson Square 1977 67,480 34,604 102,084 73.1% 11
Anderson, CA
Angels Camp Town Center 1986 70,323 -- 70,323 97.0 13
Angels Camp, CA
Blossom Valley Plaza 1988 111,612 -- 111,612 97.7 20
Turlock, CA
Brookvale Shopping Center 1968/1989 131,239 -- 131,239 100.0 19
Fremont, CA
Cable Park 1987 160,811 -- 160,811 100.0 34
Sacramento, CA
Canal Farms 1987 114,035 -- 114,035 97.4 16
Los Banos, CA
Centennial Plaza 1991 132,086 125,584 257,670 98.2 22
Hanford, CA
Century Center 1979 214,772 -- 214,772 99.3 34
Modesto, CA
Chico Crossroads 1988/1994 267,735 -- 267,735 100.0 18
Chico, CA
Cobblestone 1984 122,091 -- 122,091 87.3 21
Redding, CA
Commonwealth Square 1987 141,310 -- 141,310 99.3 43
Folsom, CA
Country Gables 1993 141,384 -- 141,384 100.0 33
Granite Bay, CA
Currier Square 1989 131,472 -- 131,472 91.1 14
Oroville, CA
Creekside Center 1968 80,911 -- 80,911 100.0 18
Hayward, CA
Dublin Retail Center 1980 154,728 -- 154,728 89.1 7
Dublin, CA
Eastridge Plaza 1985 81,010 -- 81,010 95.1 11
Porterville, CA
Elverta Crossing 1991 122,398 -- 122,398 97.1 24
Sacramento, CA
Fairmont Shopping Center 1988 104,281 -- 104,281 100.0 29
Pacifica, CA
Fashion Faire Shopping Center 1987 95,255 -- 95,255 96.4 16
San Leandro, CA
Glen Cove Center 1990 66,000 -- 66,000 100.0 11
Vallejo, CA
Heritage Park 1989 164,299 -- 164,299 86.8 30
Suisun City, CA
Heritage Place 1986 119,412 3,500 122,912 95.6 19
Tulare, CA
Kmart Center 1966/1983 132,630 -- 132,630 94.5 12
Sacramento, CA
Laguna 99 Plaza 1992 89,600 116,200 205,800 96.5 21
Elk Grove, CA
Laguna Village 1996 114,433 -- 114,433 95.1 14
Sacramento, CA
Lakewood Shopping Center 1988 107,769 -- 107,769 100.0 28
Windsor, CA
Lakewood Village 1992 127,237 3,242 130,479 87.9 28
Windsor, CA
Manteca Marketplace 1972/1988 172,435 -- 172,435 100.0 27
Manteca, CA
Mission Ridge Plaza 1992 101,157 77,000 178,157 98.9 15
Manteca, CA
Monterey Plaza 1990 183,180 49,500 232,680 100.0 31
San Jose, CA
Northridge Plaza 1990 98,625 -- 98,625 86.1 13
Fair Oaks, CA
Park Place 1987 153,775 -- 153,775 91.0 25
Vallejo, CA
Pine Creek Shopping Center 1988 212,832 -- 212,832 97.4 33
Grass Valley, CA
Plaza 580 Shopping Center 1993 104,363 192,739 297,102 98.9 28
Livermore, CA
<CAPTION>
ANNUALIZED BASE RENT
IN PLACE AT 6/30/00
-------------------------
ANN. ANN. BASE
BASE RENT/
PROPERTY AND LOCATION RENT(1) SQ. FT.(2) MAJOR RETAILERS
--------------------- ------------ ---------- ------------------------------------------------
<S> <C> <C> <C>
NORTHERN CALIFORNIA
Anderson Square $ 319,500 $ 6.48 Safeway Supermarket(3), Rite Aid
Anderson, CA
Angels Camp Town Center 590,963 8.66 Save Mart Supermarket, Rite Aid
Angels Camp, CA
Blossom Valley Plaza 1,166,425 10.70 Raley's Supermarket
Turlock, CA
Brookvale Shopping Center 1,294,840 9.87 Albertson's Supermarket, Long's Drugs, Bally
Fremont, CA Fitness
Cable Park 1,324,048 8.23 Albertson's Supermarket, Long's Drugs
Sacramento, CA
Canal Farms 850,213 7.65 Save Mart Supermarket, Rite Aid
Los Banos, CA
Centennial Plaza 1,230,055 9.48 Wal-Mart(3), Food-4-Less Supermarket, Pep Boys,
Hanford, CA Jo-Ann Fabrics & Crafts
Century Center 1,737,479 8.15 Raley's Supermarket, Gottschalks, Club Superfit
Modesto, CA
Chico Crossroads 2,046,811 7.64 Food-4-Less Supermarket, HomeBase, Barnes &
Chico, CA Noble, Office Depot
Cobblestone 950,059 8.91 Raley's Supermarket
Redding, CA
Commonwealth Square 1,936,303 13.80 Raley's Supermarket
Folsom, CA
Country Gables 1,548,192 10.95 Raley's Supermarket
Granite Bay, CA
Currier Square 930,879 7.77 Raley's Supermarket
Oroville, CA
Creekside Center 819,026 10.12 Albertson's Supermarket
Hayward, CA
Dublin Retail Center 1,350,225 9.79 Orchard Supply, Marshall's, Ross Stores,
Dublin, CA Michael's Arts & Crafts
Eastridge Plaza 605,715 7.86 Save Mart Supermarket
Porterville, CA
Elverta Crossing 1,349,840 11.36 Food-4-Less Supermarket, K-Mart(3), Rite Aid
Sacramento, CA
Fairmont Shopping Center 1,267,134 12.15 Albertson's Supermarket, Rite Aid Drugs
Pacifica, CA
Fashion Faire Shopping Center 1,279,540 13.94 Pure Foods Supermarket, Ross Dress for Less,
San Leandro, CA Michael's Arts & Crafts
Glen Cove Center 866,723 13.13 Safeway Supermarket and Drug
Vallejo, CA
Heritage Park 1,494,347 10.48 Raley's Supermarket
Suisun City, CA
Heritage Place 979,403 8.57 Save Mart, Rite Aid
Tulare, CA
Kmart Center 422,008 3.37 K-Mart, McFrugal's
Sacramento, CA
Laguna 99 Plaza 1,390,008 16.08 Pak 'N Save Supermarket
Elk Grove, CA
Laguna Village 1,806,851 16.60 United Artists Theatres, 24 Hour Fitness
Sacramento, CA
Lakewood Shopping Center 995,337 9.24 Raley's Supermarket, U.S. Post Office
Windsor, CA
Lakewood Village 1,732,570 15.49 Safeway Supermarket, Long's Drugs
Windsor, CA
Manteca Marketplace 1,838,272 10.66 Save Mart Supermarket, Rite Aid Drugs, Stadium
Manteca, CA 10 Cinemas, Ben Franklin Crafts
Mission Ridge Plaza 1,266,053 12.65 Pak 'N Save, Wal-Mart(3), Mervyn's(3)
Manteca, CA
Monterey Plaza 2,647,303 14.45 Wal-Mart, Albertson's Supermarket(3), Walgreen's
San Jose, CA
Northridge Plaza 694,452 8.18 Raley's Supermarket
Fair Oaks, CA
Park Place 1,601,613 11.45 Raley's Supermarket, 24 Hour Fitness
Vallejo, CA
Pine Creek Shopping Center 2,131,967 10.28 Raley's Supermarket, JC Penney
Grass Valley, CA
Plaza 580 Shopping Center 1,771,385 17.16 Target(3), Ross Stores
Livermore, CA
</TABLE>
28
<PAGE> 36
<TABLE>
<CAPTION>
SQUARE FOOTAGE TOTAL
YEAR ----------------------------------- % LEASED NUMBER OF
COMPLETED/ COMPANY TENANT AS OF TENANTS AS
PROPERTY AND LOCATION EXPANDED OWNED OWNED TOTAL 6/30/00 OF 6/30/00
--------------------- ---------- ---------- --------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Raley's Shopping Center 1983 138,114 -- 138,114 97.8% 16
Yuba City, CA
Serra Center 1992 85,772 125,078 210,850 100.0 14
Colma, CA
Shops at Lincoln School 1988 81,443 -- 81,443 100.0 18
Modesto, CA
Sky Park Plaza 1985 176,182 -- 176,182 94.2 27
Chico, CA
Ukiah Crossroads 1986 110,565 -- 110,565 97.4 20
Ukiah, CA
Victorian Walk 1990 102,581 -- 102,581 93.4 20
Fresno, CA
Viking Freight 1978 58,022 -- 58,022 100.0 1
Santa Clara, CA
Wal-Mart 1964 103,284 -- 103,284 100.0 1
Napa, CA
Washington Mutual 1963 18,968 -- 18,968 100.0 1
Monterey, CA
Washington Mutual 1980 6,427 -- 6,427 100.0 1
Santa Cruz, CA
Westwood Village Shopping 1981/1998 102,375 -- 102,375 93.2 21
Center
South Redding, CA
Yreka Junction 1984 127,148 -- 127,148 100.0 19
Yreka, CA
---------- --------- ---------- -----
REGION TOTAL/WEIGHTED AVERAGE 5,503,561 727,447 6,231,008 96.2% 897
---------- --------- ---------- -----
SOUTHERN CALIFORNIA
Arlington Courtyard 1991 12,221 -- 12,221 71.8% 3
Riverside, CA
Canyon Square Plaza 1988 96,727 -- 96,727 100.0 31
Santa Clarita, CA
Chino Town Square 1987 336,997 188,064 525,061 98.2 50
Chino, CA
Encinitas Marketplace 1981 118,458 -- 118,458 100.0 22
Encinitas, CA
Laurentian Center 1988 97,131 -- 97,131 100.0 25
Ontario, CA
Marina Village 1964/1996 149,107 -- 149,107 95.0 32
Huntington Beach, CA
Melrose Village Plaza 1990 132,674 -- 132,674 99.1 31
Vista, CA
Palmdale Center 1975 81,050 -- 81,050 100.0 14
Palmdale, CA
Rancho Las Palmas 1980 167,852 10,815 178,667 90.1 40
Rancho Mirage, CA
San Dimas Marketplace 1997 154,020 117,000 271,020 100.0 23
San Dimas, CA
Sycamore Plaza 1976 105,085 -- 105,085 92.6 22
Anaheim, CA
Tustin Heights Shopping Center 1983 131,518 -- 131,518 100.0 21
Tustin, CA
Vineyard Village East 1992 45,200 -- 45,200 100.0 4
Ontario, CA
---------- --------- ---------- -----
REGION TOTAL/WEIGHTED AVERAGE 1,628,040 315,879 1,943,919 97.4% 318
---------- --------- ---------- -----
OREGON
Albany Plaza 1977/1998 114,465 30,998 145,463 100.0% 19
Albany, OR
Bear Creek Plaza 1977/1998 183,850 -- 183,850 100.0 28
Medford, OR
East Burnside 1953/1999 38,480 -- 38,480 88.3 4
Portland, OR
Foster Square 1970 33,640 -- 33,640 42.2 2
Portland, OR
Hermiston Plaza 1976/1998 150,396 -- 150,396 100.0 25
Hermiston, OR
<CAPTION>
ANNUALIZED BASE RENT
IN PLACE AT 6/30/00
-------------------------
ANN. ANN. BASE
BASE RENT/
PROPERTY AND LOCATION RENT(1) SQ. FT.(2) MAJOR RETAILERS
--------------------- ------------ ---------- ------------------------------------------------
<S> <C> <C> <C>
Raley's Shopping Center $ 1,034,459 $ 7.66 Raley's Supermarket, Toys R Us
Yuba City, CA
Serra Center 1,935,372 22.56 Target(3), Drug Barn
Colma, CA
Shops at Lincoln School 764,855 9.39 Save Mart Supermarket
Modesto, CA
Sky Park Plaza 1,512,587 9.11 Raley's Supermarket, Ross Stores, Jo-Ann Fabrics
Chico, CA
Ukiah Crossroads 1,009,122 9.37 Raley's Supermarket
Ukiah, CA
Victorian Walk 805,674 8.41 Save Mart Supermarket, Rite Aid
Fresno, CA
Viking Freight 673,966 11.62 Viking Freight
Santa Clara, CA
Wal-Mart 775,000 7.50 Wal-Mart
Napa, CA
Washington Mutual 489,725 25.82 Washington Mutual
Monterey, CA
Washington Mutual 198,550 30.89 Washington Mutual
Santa Cruz, CA
Westwood Village Shopping 704,682 7.39 Holiday Supermarket, Rite Aid Drugs
Center
South Redding, CA
Yreka Junction 1,111,826 8.74 Raley's Supermarket, JC Penney
Yreka, CA
------------
REGION TOTAL/WEIGHTED AVERAGE $ 55,251,357 $10.44
------------
SOUTHERN CALIFORNIA
Arlington Courtyard $ 95,191 $10.85 Harvest Christian Bookstore
Riverside, CA
Canyon Square Plaza 1,170,056 12.10 Albertson's Supermarket and Drug
Santa Clarita, CA
Chino Town Square 4,438,210 13.42 Target(3), Wal-Mart, Mervyn's(3), Nordstrom
Chino, CA Rack, AMC Theaters
Encinitas Marketplace 1,294,854 10.93 Albertson's Supermarket
Encinitas, CA
Laurentian Center 1,179,817 12.15 Pep Boys, 24 Hour Fitness, Abbey Carpet
Ontario, CA
Marina Village 1,546,678 10.91 Von's Supermarket, Sav-On Drug
Huntington Beach, CA
Melrose Village Plaza 1,544,996 11.75 Albertson's Supermarket, Sav-On Drug
Vista, CA
Palmdale Center 501,747 6.19 Smart & Final, Dollar Tree, Pic 'N' Save
Palmdale, CA
Rancho Las Palmas 1,979,875 13.10 Von's Supermarket, Long's Drugs
Rancho Mirage, CA
San Dimas Marketplace 2,296,415 14.91 Target, Office Max, Ross Stores, Petco, Trader
San Dimas, CA Joe's Market
Sycamore Plaza 712,532 7.32 Stater Bros., Sav-on Drug
Anaheim, CA
Tustin Heights Shopping Center 1,639,139 12.46 Ralph's Supermarket, Long's Drugs, Michael's
Tustin, CA Arts & Crafts
Vineyard Village East 379,001 8.38 Sears, Dunn Edwards Paints
Ontario, CA
------------
REGION TOTAL/WEIGHTED AVERAGE $ 18,778,511 $11.85
------------
OREGON
Albany Plaza $ 909,252 $ 7.94 Albertson's Supermarket, Rite Aid Drugs
Albany, OR
Bear Creek Plaza 1,356,293 7.38 Bi-Mart Drug, TJ Maxx, Pic 'N' Save, Factory 2 U
Medford, OR
East Burnside 397,018 11.68 QFC Supermarket
Portland, OR
Foster Square 72,700 5.12 Phoenix Drugs
Portland, OR
Hermiston Plaza 884,346 5.88 Safeway Supermarket and Drug
Hermiston, OR
</TABLE>
29
<PAGE> 37
<TABLE>
<CAPTION>
SQUARE FOOTAGE TOTAL
YEAR ----------------------------------- % LEASED NUMBER OF
COMPLETED/ COMPANY TENANT AS OF TENANTS AS
PROPERTY AND LOCATION EXPANDED OWNED OWNED TOTAL 6/30/00 OF 6/30/00
--------------------- ---------- ---------- --------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Hood River 1967/1999 104,162 -- 104,162 82.0 9
Hood River, OR
Menlo Park 1957/1995 122,467 -- 122,467 54.4% 24
Portland, OR
Milwaukie Marketplace 1989 185,859 10,323 196,182 96.4 25
Milwaukie, OR
NE 33rd 1972/1999 22,847 -- 22,847 100.0 1
Portland, OR
North Lombard 1953/1994 23,252 -- 23,252 100.0 1
Portland, OR
Oregon City Shopping Center 1961/1999 247,689 -- 247,689 95.3 37
Oregon City, OR
Oregon Trail Shopping Center 1977/1999 208,284 -- 208,284 95.9 29
Gresham, OR
Pioneer Plaza 1988 96,027 4,293 100,320 100.0 23
Springfield, OR
Powell Valley Junction 1990 107,583 -- 107,583 95.6 7
Gresham, OR
Raleigh Hills 1953/1988 58,214 -- 58,214 67.9 3
Raleigh Hills, OR
Rockwood Plaza 1965 92,244 -- 92,244 64.3 12
Gresham, OR
Sandy Marketplace 1985 101,438 -- 101,438 100.0 20
Sandy, OR
SE Milwaukie 1946/2000 21,400 -- 21,400 100.0 1
Portland, OR
Shute Park Plaza 1989 58,560 -- 58,560 88.8 20
Hillsboro, OR
Southgate Shopping Center 1957/1986 50,862 -- 50,862 100.0 10
Milwaukie, OR
St. John's 1993 58,770 -- 58,770 45.7 4
Portland, OR
Sunset Mall 1969/1997 115,635 2,500 118,135 100.0 28
Portland, OR
Tacoma Shopping Center 1999 13,448 -- 13,448 100.0 1
Portland, OR
Tanasbourne Village 1990 210,992 1,209 212,201 100.0 40
Hillsboro, OR
---------- --------- ---------- -----
REGION TOTAL/WEIGHTED AVERAGE 2,420,564 49,323 2,469,887 90.9% 373
---------- --------- ---------- -----
WASHINGTON
Auburn North 1977/1999 171,032 -- 171,032 100.0% 25
Auburn, WA
Blaine International Center 1991 126,930 -- 126,930 73.1 12
Blaine, WA
Canyon Ridge Plaza 1995 86,909 181,300 268,209 100.0 19
Kent, WA
Claremont Village Plaza 1955/1994 88,770 -- 88,770 96.7 15
Everett, WA
Olympia Square 1988 167,721 -- 167,721 98.6 38
Olympia, WA
Olympia West Center 1980/1995 69,212 3,800 73,012 100.0 6
Olympia, WA
Pacific Commons 1987 151,233 55,241 206,474 100.0 23
Spanaway, WA
Panther Lake 1989 69,090 44,237 113,327 100.0 21
Kent, WA
Sunset Square 1989 376,023 10,634 386,657 97.4 41
Bellingham, WA
Tacoma Central 1987/1994 134,868 165,519 300,387 100.0 21
Tacoma, WA
---------- --------- ---------- -----
REGION TOTAL/WEIGHTED AVERAGE 1,441,788 460,731 1,902,519 96.6% 221
---------- --------- ---------- -----
NEVADA
Caughlin Ranch 1990/1991 108,982 -- 108,982 85.2% 21
Reno, NV
Cheyenne Commons 1992 362,758 -- 362,758 88.6 45
Las Vegas, NV
Dodge Center 1976 49,258 -- 49,258 100.0 4
Fallon, NV
Eagle Station 1982/1994 114,258 60,000 174,258 95.4 27
Carson City, NV
<CAPTION>
ANNUALIZED BASE RENT
IN PLACE AT 6/30/00
-------------------------
ANN. ANN. BASE
BASE RENT/
PROPERTY AND LOCATION RENT(1) SQ. FT.(2) MAJOR RETAILERS
--------------------- ------------ ---------- ------------------------------------------------
<S> <C> <C> <C>
Hood River $ 442,044 5.17 Rosauer's Supermarket, Hi School Pharmacy
Hood River, OR
Menlo Park 483,482 $ 7.26 Walgreen's Drugs, Staples
Portland, OR
Milwaukie Marketplace 1,661,767 9.28 Albertson's Supermarket, Rite Aid Drugs, Jo-Ann
Milwaukie, OR Fabrics & Crafts
NE 33rd 420,000 18.38 QFC Supermarket
Portland, OR
North Lombard 408,000 17.55 Walgreen's Drugs
Portland, OR
Oregon City Shopping Center 1,644,499 6.97 Emporium, Rite Aid Drugs, Fisherman's Marine
Oregon City, OR Supply, Michael's Arts & Crafts
Oregon Trail Shopping Center 1,970,038 9.86 Nature's Supermarket, Office Depot, Big 5
Gresham, OR Sporting Goods, Pic 'N' Save, Michael's Arts &
Crafts
Pioneer Plaza 904,245 9.42 Safeway Supermarket & Drug
Springfield, OR
Powell Valley Junction 945,463 9.19 Food-4-Less, Cascade Athletic Club
Gresham, OR
Raleigh Hills 817,250 20.68 New Season's Supermarket, Walgreen's Drugs
Raleigh Hills, OR
Rockwood Plaza 447,361 7.54 Vintage Thrift
Gresham, OR
Sandy Marketplace 864,116 8.52 Danielson's Fresh Market, Hi School Pharmacy
Sandy, OR
SE Milwaukie 300,000 14.02 QFC Supermarket
Portland, OR
Shute Park Plaza 605,790 11.65 Baxter's Auto Parts
Hillsboro, OR
Southgate Shopping Center 602,134 11.84 Office Max
Milwaukie, OR
St. John's 205,559 7.65 Rite Aid
Portland, OR
Sunset Mall 1,263,801 10.93 Safeway Supermarket & Drug
Portland, OR
Tacoma Shopping Center 294,000 21.86 New Season's Supermarket
Portland, OR
Tanasbourne Village 2,621,079 12.42 Safeway Supermarket, Rite Aid Drugs,
Hillsboro, OR
------------
REGION TOTAL/WEIGHTED AVERAGE $ 20,520,237 $ 9.33
------------
WASHINGTON
Auburn North $ 1,209,846 $ 7.07 Albertson's Supermarket, Rite Aid Drugs, Office
Auburn, WA Depot, Fashion Bug
Blaine International Center 884,261 9.53 Cost Cutter Supermarket, Rite Aid
Blaine, WA
Canyon Ridge Plaza 974,878 11.22 Target(3), Top Foods Supermarket(3), Ross Dress
Kent, WA For Less
Claremont Village Plaza 1,195,157 13.92 QFC Supermarket and Drug
Everett, WA
Olympia Square 1,968,177 11.90 Albertson's Supermarket and Drug, Ross Dress For
Olympia, WA Less
Olympia West Center 1,233,399 17.82 Barnes & Noble, Good Guys, Petco
Olympia, WA
Pacific Commons 1,539,685 10.18 Marketplace Supermarket
Spanaway, WA
Panther Lake 834,775 12.08 Albertson's Supermarket(3), Rite Aid Drugs
Kent, WA
Sunset Square 3,074,622 8.39 Cost Cutter Supermarket, K-Mart, Jo-Ann Fabrics
Bellingham, WA & Crafts, Rite Aid Drugs
Tacoma Central 2,229,538 16.53 Target(3), Top Food & Drug(3),Office Depot, TJ
Tacoma, WA Maxx, Cineplex Odeon
------------
REGION TOTAL/WEIGHTED AVERAGE $ 15,144,338 $10.87
------------
NEVADA
Caughlin Ranch $ 1,115,372 $12.01 Scolari's Supermarket, Ross Dress For Less
Reno, NV
Cheyenne Commons 4,076,250 12.68 Wal-Mart, 24 Hour Fitness, Ross Dress For Less
Las Vegas, NV
Dodge Center 276,334 5.61 Raley's Supermarket
Fallon, NV
Eagle Station 1,029,796 9.45 Raley's Supermarket, Mervyn's(3)
Carson City, NV
</TABLE>
30
<PAGE> 38
<TABLE>
<CAPTION>
SQUARE FOOTAGE TOTAL
YEAR ----------------------------------- % LEASED NUMBER OF
COMPLETED/ COMPANY TENANT AS OF TENANTS AS
PROPERTY AND LOCATION EXPANDED OWNED OWNED TOTAL 6/30/00 OF 6/30/00
--------------------- ---------- ---------- --------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Elko Junction 1996/1997 170,812 -- 170,812 100.0 21
Elko, NV
Green Valley Town & Country 1990 130,722 -- 130,722 100.0% 38
Henderson, NV
Mira Loma Shopping Center 1985 94,361 2,546 96,907 100.0 19
Reno, NV
Rainbow Promenade 1995/1997 228,279 -- 228,279 99.3 25
Las Vegas, NV
Raley's 1991 60,114 -- 60,114 100.0 1
Fallon, NV
Sahara Pavilion North 1989 333,679 -- 333,679 99.3 68
Las Vegas, NV
Sahara Pavilion South 1990 160,682 -- 160,682 100.0 26
Las Vegas, NV
West Town 1978/1991 65,424 -- 65,424 100.0 2
Winnemucca, NV
Winterwood Pavilion 1990 144,653 -- 144,653 100.0 28
Las Vegas, NV
---------- --------- ---------- -----
REGION TOTAL/WEIGHTED AVERAGE 2,023,982 62,546 2,086,528 96.7% 325
---------- --------- ---------- -----
OTHER
Country Club Center 1988/1998 57,626 63,000 120,626 92.9% 19
Albuquerque, NM
Maysville Marketsquare 1991/1993 126,507 89,612 216,119 97.8 18
Maysville, KY
Memphis Retail Center 1990 51,542 40,000 91,542 81.4 11
Memphis, TN
Ocoee Plaza 1990 52,242 -- 52,242 100.0 12
Ocoee, FL
---------- --------- ---------- -----
REGION TOTAL/WEIGHTED AVERAGE 287,917 192,612 480,529 94.3% 60
---------- --------- ---------- -----
PORTFOLIO TOTAL/ WEIGHTED %
AVERAGE 13,305,852 1,808,538 15,114,390 95.5 2,194
========== ========= ========== =====
<CAPTION>
ANNUALIZED BASE RENT
IN PLACE AT 6/30/00
-------------------------
ANN. ANN. BASE
BASE RENT/
PROPERTY AND LOCATION RENT(1) SQ. FT.(2) MAJOR RETAILERS
--------------------- ------------ ---------- ------------------------------------------------
<S> <C> <C> <C>
Elko Junction $ 1,644,372 9.63 Raley's Supermarket, Builder's Mart
Elko, NV
Green Valley Town & Country 1,908,691 $14.60 Albertson's/Sav-On Superstore
Henderson, NV
Mira Loma Shopping Center 931,050 9.87 Scolari's Market, Long's Drugs
Reno, NV
Rainbow Promenade 3,222,294 14.22 United Artists Theatres, Barnes & Noble, Linens
Las Vegas, NV 'N Things, Office Max, Cost Plus
Raley's 400,900 6.67 Raley's Supermarket
Fallon, NV
Sahara Pavilion North 4,481,309 13.53 Von's Supermarket, Long's Drugs, TJMaxx,
Las Vegas, NV Shepler's, Border's Books, Gold's Gym
Sahara Pavilion South 2,312,016 14.39 Sports Authority, Office Max, Michael's Arts &
Las Vegas, NV Crafts
West Town 461,500 7.05 Raley's Supermarket
Winnemucca, NV
Winterwood Pavilion 1,426,126 9.86 Von's Supermarket and Drug
Las Vegas, NV
------------
REGION TOTAL/WEIGHTED AVERAGE $ 23,286,010 $11.90
------------
OTHER
Country Club Center $ 601,939 $11.25 Furr's Foods(3)
Albuquerque, NM
Maysville Marketsquare 877,695 7.09 Wal-Mart(3), Kroger Company, J.C. Penney
Maysville, KY
Memphis Retail Center 401,682 9.57 Hancock Fabrics
Memphis, TN
Ocoee Plaza 371,219 7.11 Food Lion, Family Dollar
Ocoee, FL
------------
REGION TOTAL/WEIGHTED AVERAGE $ 2,252,535 $ 8.30
------------
PORTFOLIO TOTAL/ WEIGHTED 135,232,988 10.65
AVERAGE $ $
============
</TABLE>
------------------------
(1) Annualized Base Rent for all leases in place at June 30, 2000 calculated as
follows: total base rent to be received during the entire term of each
lease, divided by the terms in months for such leases, multiplied by 12.
(2) Annualized Base Rent at June 30, 2000 divided by the total leased square
footage.
(3) Retailers that own their buildings.
31
<PAGE> 39
The following tables summarizes certain information regarding the combined
company's tenants which, on a pro forma basis, accounted for more than 1.0% or
more of Pan Pacific's total annualized base rent at June 30, 2000:
<TABLE>
<CAPTION>
ANNUALIZED BASE RENT IN PLACE AT 6/30/00
------------------------------------------
LEASED % OF TOTAL TOTAL % OF TOTAL ANN. BASE
NUMBER OF SQ. FT. AS OF LEASED ANN. BASE ANN. BASE RENT/
TENANT LEASES 6/30/00 SQ. FT. RENT(1) RENT SQ. FT.(2)
------ --------- ------------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Raley's.................................. 20 1,136,895 9.0% $ 7,698,444 5.7% $6.77
Von's/Safeway/Pak 'N Save................ 11 533,359 4.2 4,090,451 3.0 7.67
Wal-Mart................................. 4 419,872 3.3 3,611,372 2.7 8.60
Albertson's/Sav-On....................... 14 578,510 4.6 3,457,009 2.6 5.98
Rite Aid................................. 19 456,963 3.6 2,788,483 2.1 6.10
Hollywood Video.......................... 15 94,684 0.8 1,752,314 1.3 18.51
Ross Dress for Less...................... 9 207,821 1.6 1,777,395 1.3 8.55
Save Mart................................ 7 246,714 1.9 1,632,644 1.2 6.62
QFC...................................... 4 113,950 0.9 1,630,598 1.2 14.31
24 Hour Fitness.......................... 4 108,305 0.9 1,489,303 1.1 13.75
Office Max, Inc.......................... 5 134,550 1.1 1,480,871 1.1 11.01
Blockbuster Video........................ 16 88,686 0.7 1,432,077 1.1 16.15
--- --------- ---- ----------- ---- -----
TOTAL.................................... 128 4,120,309 32.6% $32,840,961 24.4% $7.97
=== ========= ==== =========== ==== =====
</TABLE>
-------------------------
(1) Annualized base rent for all leases in place at June 30, 2000 calculated as
follows: total base rent to be received during the entire term of each
lease, divided by the terms in months for such leases, multiplied by 12.
(2) Annualized base rent at June 30, 2000 divided by total leased square
footage.
Upon completion of the merger, Pan Pacific will expand its board of
directors to seven members, adding two of Western Properties' existing
independent trustees from its board of trustees. With these additional
independent directors, five of the seven Pan Pacific board members will be
independent. Pan Pacific will continue to be led by its existing senior
management team, including Stuart A. Tanz as Chairman, President and Chief
Executive Officer, Joseph B. Tyson as Executive Vice President, Chief Financial
Officer and Secretary, and Jeffrey S. Stauffer as Executive Vice President and
Chief Operating Officer.
32
<PAGE> 40
THE MERGER
GENERAL
The merger agreement provides that Western Properties will incorporate and
become WPT, Inc. and then immediately merge into Pan Pacific. The incorporation
procedure is necessary because California law does not specifically allow the
merger of a California real estate investment trust, such as Western Properties,
with a corporation, but does allow corporations to merge with each other. As a
result of the incorporation, WPT will succeed to all of the assets and
liabilities of Western Properties and each outstanding Western Properties common
share will become one share of common stock of WPT. The incorporation will only
occur if the merger occurs.
In the merger, each share of WPT common stock issued and outstanding
immediately before the completion of the merger will be converted into the right
to receive 0.62 of a share of Pan Pacific common stock, except for shares held
by parties who exercise and are entitled to dissenters' rights. Cash will be
paid instead of fractional shares of Pan Pacific common stock.
In connection with the merger, Pan Pacific will assume all options to
purchase Western Properties common shares outstanding immediately prior to the
merger and Western Properties' obligations under its 7.875% Unsecured Senior
Notes Due 2004, 7.10% Unsecured Senior Notes Due 2006, 7.20% Unsecured Senior
Notes Due 2008 and 7.30% Unsecured Senior Notes Due 2010, and the indentures
under which the notes were issued.
This joint proxy statement/prospectus constitutes a prospectus of Pan
Pacific, which is a part of the registration statement on Form S-4 filed by Pan
Pacific with the SEC under the Securities Act of 1933 in order to register the
shares of Pan Pacific common stock to be issued to WPT shareholders in the
merger and a proxy statement of Pan Pacific in connection with the solicitation
of the approval by Pan Pacific stockholders of the merger. This joint proxy
statement/prospectus also constitutes a proxy statement of Western Properties in
connection with the solicitation of the approval by Western Properties
shareholders of the merger and the incorporation.
BACKGROUND OF THE MERGER
Beginning in August 1999, the Western Properties board began to study
possible options for seeking to achieve long term growth of Western Properties,
including acquisitions of other companies, repositioning Western Properties, and
the possible consolidation of Western Properties with other companies. This
review was prompted by the concern of the Western Properties board that smaller
real estate investment trusts, such as Western Properties, would continue to
have relatively greater difficulty accessing capital than larger real estate
investment trusts, which would make it difficult for Western Properties to grow
and retain employees and compete effectively with other real estate investment
trusts. The Western Properties board also believed that larger capitalization
shopping center real estate investment trusts often trade at higher multiples of
funds from operations than smaller capitalization shopping center real estate
investment trusts (those with capitalizations of less than $500 million), and
that a merger with another real estate investment trust would increase liquidity
as more shares would be available on the market.
Western Properties' management received a presentation from Donaldson,
Lufkin & Jenrette on November 18, 1999, regarding possible strategic
alternatives. These included acquisitions of other companies, a restructuring of
Western Properties' portfolio and operations, a sale of Western Properties and
continuing its operations in the ordinary course of business. On December 7,
1999, Donaldson, Lufkin & Jenrette presented to the Western Properties board an
analysis of these strategic alternatives. On December 16, 1999, Donaldson,
Lufkin & Jenrette recommended that Western Properties create a detailed
memorandum and property-by-property projections on Western Properties, which
would then be distributed to potential suitors on a confidential basis in order
to gauge the market interest in a strategic transaction with Western Properties.
On January 8, 2000, Western Properties engaged Donaldson, Lufkin & Jenrette to
act as its financial advisor and to structure a formal process to identify
strategic alternatives to maximize shareholder value.
33
<PAGE> 41
The Western Properties board met on January 11, 2000 and directed
Donaldson, Lufkin & Jenrette to solicit expressions of interest from a broad
range of real estate investment trusts, private financial institutions and real
estate companies in an acquisition transaction involving Western Properties.
Donaldson, Lufkin & Jenrette contacted over 60 potential transaction candidates.
Of the parties identified, approximately 50 expressed preliminary interest,
including Pan Pacific. At the direction of the Western Properties board,
Donaldson, Lufkin & Jenrette sent the interested parties confidentiality
agreements in March 2000. An article published on March 13, 2000 in Real Estate
Finance and Investment stated that Western Properties had engaged Donaldson,
Lufkin & Jenrette as its financial advisor. Following publication of that
article, the trading volume and price of Western Properties' shares increased.
Western Properties indicated that it had engaged Donaldson, Lufkin & Jenrette to
explore strategic alternatives in its Annual Report on Form 10-K filed with the
SEC on March 28, 2000.
Donaldson, Lufkin & Jenrette prepared an executive summary book on Western
Properties, under the direction of the Western Properties board, and began
sending copies of it to interested parties, including Pan Pacific, on April 3,
2000. Donaldson, Lufkin & Jenrette also prepared a property description book and
began sending copies of it to a further refined list of 32 of the interested
parties, including Pan Pacific, on April 15, 2000.
During April 2000, Pan Pacific, with the assistance of its financial
advisor, Prudential Securities Incorporated, conducted a preliminary analysis of
the information provided in the Western Properties executive summary and
property description books, including an analysis of Western Properties'
business, financial performance and balance sheet, as well as an analysis of
each property's demographic profile, historical and projected cash flow
statement, tenant roster and lease expiration schedule. Based on Pan Pacific's
analysis of Western Properties' properties and tenants, Pan Pacific concluded
that acquiring the assets of Western Properties could potentially generate
numerous strategic benefits which could enhance stockholder value, including
significantly increasing and diversifying its portfolio and tenant base,
enhancing its market presence in key West Coast growth markets and capitalizing
on certain operational and tenant synergies. In addition, Pan Pacific concluded
that an acquisition of Western Properties' business through a stock-for-stock
merger would be the most effective structure to realize these strategic benefits
and potentially enhance its financial position, credit profile, capital markets
presence and liquidity in its stock. From April 25, 2000 through April 27, 2000,
senior management of Pan Pacific reviewed their preliminary analysis and
assessment of an acquisition of Western Properties with Pan Pacific's board of
directors. The Pan Pacific board instructed senior management of Pan Pacific to
proceed to submit a preliminary, non-binding expression of interest in an
acquisition of Western Properties to Donaldson, Lufkin & Jenrette.
From May 1, 2000 through May 11, 2000, Donaldson, Lufkin & Jenrette
received, on behalf of Western Properties, preliminary expressions of interest
from 14 of the interested parties, including Pan Pacific. Pan Pacific's
preliminary expression of interest proposed an acquisition of Western
Properties' business in a stock-for-stock merger. The Western Properties board
met on May 11, 2000 and reviewed the status of proposals received by Donaldson,
Lufkin & Jenrette. After receiving a report by Donaldson, Lufkin & Jenrette on
these proposals, the Western Properties board determined that several of the
proposals did not merit further exploration. Several of these proposals were not
pursued because they were for the purchase of only partial interests in Western
Properties or a portion of Western Properties' assets, rather than all of
Western Properties' shares. Others were not pursued because the prospective
suitors did not demonstrate that they had the financing needed to consummate the
transactions contemplated by their proposals, which increased the risk that the
transactions contemplated in their proposals would not be consummated. Western
Properties also considered several other potential transactions, including
mergers with other public real estate investment trusts, a purchase of the
assets of another real estate investment trust, and a partial merger with
another real estate investment trust. Western Properties did not pursue these
proposals primarily because the other parties to the proposed transactions were
not sufficiently interested in them, or because Western Properties and the other
parties could not agree on the acquisition price or other terms.
At the direction of the Western Properties board, Donaldson, Lufkin &
Jenrette sent letters to eight prospective suitors, including Pan Pacific, on
June 6, 2000 advising them to improve parts of their
34
<PAGE> 42
proposals that were viewed to be inadequate and instructing certain parties that
had submitted proposals to acquire some or all of Western Properties' assets
(rather than its shares) to reformulate their proposals as acquisitions of
Western Properties' shares. Prospective suitors were allowed to conduct further
due diligence in June 2000.
During June 2000, Pan Pacific, with the assistance of Prudential
Securities, continued to conduct its due diligence investigation of Western
Properties. During this time, representatives of Western Properties and Pan
Pacific spoke on many occasions regarding due diligence questions and Pan
Pacific's preliminary expression of interest. Western Properties indicated a
desire to explore the proposal further in light of the potential strategic
benefits; however, Western Properties identified several issues, specifically
the proposed stock-for-stock exchange ratio, the fact that Pan Pacific's current
dividend level would equate to a lower dividend amount, as adjusted for the
exchange ratio, than Western Properties' current dividend level, and Western
Properties' desire to have appropriate representation on the Pan Pacific board
upon completion of the merger, among other issues. Pan Pacific agreed to
consider increasing its dividend to approximate Western Properties' dividend
level, as adjusted for the exchange ratio. Pan Pacific management believed,
subject to further financial due diligence, that despite the increase, the
combined company's payout ratios would remain consistent with Pan Pacific's
current ratios. With respect to board representation, Pan Pacific agreed to
increase the size of its board to potentially include two of Western's
independent trustees. In terms of the exchange ratio, Pan Pacific agreed to
explore further increasing the proposed exchange ratio; however, Pan Pacific
expressed the importance of establishing an exchange ratio that would
potentially enable the stock-for-stock transaction to be effected on an
accretive basis to its funds from operations per share, thereby potentially
benefiting both companies' shareholders. In addition, Pan Pacific and Western
Properties discussed Western Properties' three existing development projects. On
June 15, 2000, Stuart A. Tanz, Chairman, President and Chief Executive Officer
of Pan Pacific, visited the development projects and also met with certain
senior management of Western Properties directly responsible for the development
projects. Given the complexity and status of each project, as well as Western
Properties' established relationships with the various municipalities and
prospective tenants involved in each project, Pan Pacific indicated a desire to
explore establishing development arrangements with certain members of Western
Properties' senior management team, including Mr. Blake and L. Gerald Hunt, the
Chief Operations Officer and Senior Vice President of Western Properties, to
complete each project after completion of the merger.
The Western Properties' board instructed Donaldson, Lufkin & Jenrette to
send final requests for proposals to six parties who expressed a continued
interest in acquiring Western Properties and who had submitted plausible
proposals. These remaining prospective suitors were informed that final
proposals were due by July 10, 2000. On June 12, 2000, senior management of Pan
Pacific reviewed its due diligence findings with the Pan Pacific board. The Pan
Pacific board instructed senior management to proceed with submitting a proposal
to acquire Western Properties to Donaldson, Lufkin & Jenrette. Donaldson, Lufkin
& Jenrette received proposals from four potential buyers, including one proposal
from a party who had not previously received Western Properties' confidential
information memorandum, plus an expression of interest from a fifth party that
wished to pursue an asset purchase. A sixth party which was contacted by
Donaldson, Lufkin & Jenrette did not submit a final proposal. The five proposals
consisted of the proposal by Pan Pacific for a stock-for-stock acquisition, a
proposal by a subsidiary of a public real estate investment company for a
cash-for-stock acquisition, a proposal by a private real estate investment
company for a cash acquisition of either the stock or assets of Western
Properties, a proposal from a private investment company that would form a
consortium for a cash-for-stock acquisition, and a proposal by a private real
estate investment company for a cash-for-assets acquisition.
On July 19, 2000, the Western Properties board met to review the proposals.
Donaldson, Lufkin & Jenrette made a presentation to the Western Properties board
regarding the terms of each of the proposals and their relative advantages and
disadvantages. Donaldson, Lufkin & Jenrette estimated the value of the proposals
to range from $12.15 per share (for Pan Pacific's proposal) to $12.96 per share.
The proposals differed from each other in scope, structure and conditions. As a
result, Donaldson, Lufkin & Jenrette was required to make numerous assumptions
to determine and compare the values of each proposal. For the proposals to
acquire assets of Western Properties, Donaldson, Lufkin & Jenrette was required
to make
35
<PAGE> 43
assumptions regarding the value of any assets that might be excluded from these
proposals, including the value of partially completed development projects.
Donaldson, Lufkin & Jenrette also noted that the proposals differed from each
other in the costs associated with them, their treatment of Western Properties'
contingent liabilities, their diligence requirements, their tax consequences and
other matters. The Western Properties board considered the presentation by
Donaldson, Lufkin & Jenrette in making its decisions regarding which proposals
to pursue.
Pan Pacific's proposal was the only proposal reviewed at the July 19, 2000
Western Properties board meeting to acquire Western Properties' shares in
exchange for stock. The Western Properties board believed that a stock-for-stock
transaction had many potential advantages over a cash-for-stock transaction. One
advantage was that a stock-for-stock transaction could be structured to qualify
as a reorganization, whereas a cash-for-stock transaction would be taxable to
the shareholders of Western Properties. A second advantage of a stock-for-stock
transaction was that it could allow Western Properties' shareholders to
participate in any appreciation in the value of the acquiror's stock.
The Western Properties board chose not to pursue one proposal in part
because the prospective suitor requested a protracted due diligence period, and
the Western Properties board was concerned about the delay that would be caused
by such a due diligence period. The Western Properties board was also concerned
by that prospective suitor's need to obtain equity from a third party, which the
Western Properties board felt would likely participate in the negotiation of the
acquisition agreement as a condition to its agreement to provide equity to that
suitor and further delay the transaction and increase the risk that the
transaction would not be completed. In addition, the Western Properties board
noted that this proposal, which was to pay cash-for-stock, would be taxable to
Western Properties' shareholders.
The second proposal, which was from a prospective suitor who wished to
pursue an asset purchase, was not pursued by the Western Properties board
because of the numerous disadvantages to Western Properties inherent in an asset
sale. These disadvantages included, among other things, the need for Western
Properties to manage the process of a liquidating distribution and to hold back
appropriate amounts of cash to cover unanticipated expenses and the need for
Western Properties to satisfy all contingent liabilities and to address the tax
and profit distribution issues that would be raised by an asset sale. The
Western Properties board was also concerned about the possibility that one or
more assets would be excluded by the prospective suitor after its due diligence,
leaving Western Properties with the burden of disposition.
The Western Properties board chose not to pursue a third proposal in part
because it excluded the purchase of certain of Western Properties' assets, was
contingent on third party debt financing from a source that had not been
identified, and was made by a party that had not performed substantial due
diligence on Western Properties. In addition, this prospective suitor was
unwilling to further conduct substantial due diligence unless it was given the
exclusive right to negotiate with Western Properties. That prospective suitor
indicated it was willing to restructure its proposal as a proposal to acquire
the shares of Western Properties, but only if the net cost and liability to that
prospective suitor were no more than in a proposal to acquire the assets of
Western Properties, which was not feasible because of Western Properties'
contingent liabilities.
A fourth proposal was not pursued by the Western Properties board in part
because the prospective suitor had not performed substantial due diligence on
Western Properties. In addition, even though this proposal was structured as a
proposal for Western Properties' shares, it required Western Properties'
contingent liabilities to be excluded, which Western Properties did not deem to
be feasible or advisable.
The proposal from Pan Pacific was for the acquisition of the shares of
Western Properties in exchange for Pan Pacific's shares, using an exchange ratio
of 0.60 of a share of Pan Pacific's common stock for each Western Properties
common share. Additionally, Pan Pacific's proposal indicated that Pan Pacific
would increase its dividend to a level approximately equivalent to Western
Properties current dividend level, as adjusted for the exchange ratio, and Pan
Pacific would expand its board to seven members to include two existing Western
Properties trustees chosen by Pan Pacific. The Western Properties board was
concerned that while the value implied by the proposed exchange ratio
represented a premium over Western Properties' stock price, based on the closing
stock prices of each company's stock on the last trading day
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<PAGE> 44
prior to July 10, 2000, it was lower than the cash offer made by another
prospective suitor for the shares of Western Properties. However, the Western
Properties board believed that the relatively lower valuation of Pan Pacific's
proposal implied by its exchange ratio was offset by the advantages of Pan
Pacific's stock-for-stock transaction structure, in comparison to the
cash-for-stock or cash-for-assets structures proposed by the other prospective
suitors. In addition, during the Western Properties board's consideration of the
proposals at its July 19, 2000 meeting, Donaldson, Lufkin & Jenrette informed
the Western Properties board that Pan Pacific was well regarded by research
analysts, who generally rated Pan Pacific's stock as a buy, that Pan Pacific had
a conservative capital structure, an investment grade rating of BBB- by Standard
& Poors, a more geographically diversified portfolio and a more diversified
tenant base.
The Western Properties board then instructed its senior management and
Donaldson, Lufkin & Jenrette to communicate to Pan Pacific its interest in
pursuing a merger provided that Pan Pacific increase its proposed
stock-for-stock exchange ratio and to communicate to other prospective suitors
that the Western Properties board had not yet made a definitive decision and
that it was still considering various proposals. On July 19, 2000, senior
management of Western Properties communicated to Prudential Securities and
senior management of Pan Pacific the basis upon which the Western Properties
board would preliminarily consider pursuing a merger with Pan Pacific. On July
20, 2000, senior management of Pan Pacific and Western Properties preliminarily
agreed to continue negotiations for a potential merger using a 0.62 exchange
ratio, subject to each company's completion of its due diligence. Pan Pacific
also agreed that Western Properties would not be obligated to complete the
merger if Pan Pacific's stock were to close at an average price of less than
$15.00 per share for the ten trading day period prior to the closing of the
merger. Pan Pacific indicated that it would not proceed with merger discussions
with Western Properties unless Pan Pacific received a period of exclusivity from
Western Properties. On July 25, 2000, Western Properties and Pan Pacific entered
into a confidentiality and exclusivity agreement which gave Western Properties
the right to conduct due diligence on Pan Pacific and gave Pan Pacific the right
to conduct due diligence on Western Properties. That agreement also restricted
Western Properties' ability to solicit proposals from third parties until August
21, 2000.
Beginning on July 25, 2000, Western Properties and Pan Pacific and their
financial advisors conducted due diligence on each other and began to work on
definitive documentation for the proposed merger. On July 31, 2000, at a
regularly scheduled quarterly meeting, the Pan Pacific board received an update
on the proposed merger from senior management and Prudential Securities. On July
31, 2000, Pan Pacific's counsel circulated to all parties the initial draft of a
proposed merger agreement. From July 31, 2000 to August 15, 2000, Western
Properties and Pan Pacific had numerous conversations with each other and with
their respective counsel and financial advisors regarding the terms of the
proposed merger agreement.
Senior management of Western Properties, Pan Pacific and their respective
counsel met in person and by telephone on August 16, 2000 to negotiate and
attempt to finalize certain outstanding issues with respect to the proposed
merger agreement. On August 17, 2000 and again on August 18, 2000, Pan Pacific's
counsel circulated to all parties revised drafts of the proposed merger
agreement. A copy of the August 18 draft was distributed to the Pan Pacific
directors and the Western Properties' trustees on the evening of August 18,
2000. Separate memorandums summarizing the principal terms of the proposed
merger agreement were also distributed to the Western Properties trustees on
August 18, 2000 and to the Pan Pacific directors on the morning of August 21,
2000. Two issues that were considered unresolved at that time were the
provisions on dividend coordination between the parties and the circumstances
under which Western Properties would owe a break-up fee to Pan Pacific and the
amount thereof. On August 19 and August 20, 2000, senior management of Western
Properties and Pan Pacific discussed these issues with each other and their
respective advisors, and agreed that Western Properties would accelerate the
record date for its fourth quarter 2000 dividend by one month so that its
shareholders would receive their regular quarterly dividend for the fourth
quarter of 2000 prior to the merger, that Pan Pacific would declare a special
dividend with a record date on or before November 15, 2000 in the amount of
$0.28 per share (or the equivalent of a two-month dividend at Pan Pacific's
current dividend rate) and that Pan Pacific would thereafter reschedule its
dividend record and payment dates to approximate those of Western Properties (as
close as practicable to March 15, June 15, September 15 and December 15 of each
year)
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<PAGE> 45
and would declare a $0.455 per share dividend in the first quarter after
completion of the merger in order to approximate Western Properties' current
dividend level, as adjusted for the 0.62 exchange ratio. Senior management of
Western Properties and Pan Pacific also agreed to modify the provisions
regarding Western Properties' obligation to pay Pan Pacific a break-up fee by,
among other things, permitting Western Properties to pay the break-up fee in two
installments, the first at the time of the event causing the break-up fee
obligation and the second 90 days later. The parties also agreed that the
break-up fee payable by Western Properties would be increased to $10 million if
the merger agreement was terminated as a result of certain events that occurred
after November 1, 2000.
On August 19, 2000, Western Properties provided comments to Pan Pacific's
counsel on the August 18 draft of the merger agreement, and on August 20, 2000
senior management of Western Properties, Pan Pacific and their respective
counsel met by telephone conference to discuss the status of the draft of the
merger agreement. The remaining open issues on the merger agreement were
resolved on August 20, 2000 and a revised final draft was circulated that
evening.
On August 21, 2000, the Pan Pacific board held a special meeting to
consider the draft merger agreement, the merger and related matters.
Representatives of senior management, Prudential Securities and Pan Pacific's
counsel were present. At the meeting, the Pan Pacific board received a report
from members of Pan Pacific's senior management on the results of their due
diligence review of Western Properties and their analysis of the proposed merger
and the proposed development arrangements between Pan Pacific and two executive
officers of Western Properties, Mr. Blake and Mr. Hunt.
At that meeting, Prudential Securities reviewed with the Pan Pacific board
the financial analysis performed by Prudential Securities in respect of the
proposed merger. Prudential Securities concluded its presentation by delivering
to the Pan Pacific board its oral opinion, which was later confirmed by delivery
of its written opinion dated August 21, 2000, to the effect that, as of that
date, and based upon the assumptions made, the matters considered, and the
limits of the review set forth in such opinion, the exchange ratio used in the
merger agreement was fair, from a financial point of view, to Pan Pacific.
Pan Pacific's counsel made a presentation to the Pan Pacific board in which
they explained the material terms of the proposed merger agreement, briefed the
Pan Pacific board on certain legal issues raised by the proposed merger
transaction and advised the Pan Pacific board of its legal duties in connection
with the merger.
During and after such presentations, the Pan Pacific board engaged in
extensive discussions of the advantages and disadvantages of the proposed
merger, as described under " -- Pan Pacific's Reasons for the Merger." Following
such presentations and discussions, the Pan Pacific board concluded that the
proposed merger was in the best interests of Pan Pacific and its stockholders,
and by a unanimous vote of the directors, approved the merger, the Agreement and
Plan of Merger dated as of August 21, 2000, and the transactions contemplated by
the Agreement and Plan of Merger.
On August 21, 2000, the Western Properties board held a special meeting to
consider the Agreement and Plan of Merger, the proposed incorporation and
related matters. Representatives of senior management, Donaldson, Lufkin &
Jenrette, KPMG LLP, and Western Properties' legal counsel were present. At the
meeting, the Western Properties board received a report from members of Western
Properties' senior management on the results of their due diligence review of
Pan Pacific. A member of KPMG LLP reviewed with the Western Properties board the
results of their due diligence review regarding Pan Pacific's accounting
practices and systems, and Pan Pacific's compliance with its obligations to
maintain its status as a real estate investment trust.
At that meeting, Donaldson, Lufkin & Jenrette gave a report on its due
diligence review of Pan Pacific, summarized for the Western Properties board the
evaluation process Western Properties' management used to select Pan Pacific,
and presented to the Western Properties board its financial analysis of the
proposed merger. It also gave a report to the Western Properties board on the
status of other potential suitors. It concluded its presentation by delivering
to the Western Properties board its oral fairness opinion, later confirmed in
writing, to the effect that, as of August 21, 2000, and based upon and
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<PAGE> 46
subject to the assumptions, limitations and qualifications set forth in such
fairness opinion, the exchange ratio was fair, from a financial point of view,
to Western Properties and its shareholders.
Western Properties' counsel made a presentation to the Western Properties
board in which they explained the material terms of the Agreement and Plan of
Merger, briefed the Western Properties board on certain legal issues raised by
the proposed merger and the proposed development arrangements described in
Exhibit E to the merger agreement, and advised the Western Properties board on
its fiduciary duties in connection with the merger.
Mr. Blake then reviewed with the Western Properties board the terms of the
proposed development arrangements that Pan Pacific and Mr. Blake and Mr. Hunt
expected to enter into with Pan Pacific following the merger to complete Western
Properties' three development projects. Mr. Blake distributed a memorandum to
the Western Properties board outlining those terms, and the Western Properties
board then discussed the terms of the development arrangements. Mr. Blake and
Mr. Hunt left the room during this portion of the board meeting.
During and after such presentations, the Western Properties board engaged
in extensive discussions of the advantages and disadvantages of the proposed
merger, as described under " -- Western Properties' Reasons for the Merger."
Following such presentations and discussions, the Western Properties board
concluded that the proposed merger and incorporation were in the best interests
of Western Properties and its shareholders, and by a unanimous vote of the
trustees, approved the merger, the incorporation, the Agreement and Plan of
Merger and the transactions contemplated by the Agreement and Plan of Merger.
Following the Pan Pacific and Western Properties board meetings, on August
21, 2000, the Agreement and Plan of Merger was executed by Pan Pacific and
Western Properties. Revenue Properties (U.S.), Inc., Pan Pacific Development
(Nevada), Inc. and Western Properties also executed a voting agreement under
which Revenue Properties and Pan Pacific Development (Nevada), Inc. agreed to
vote their shares of Pan Pacific common stock in favor of the merger. On the
morning of August 22, 2000, the proposed merger was publicly announced.
Following the execution of the Agreement and Plan of Merger, senior
management of Western Properties and senior management of Pan Pacific discussed
modifications to the Agreement and Plan of Merger. These proposed modifications
included changes permitting a closing date prior to November 15, 2000, allowing
Western Properties and Pan Pacific greater flexibility in setting record dates
for their dividends to be paid in advance of the merger, eliminating the step-up
in the break-up fee to $10 million and clarifying certain matters relating to
the payment of benefits to Western Properties employees. On September 12, 2000,
Western Properties' counsel presented to Pan Pacific and its counsel a form of
Amended and Restated Agreement and Plan of Merger, which incorporated the
modifications agreed to by Western Properties and Pan Pacific. The Amended and
Restated Agreement and Plan of Merger was approved by the unanimous written
consent of each of the Pan Pacific board and the Western Properties board on
September 15, 2000. On September 15, 2000, Pan Pacific and Western Properties
executed the Amended and Restated Agreement and Plan of Merger.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF PAN PACIFIC
THE PAN PACIFIC BOARD BELIEVES THAT THE MERGER IS ADVISABLE AND IN THE BEST
INTERESTS OF PAN PACIFIC AND ITS STOCKHOLDERS. ACCORDINGLY, THE PAN PACIFIC
BOARD RECOMMENDS APPROVAL OF THE PAN PACIFIC MERGER PROPOSAL.
PAN PACIFIC'S REASONS FOR THE MERGER
The decision by the Pan Pacific board to acquire Western Properties
reflected Pan Pacific's desire to enhance its market presence in key West Coast
growth markets (such as in the greater San Francisco, Sacramento and Portland
areas), tenant diversification, growth prospects, credit profile, capital
markets presence and stockholder value. The decision process involved, in part,
an assessment of the potential risks and benefits of acquiring Western
Properties. During this assessment, the Pan Pacific board reviewed
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<PAGE> 47
historical information, including but not limited to, Western Properties'
balance sheet and income statements, credit rating, and its portfolio's
property-level financial performance, condition, tenant base and competitive
position. A significant factor considered by the Pan Pacific board was its
belief that the strategic advantages offered by its acquisition of Western
Properties, as well as the terms of the merger agreement and the consideration
to be offered by Pan Pacific, represented a transaction that was attractive to
Pan Pacific and its stockholders. In particular, the Pan Pacific board, in
approving the merger, considered the strategic benefits and other positive
factors discussed below:
- OPPORTUNITY TO ACQUIRE IN A SINGLE TRANSACTION A LARGE PORTFOLIO OF
COMPLEMENTARY, HIGH-QUALITY, PREDOMINANTLY GROCERY-ANCHORED SHOPPING
CENTERS IN PAN PACIFIC'S CORE MARKETS. The Pan Pacific board believes the
retail properties owned by Western Properties provide an attractive
strategic fit with Pan Pacific's portfolio, complement its existing
geographic locations and are consistent in terms of the following key
qualitative measures:
<TABLE>
<CAPTION>
PRO FORMA
AS OF JUNE 30, 2000(1)
-----------------------
PAN WESTERN
PACIFIC PROPERTIES
------- ----------
<S> <C> <C>
Shopping center average size (square footage) 156,003 119,798
Number of grocery anchored centers (as a % of total shopping
center portfolio) 71.7% 78.7%
Grocery anchor sales per square foot(2) $378 $373
Base rent per square foot(3) $10.91 $10.15
Top 50 tenants as a % of total annualized base rent 42.7% 49.5%
Population (3-mile radius)(4) 92,752 59,675
Household Income (3-mile radius)(4) $56,558 $60,562
</TABLE>
-------------------------
(1) Information provided in this table assumes Pan Pacific's acquisition of
Sycamore Plaza, Western Properties' disposition of Gridley Shopping Center
and North Hills Shopping Center, and Western Properties' expected
disposition of Heritage Oaks Shopping Center and Dinuba Shopping Center and
excludes three non-retail properties of Western Properties.
(2) Based on the latest 12 month reported sales information of those grocery
store tenants that report sales.
(3) Annualized base rent in place at June 30, 2000 calculated as follows: total
base rent to be received during the entire term of each lease, divided by
the terms in months of such leases, multiplied by 12 and divided by the
total leased square footage.
(4) Population and household income data compiled from a market profile report,
prepared by CAIC, a nationally-recognized demographic data provider, for
each property's specific address and weighted as to total square footage.
Population and household income data is based on 1990 census data, updated
to reflect 2000 estimates.
- SIGNIFICANTLY ENHANCES PAN PACIFIC'S MARKET PRESENCE IN KEY WEST COAST
GROWTH MARKETS. Upon completion of the merger, 52 of the 110 properties
that Pan Pacific expects to own after completion of the merger,
representing 40.7% of Pan Pacific's total leased square footage, will be
located in three, high-barrier-to-entry growth markets: San Francisco Bay
Area, greater Sacramento region and greater Portland region, as follows:
<TABLE>
<CAPTION>
PAN PACIFIC HISTORICAL PAN PACIFIC PRO FORMA
--------------------------------- ---------------------------------
SAN GREATER GREATER SAN GREATER GREATER
FRANCISCO SACRAMENTO PORTLAND FRANCISCO SACRAMENTO PORTLAND
BAY AREA REGION REGION TOTAL BAY AREA REGION REGION TOTAL
--------- ---------- -------- ------- --------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Number of properties.............. 9 2 9 20 24 9 19 52
Total leaseable square footage
(000s).......................... 1,072 275 1,301 2,648 3,059 1,330 1,786 6,175
Annualized base rent at 6/30/00
(000s)(1)....................... $11,773 $3,131 $12,179 $27,083 $29,407 $12,604 $16,024 $58,035
</TABLE>
-------------------------
(1) Annualized base rent in place at June 30, 2000 calculated as follows: total
base rent to be received during the entire term of each lease, divided by
the terms in months of such leases, multiplied by 12, and divided by the
total leased square footage.
- OPPORTUNITY TO GENERATE MEANINGFUL OPERATING EFFICIENCIES. The Pan
Pacific board believes that Pan Pacific will realize numerous corporate
overhead savings, operating efficiencies and economies of scale resulting
in savings in operating costs and general and administrative expenses for
the combined company aggregating approximately $3.0 million, on an
annualized basis, based on the following:
(a) Pan Pacific will continue to be managed by its current executive
officers and senior management team, with no additional staffing at
the senior corporate level;
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<PAGE> 48
(b) all of the Western Properties are located in Pan Pacific's existing
core markets. Pan Pacific intends to manage Western Properties'
assets using Pan Pacific's existing regional offices and
infrastructure;
(c) both companies use similar property management, accounting and
reporting procedures, methodologies and systems, as well as the same
auditing firm, which should facilitate an efficient integration of
the Western Properties portfolio into Pan Pacific; and
(d) increasing Pan Pacific's portfolio size from 60 properties as of
August 21, 2000 to an expected 110 properties after completion of the
merger should enhance Pan Pacific's ability to generate property
operating cost savings and reduction in expenses by spreading costs
over a larger number of properties, thereby improving Pan Pacific's
profit margin.
- OPPORTUNITY TO CAPITALIZE ON TENANT SYNERGIES. Approximately 300 of
Western Properties' tenants, representing 56% of Western Properties'
total leased square footage, are existing tenants within Pan Pacific's
portfolio. The Pan Pacific board believes this should provide
opportunities for Pan Pacific to enhance certain key relationships.
Additionally, these enhanced relationships, together with Pan Pacific's
broader geographic representation, should provide for greater
multi-lease, multi-market opportunities as tenants seek to expand and
relocate operations.
- ENHANCES PAN PACIFIC'S PLATFORM FOR FUTURE SHOPPING CENTER INVESTMENT
OPPORTUNITIES. The Pan Pacific board believes that Pan Pacific's
increased portfolio size, broader tenant relationships and broader
geographic representation in Northern California and Oregon will enhance
Pan Pacific's ability to access future shopping center investment
opportunities on the West Coast and to allocate more selectively capital
and resources to the best opportunities and growth markets.
- OPPORTUNITY TO INCREASE PAN PACIFIC'S FUNDS FROM OPERATIONS PER
SHARE. The Pan Pacific board believes that the merger should increase Pan
Pacific's funds from operations per share projected for the year ending
December 31, 2001, as compared to Pan Pacific on a stand-alone basis.
- STRENGTHENS PAN PACIFIC'S BALANCE SHEET AND FINANCIAL FLEXIBILITY AND KEY
COVERAGE RATIOS. As a result of the merger, the Pan Pacific board
believes Pan Pacific's balance sheet and financial flexibility will be
enhanced as result of the following improved key ratios:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 2000
----------------------------------------
WESTERN PAN PACIFIC
PAN PACIFIC PROPERTIES PRO FORMA
----------- ---------- -----------
<S> <C> <C> <C>
Interest coverage ratio(1).................................. 2.9x 2.7x 2.9x
Total debt-to-total assets.................................. 46.5% 50.6% 46.4%
Unsecured debt-to-total debt(2)............................. 38.4% 95.5% 59.8%
Unencumbered net operating income-to-total net operating
income(3)................................................. 56.6% 95.7% 71.8%
</TABLE>
-------------------------
(1) Interest coverage ratio is calculated by dividing the sum of net income,
interest expense, depreciation and amortization, provision for loss on real
estate investment and minority interests by interest expense.
(2) Unsecured debt-to-total debt is calculated by dividing the sum of senior
notes and line of credit payable by the sum of notes payable, senior notes
and line of credit payable.
(3) Unencumbered net operating income-to-total net operating income is
calculated by dividing total revenue less expenses (excluding interest,
depreciation and amortization and provision for loss on real estate
investment), or net operating income, of properties not encumbered by
secured debt by total net operating income.
- SUBSTANTIALLY INCREASES PAN PACIFIC'S SHARE BASE AND TOTAL MARKET
CAPITALIZATION. As a result of the merger, Pan Pacific's outstanding
common stock will increase by approximately 52.2% from 22.4 million
shares outstanding as of the record date to 34.1 million shares, assuming
the exchange of all outstanding exchangeable securities of subsidiaries
of Pan Pacific and Western Properties. The increase in shares will
increase Pan Pacific's equity market capitalization from approximately
$451 million to approximately $675 million and its total capitalization
will increase from approximately $819 million to $1.3 billion, based on
the closing price of Pan Pacific common stock as of September 29, 2000
($20.06), the pro forma number of shares of Pan Pacific common stock
outstanding as of September 29, 2000, and pro forma indebtedness
outstanding as of June 30, 2000.
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<PAGE> 49
The Pan Pacific board believes the increase in common stock and
capitalization affords several benefits:
(a) the increased number of Pan Pacific shares in the market should
increase the liquidity of Pan Pacific common stock and should attract
new institutional investors who generally prefer larger,
better-capitalized companies due to greater liquidity and greater
nominal equity, which allows the purchase and sale of larger volumes
of shares without materially disrupting the market price for such
shares;
(b) the increased equity capitalization and greater liquidity should, over
time, result in a higher earnings multiple and stock price;
(c) the credit rating agencies generally favor larger equity
capitalization companies and view them to be more stable for unsecured
debt investors; and
(d) the increased attractiveness of Pan Pacific to potential investors and
credit rating agencies should also improve Pan Pacific's ability to
access more favorably priced equity and debt capital.
- ENHANCES DIVERSITY OF PAN PACIFIC'S STOCKHOLDER BASE. Western Properties
shares are predominately held by individual investors as compared to Pan
Pacific shares which are predominately held by institutional investors.
In addition, Revenue Properties (U.S.), Inc. and its wholly-owned
subsidiaries, which collectively owned 50.9% of the outstanding Pan
Pacific common stock as of the record date, will own approximately 33.8%
of the outstanding common stock of Pan Pacific after the merger. The Pan
Pacific board believes the merger will provide Pan Pacific with a more
diversified and balanced stockholder base, which should result in greater
liquidity for holders of Pan Pacific common stock.
- FAIRNESS OPINION OF PRUDENTIAL SECURITIES. Pan Pacific's board considered
the opinion of its financial advisor, to the effect that, as of August
21, 2000 and based on and subject to the assumptions, limitations and
qualifications set forth in its opinion, the exchange ratio was fair to
Pan Pacific from a financial point of view. This opinion is described
under "Opinion of Financial Advisor to Pan Pacific."
- EXTENSIVE DUE DILIGENCE. Pan Pacific's management delivered reports
and/or made presentations to the Pan Pacific board concerning the results
of their due diligence investigation of Western Properties. The
investigations of management included tours of all of Western Properties'
properties, extensive reviews of Western Properties' top 50 leases,
reviews of Western Properties' environmental studies on its properties
and several meetings with Western Properties' management.
- TERMS OF THE MERGER AGREEMENT. The Pan Pacific board reviewed the
principal terms and conditions of the merger agreement, including the
representations, warranties and covenants of each party and the
conditions to each party's obligation to complete the merger. The Pan
Pacific board considered favorably that the terms of the merger agreement
are reasonable and protective of Pan Pacific's interests. In particular,
the Pan Pacific board considered favorably that:
(a) the conditions to each party's obligation to complete the merger are
typical or likely to be satisfied;
(b) Western Properties' ability to solicit, facilitate, discuss or enter
into an alternative transaction is restricted in a customary manner;
and
(c) depending on the reasons for a termination of the merger agreement,
Western Properties may be obligated to pay Pan Pacific $7.0 million
as a break-up fee.
The Pan Pacific board also considered and reviewed with management the
potentially negative factors listed below relating to the merger.
- FIXED EXCHANGE RATIO. The exchange ratio is fixed and not subject to
adjustment. Accordingly, an adverse change in the operations and
prospects of Western Properties, general market and economic conditions
or other factors which are beyond the control of Pan Pacific may alter
the relative value of the companies in a manner adverse to Pan Pacific.
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<PAGE> 50
- POTENTIAL FAILURE TO ACHIEVE BENEFITS OF THE MERGER. The Pan Pacific
board considered the risk that the anticipated benefits of the merger,
including cost savings and operating synergies, may not be fully
realized.
- RISK THAT MERGER WILL NOT BE COMPLETED. The Pan Pacific board considered
the risk that the merger would not be completed. In evaluating this risk,
the Pan Pacific board considered the particular circumstances under which
Western Properties could terminate the merger agreement. The Pan Pacific
board also considered the possible adverse effects on the market for Pan
Pacific common stock and upon Pan Pacific's ability to raise capital in
both the public and private markets that might result if the merger were
announced and not completed.
- POTENTIAL DISRUPTION OF OPERATIONS. The Pan Pacific board considered the
risk that the announcement of the merger and the efforts necessary to
complete the merger could result in a disruption in the operations of Pan
Pacific by, among other things, diverting management and other resources
of Pan Pacific from their day-to-day business.
- TRANSACTION COSTS. The Pan Pacific board considered that the combined
company was likely to incur transaction costs of approximately $14.5
million, including financial advisors, legal, printing and accounting
fees, and severance payments in connection with the merger.
The foregoing discussion of the information and factors considered by the
Pan Pacific board is not intended to be exhaustive but is believed to include
all material factors considered by the Pan Pacific board. In view of the wide
variety of information and factors considered, the Pan Pacific board did not
find it practical to, and did not, assign any relative or specific weights to
the foregoing factors, and individual directors may have given differing weights
to different factors. The Pan Pacific board did not attempt to analyze the
fairness of the exchange ratio in isolation from the considerations as to the
businesses of Pan Pacific and Western Properties, the strategic merits of the
merger or the other considerations referred to above. The Pan Pacific board did,
however, take into account, and placed reliance upon, the analyses performed by,
and the opinion rendered by, Prudential Securities as to the fairness of the
exchange ratio to Pan Pacific from a financial point of view.
RECOMMENDATION OF THE BOARD OF TRUSTEES OF WESTERN PROPERTIES
THE WESTERN PROPERTIES BOARD BELIEVES THAT THE MERGER IS ADVISABLE AND IN
THE BEST INTERESTS OF WESTERN PROPERTIES AND ITS SHAREHOLDERS. ACCORDINGLY, THE
WESTERN PROPERTIES BOARD HAS UNANIMOUSLY APPROVED THE MERGER AND INCORPORATION
AND RECOMMENDS APPROVAL OF THE WESTERN PROPERTIES MERGER AND INCORPORATION
PROPOSAL.
WESTERN PROPERTIES' REASONS FOR THE MERGER
The Western Properties board has determined that the terms of the merger
and the incorporation and the transactions contemplated thereby are fair to, and
in the best interests of, Western Properties and its shareholders. The Western
Properties board received the advice of its management, financial advisors,
accountants, and counsel throughout its consideration of the merger agreement
and the incorporation. In making its determination with respect to the merger
agreement and the incorporation, the Western Properties board considered the
following positive factors:
- PAN PACIFIC'S GEOGRAPHIC AND TENANT DIVERSIFICATION. The Western
Properties board considered the fact that Pan Pacific has greater
geographic diversification and greater tenant diversification than
Western Properties, which could provide the combined company with greater
cash flow stability.
- ATTRIBUTES OF PAN PACIFIC. The Western Properties board considered the
depth of the management team of Pan Pacific, its conservative balance
sheet, the favorable view that research analysts have of it, and the
possibilities for appreciation in the value of its stock.
- BENEFITS OF STOCK CONSIDERATION. The Western Properties board considered
the fact that the merger, as a "stock-for-stock" rather than a
"cash-for-stock" transaction, will provide an opportunity for Western
Properties' shareholders to share in any future stock price appreciation
of Pan Pacific, and should enable Western Properties' shareholders to
convert their shares of Western
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<PAGE> 51
Properties into shares of Pan Pacific on a tax-free basis (except with
respect to any cash received for fractional shares). The Western
Properties board also considered the fact that the merger agreement
permits continued payment of dividends to the holders of Western
Properties shares prior to the merger and that Pan Pacific intends to
increase its dividend following the effective date of the merger so that
the shares received by Western Properties shareholders in the merger
would earn the same total dividend as the shares of Western Properties
given in exchange.
- PAN PACIFIC'S AGREEMENT TO INCREASE ITS DIVIDEND. The Western Properties
board considered Pan Pacific's agreement to increase its dividend from
$0.420 per share to $0.455 per share for the first quarter after
completion of the merger in order to approximate Western Properties'
current dividend level, as adjusted for the 0.62 exchange ratio.
- BENEFITS OF GREATER MARKET CAPITALIZATION. The combined company's total
market capitalization will be $1.3 billion, based on the closing price of
Pan Pacific common stock on September 29, 2000 ($20.06), the pro forma
number of shares of Pan Pacific common stock as of September 29, 2000 and
the pro forma outstanding indebtedness of Pan Pacific as of June 30,
2000. In this regard, the Western Properties board noted that a larger
real estate investment trust should give increased liquidity to its
shares, and that smaller capitalized real estate investment trusts have
had difficulty obtaining capital from the financial markets.
- REVIEW OF FINANCIAL DATA. The Western Properties board considered
information relating to the financial performance, financial condition,
business operations and prospects of Western Properties and Pan Pacific.
- EXTENSIVE DUE DILIGENCE. Western Properties' management, its counsel,
KPMG LLP, and Donaldson, Lufkin & Jenrette made presentations to the
Western Properties board concerning the results of their due diligence
investigations of Pan Pacific. The investigations by management included
tours of most of Pan Pacific's properties, reviews of Pan Pacific's
property level information, reviews of Pan Pacific's environmental
studies on its properties, and meetings with Pan Pacific's management. A
member of KPMG LLP reviewed with the Western Properties board the results
of KPMG LLP's due diligence review regarding Pan Pacific's accounting
practices and systems and its qualification as a real estate investment
trust. Donaldson, Lufkin & Jenrette presented a report on its review of
Pan Pacific's financial projections.
- FAIRNESS OPINION OF DONALDSON, LUFKIN & JENRETTE. The Western Properties
board considered the opinion, analyses and presentations of Donaldson,
Lufkin & Jenrette described below under "Opinion of Financial Advisor to
Western Properties," including the opinion of Donaldson, Lufkin &
Jenrette to the effect that, as of August 21, 2000, based on and subject
to the assumptions, limitations and qualifications set forth in such
opinion, the exchange ratio was fair to Western Properties and its
shareholders from a financial point of view. A copy of Donaldson, Lufkin
& Jenrette's written opinion to the Western Properties board dated as of
August 21, 2000, is attached as Annex C to this joint proxy
statement/prospectus.
- TERMS OF THE MERGER AGREEMENT. The Western Properties board considered
the terms of the merger agreement, including the exchange ratio. In
addition, the Western Properties board considered the conditions to its
obligation to complete the merger, including that the average closing
price of Pan Pacific's stock for the ten trading days preceding the
closing date must be equal to or greater than $15.00 per share.
- POTENTIAL OPPORTUNITIES OF WESTERN PROPERTIES' SHAREHOLDERS TO OBTAIN
APPRAISAL RIGHTS. The Western Properties board considered the fact that
the incorporation would grant to Western Properties' shareholders
dissenters' rights in certain limited circumstances upon conversion of
their Western Properties shares into shares of common stock of WPT.
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The Western Properties board also considered the following possibly
negative factors in its deliberations concerning the merger agreement and the
incorporation:
- CHALLENGES OF EXECUTING BUSINESS COMBINATION. The Western Properties
board considered the challenges inherent in the combination of two
business enterprises the size of Western Properties and Pan Pacific and
the possible diversion of management attention for an extended period of
time.
- FIXED EXCHANGE RATIO. The Western Properties board considered the fact
that, because the exchange ratio is fixed, a decline in the value of Pan
Pacific's common stock reduces the value of the consideration to be
received by Western Properties' shareholders in the merger.
- UNCERTAINTY OF MARKET PERCEPTION. The Western Properties board considered
the uncertainty of the financial market's perception of the transaction,
and the effect of the uncertainty on the trading price of Western
Properties' shares.
- RESTRICTIONS ON WESTERN PROPERTIES' ABILITY TO PURSUE ALTERNATIVE
TRANSACTIONS. The Western Properties board considered the fact that the
merger agreement prohibits Western Properties and its representatives
from soliciting or otherwise facilitating a proposal of an acquisition by
or business combination with any other party except in response to a bona
fide unsolicited proposal with respect to which, among other things, the
Western Properties board believes in good faith, following consultation
with its financial advisor, that such proposal is or is likely to result
in an offer that is more favorable to Western Properties' shareholders.
- POTENTIAL BREAK-UP FEE AND EXPENSE REIMBURSEMENT. The Western Properties
board considered the fact that the merger agreement requires Western
Properties to pay Pan Pacific a break-up fee of $7.0 million if the
merger agreement is terminated in certain circumstances, including the
recommendation by the Western Properties board to the shareholders of
Western Properties that they vote in favor of a competing proposal, or if
Western Properties terminates the merger agreement in order to enter into
an alternative acquisition transaction. The Western Properties board
recognized that the inclusion of these provisions in the merger agreement
would make it less likely that a more attractive offer for the
acquisition of Western Properties would be presented to Western
Properties and its shareholders. However, the Western Properties board
believed, based on input from its financial advisors, its counsel and Pan
Pacific, that inclusion of the break-up fee provisions was necessary to
induce Pan Pacific to enter into the merger agreement, and that the terms
of the break-up fee were generally comparable to those contained in other
acquisition agreements for companies similar to Western Properties. The
Western Properties board also considered the fact that the merger
agreement requires Western Properties to pay up to $2.0 million of Pan
Pacific's expenses if the merger agreement is terminated as a result of a
material breach of the merger agreement by Western Properties.
- RESTRICTIONS ON BUSINESS OPERATIONS BEFORE THE MERGER. The Western
Properties board considered the restrictions the merger agreement places
on Western Properties' ability to operate its business before the merger
in a manner that is inconsistent with past practice or outside of the
ordinary course of business. The Western Properties board also considered
the other significant restrictions the merger agreement places on Western
Properties' ability to buy and sell properties and to borrow money.
- RISK THAT THE MERGER WILL NOT BE COMPLETED. The Western Properties board
considered the various conditions to Pan Pacific's obligations to
complete the merger and the possibility that the merger would not be
completed. In evaluating this risk, the Western Properties board
considered the particular circumstances under which Pan Pacific could
terminate the merger agreement. The Western Properties board also
considered the possible adverse effects on the market for Western
Properties' common shares and upon Western Properties' ability to raise
capital in both the public and private markets that might result if the
merger were announced and not completed. See "The Merger
Agreement -- Conditions to Obligations to Complete the Merger."
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- POTENTIAL FAILURE TO ACHIEVE BENEFITS OF THE MERGER. The Western
Properties board considered the risk that the anticipated benefits of the
merger may not be realized.
The Western Properties board also was aware that Bradley N. Blake and L.
Gerald Hunt expect to enter into development arrangements with the combined
company to complete Western Properties' three existing development projects as
described in Exhibit E to the merger agreement. See "Potential Conflicts of
Interest; Interests of Executive Officers and Trustees of Western Properties in
the Merger." The Western Properties board considered the fact that, if such
development arrangements were entered into, Mr. Blake and Mr. Hunt would receive
a benefit that would not be shared by the other shareholders of Western
Properties. Mr. Blake discussed with the Western Properties board the material
terms of the proposed development arrangements. The Western Properties board
considered whether there was any evidence that these arrangements would benefit
Mr. Blake and Mr. Hunt at the expense of Western Properties or its shareholders,
or whether Pan Pacific would have offered a higher exchange ratio if these
arrangements were eliminated. The Western Properties board noted that the
proposed arrangements were not a condition to the merger and were not binding on
Pan Pacific, and concluded that the proposed arrangements did not benefit Mr.
Blake and Mr. Hunt at the expense of Western Properties or its shareholders, and
that there did not appear to be any evidence that Pan Pacific would have offered
a higher exchange ratio if these arrangements were eliminated. The Western
Properties board concluded that the proposed arrangements with Mr. Blake and Mr.
Hunt were a neutral factor in their determination that the merger agreement was
in the best interests of Western Properties and its shareholders.
The foregoing discussion of the information and factors which were
considered by the Western Properties board is not intended to be exhaustive but
is believed to include all material factors considered by the Western Properties
board. The Western Properties board did not assign specific weights to the
foregoing factors and individual trustees may have given different weights to
different factors.
ACCOUNTING TREATMENT OF THE MERGER
The merger will be treated as a purchase in accordance with Accounting
Principles Board Opinion No. 16. Purchase accounting for a merger is the same as
the accounting treatment used for the acquisition of any group of assets. The
fair value of the consideration given by Pan Pacific in the merger will be
allocated to the assets acquired and liabilities assumed as of the completion of
the merger. The financial statements of Pan Pacific will reflect the combined
operations of Pan Pacific and Western Properties from the closing date of the
merger.
DETERMINATION OF EXCHANGE RATIO
The exchange ratio for WPT common stock was determined through arm's-length
negotiations between Pan Pacific and Western Properties.
REGULATORY MATTERS
Neither Pan Pacific nor Western Properties is aware of any federal or state
regulatory approvals which must be obtained in connection with the merger.
DELISTING AND DEREGISTRATION OF WESTERN PROPERTIES COMMON SHARES; LISTING OF PAN
PACIFIC COMMON STOCK ISSUED IN CONNECTION WITH THE MERGER
Western Properties common shares currently are listed on the American Stock
Exchange under the symbol "WIR." Upon completion of the merger, Western
Properties common shares will be delisted from the American Stock Exchange and
deregistered under the Securities Exchange Act of 1934. Application will be made
for the listing of the shares of Pan Pacific common stock to be issued in the
merger on the New York Stock Exchange under the symbol "PNP." The approval for
listing of such shares on the New York Stock Exchange is a condition to the
completion of the merger. See "The Merger Agreement -- Conditions to Obligations
to Complete the Merger." Following the merger, holders of WPT common stock will
be instructed to exchange their outstanding stock certificates for stock
certificates
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representing shares of Pan Pacific common stock. See "The Merger
Agreement -- Exchange of Share Certificates."
RESALES OF PAN PACIFIC COMMON STOCK ISSUED IN CONNECTION WITH THE MERGER;
AFFILIATE AGREEMENTS
Pan Pacific common stock issued in connection with the merger will be
freely transferable, except for shares of Pan Pacific common stock received by
persons who are deemed to be "affiliates," as such term is defined by Rule 144
under the Securities Act of 1933, of Western Properties at the time the merger
proposal is submitted to Western Properties shareholders for approval. Shares of
Pan Pacific common stock held by such affiliates may be resold by them only in
transactions permitted by the resale provisions of Rule 145 under the Securities
Act of 1933 (or Rule 144 in the case of such persons who become affiliates of
Pan Pacific) or as otherwise permitted under the Securities Act. Persons who may
be deemed to be "affiliates" of Pan Pacific or Western Properties generally
include individuals or entities that control, or are controlled by, or are under
the common control with, such party and may include directors and executive
officers of such party as well as principal shareholders of such party. Pursuant
to the terms of the merger agreement, Western Properties has delivered to Pan
Pacific a list of names of those persons whom it believes to be "affiliates" of
Western Properties, within the meaning of Rule 144 under the Securities Act of
1933. Western Properties has agreed that it will use its reasonable best efforts
to cause each person who is identified as an affiliate in the list referred to
above to execute a written affiliate agreement providing, among other things,
that such person will not sell, transfer or otherwise dispose of any of the
shares of Pan Pacific common stock received as a result of the merger except in
compliance with the Securities Act of 1933 and the rules and regulations of the
SEC thereunder.
APPRAISAL OR DISSENTERS' RIGHTS
Pan Pacific stockholders are not entitled to any appraisal or dissenters'
rights under Maryland law as a result of the merger.
Western Properties shareholders will be entitled to dissenters' rights in
limited circumstances as a result of the incorporation and the merger. If a
holder of Western Properties common shares (which will become WPT common stock
upon the incorporation immediately before the merger) does not wish to accept
Pan Pacific common stock in exchange for WPT common stock, then Chapter 13 of
the California General Corporation Law provides that such shareholder may elect
instead to receive cash in the amount of the "fair market value" of his or her
shares (exclusive of any appreciation or depreciation in connection with the
proposed merger) determined as of the day before the first announcement of the
terms of the proposed merger if dissenters' rights are available. Dissenters'
rights will be available if demands for payment are properly filed with Western
Properties with respect to 5% or more of Western Properties' outstanding shares
on or prior to the date of the Western Properties special meeting. The closing
price of Western Properties' common shares on the American Stock Exchange on
August 21, 2000, the last trading day prior to the first announcement of the
proposed merger, was $12.50 per share.
If you are a holder of Western Properties common shares and wish to
exercise your dissenters' rights under Chapter 13 of the California General
Corporation Law, you must satisfy each of the conditions described below:
- You must vote against the merger.
- You must deliver to Western Properties or its transfer agent a written
demand for appraisal of your Western Properties common shares not later
than the date of the Western Properties special meeting. This written
demand is in addition to and separate from any proxy or vote against the
principal terms of the merger. Merely voting against the approval of the
principal terms of the merger will not constitute a demand for appraisal
within the meaning of Chapter 13 of the California General Corporation
Law.
- If it is determined that dissenters' rights are available, you must
deliver the certificate for your shares for endorsement within 30 days
after the date on which notice of shareholder approval of the
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merger is mailed to you by Western Properties or, if the merger has
occurred, Pan Pacific. The notice will contain a statement of the price
which Western Properties or, if the merger has occurred, Pan Pacific has
determined to be the fair market value of Western Properties common
shares on the date prior to the first announcement of the merger.
- If you disagree with Western Properties or, if the merger has occurred,
Pan Pacific, as to the calculation of "fair market value," you must file
a petition in the Superior Court of the appropriate county demanding
determination of the fair market value of your Western Properties common
shares. This petition must be filed by either you or Western Properties
or Pan Pacific within six months of the notice described above.
Demands for appraisal must be made in writing and must be mailed or
delivered to: Barbara J. Donham, Western Properties Trust, 2200 Powell Street,
Suite 600, Emeryville, California 94608, or to its transfer agent, ChaseMellon
Shareholder Services, L.L.C. The demand must state the number and class of
shares you hold of record that you demand to be purchased and the amount claimed
to be the "fair market value" of those shares on August 21, 2000, the day before
the announcement of the merger (exclusive of any appreciation or depreciation in
connection with the proposed merger). The statement of the fair market value
will constitute an offer by you to sell such dissenting shares at that price.
You will continue to have the rights and privileges incident to your shares of
WPT, Inc. until the fair market value of your Western Properties common shares
is determined or you lose your dissenters' rights.
If dissenters' rights are available and you properly demand appraisal of
your Western Properties common shares under Chapter 13 of the California General
Corporation Law but you fail to perfect or withdraw your right to appraisal,
your Western Properties common shares will be converted into Pan Pacific common
stock. You may not, however, withdraw a demand for appraisal unless Western
Properties or, if the merger has occurred, Pan Pacific gives its consent.
If the merger agreement is terminated, you will lose your right to require
Western Properties to purchase your Western Properties common shares. It is a
condition to the obligations of Pan Pacific to complete the merger that demands
for dissenters' rights not be made by holders of 5% or more of Western
Properties common shares. Unless this condition is waived by Pan Pacific, the
merger will not be completed if dissenters' rights are available.
If the dissenters' rights condition is waived by Pan Pacific, you will be
entitled to receive the fair market value of your Western Properties common
shares on the date prior to the first announcement of the merger, plus interest
at the legal rate on judgments from the date on which the fair market value of
Western Properties common shares has been determined. If a suit is filed to
determine the fair market value of Western Properties common shares, the costs
of the action will be assessed or apportioned as the court concludes is
equitable, provided that Western Properties or Pan Pacific must pay all such
costs if the value awarded by the court is 125% of the price offered by Western
Properties or Pan Pacific. Cash dividends paid by Western Properties or Pan
Pacific after the date of approval of the principal terms of the merger
agreement by Western Properties' shareholders will be credited against the total
amount owed. If the amount payable exceeds the amount of dividends that Western
Properties would be permitted to pay under California law, the holders of
dissenters' rights will become creditors of Western Properties for any amount
unpaid. Interest will continue to accrue on the unpaid amount at the legal rate
on judgment until paid.
IF YOU ARE A HOLDER OF WESTERN PROPERTIES COMMON SHARES AND YOU ARE
CONSIDERING EXERCISING YOUR DISSENTERS' RIGHTS, YOU SHOULD BE AWARE THAT THE
FAIR MARKET VALUE OF YOUR WESTERN PROPERTIES COMMON SHARES AS DETERMINED UNDER
CHAPTER 13 OF THE CALIFORNIA GENERAL CORPORATION LAW COULD BE GREATER THAN, THE
SAME AS, OR LESS THAN THE VALUE OF THE PAN PACIFIC COMMON STOCK THAT YOU WOULD
OTHERWISE RECEIVE IN THE MERGER. THE OPINION DELIVERED BY DONALDSON, LUFKIN &
JENRETTE IS NOT AN OPINION AS TO FAIR MARKET VALUE UNDER CHAPTER 13 OF THE
CALIFORNIA GENERAL CORPORATION LAW.
The foregoing is a summary of the provisions of Chapter 13 of the
California General Corporation Law and is qualified in its entirety by reference
to the full text of that Chapter, which is included as Annex D.
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OPINION OF FINANCIAL ADVISOR TO PAN PACIFIC
On August 21, 2000, Prudential Securities Incorporated delivered its oral
opinion to the Pan Pacific board to the effect that, as of such date, based on
and subject to the assumptions made, the matters considered, and the limitations
and qualifications as set forth in its written opinion, the exchange ratio was
fair to Pan Pacific from a financial point of view. Prudential Securities made a
presentation of the financial analysis underlying its oral opinion at a
telephonic meeting of the Pan Pacific board on August 21, 2000. This analysis,
as presented to the Pan Pacific board, is summarized below. All of the members
of the Pan Pacific board attended the meeting on August 21, 2000 and had an
opportunity to ask questions regarding Prudential Securities' presentation.
Prudential Securities subsequently confirmed its oral opinion in a written
opinion dated August 21, 2000.
In requesting the Prudential Securities opinion, the Pan Pacific board did
not give any special instructions to Prudential Securities or impose any
limitation upon the scope of the investigation that Prudential Securities deemed
necessary to enable it to deliver the Prudential Securities opinion. A copy of
the Prudential Securities opinion, which sets forth the assumptions made,
matters considered and limits on the review undertaken, is attached to this
document as Annex B and is incorporated herein by reference. The summary of the
Prudential Securities opinion set forth below is qualified in its entirety by
reference to the full text of the Prudential Securities opinion. Pan Pacific
stockholders are urged to read the Prudential Securities opinion in its
entirety.
THE OPINION IS DIRECTED ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO TO PAN
PACIFIC FROM A FINANCIAL POINT OF VIEW AND DOES NOT CONSTITUTE A RECOMMENDATION
TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE MEETING OR AS
TO ANY OTHER ACTION SUCH STOCKHOLDER SHOULD TAKE REGARDING THE MERGER.
In conducting its analysis and arriving at the Prudential Securities
opinion dated August 21, 2000, Prudential Securities reviewed such information
and considered such financial data and other factors as Prudential Securities
deemed relevant under the circumstances, including, among others, the following:
- the Agreement and Plan of Merger dated August 21, 2000;
- historical financial and operating data of Pan Pacific that was publicly
available including, but not limited to:
(a) Pan Pacific's annual report on Form 10-K for the three fiscal years
ended December 31, 1999, 1998 and 1997; and
(b) Pan Pacific's quarterly report on Form 10-Q for the quarter ended June
30, 2000;
- historical financial and operating data of Western Properties that was
publicly available including, but not limited to:
(a) Western Properties' annual report on Form 10-K for the three fiscal
years ended December 31, 1999, 1998 and 1997;
(b) Western Properties' quarterly report on Form 10-Q for the quarter
ended June 30, 2000; and
(c) Western Properties' proxy statement for the annual meeting of
shareholders held on May 11, 2000;
- other information relating to Western Properties, including, but not
limited to, financial forecasts for the fiscal years ending December 31,
2000, 2001, 2002, 2003 and 2004 prepared by the management of Western
Properties and a schedule of future investment projects, acquisitions and
dispositions;
- the development services/joint venture term sheet regarding the proposed
development arrangements between Pan Pacific and certain members of
Western Properties' senior management attached as an exhibit to the
merger agreement;
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- publicly available financial, operating and stock market data concerning
certain companies engaged in businesses Prudential Securities deemed
comparable to Pan Pacific and Western Properties, respectively, or
otherwise relevant to Prudential Securities' inquiry;
- the financial terms of recent comparable transactions that Prudential
Securities deemed relevant to the inquiry;
- the historical stock prices and trading volumes of Pan Pacific common
stock and Western Properties common shares; and
- other financial studies, analyses and investigations as Prudential
Securities deemed appropriate.
Prudential Securities assumed, with Pan Pacific's consent, that the merger
will be effected in accordance with the terms set forth in the Agreement and
Plan of Merger dated as of August 21, 2000.
Prudential Securities met with the senior management of Pan Pacific and
Western Properties to discuss the following:
- the prospects for their respective businesses;
- their estimates of such businesses' future financial performance;
- the financial impact of the merger on the respective companies; and
- other matters that Prudential Securities deemed relevant.
In connection with its review and analysis and in arriving at its opinion,
Prudential Securities relied upon the accuracy and completeness of the financial
and other information provided to Prudential Securities by Pan Pacific and
Western Properties. Prudential Securities did not undertake any independent
verification of this information or any independent valuation or appraisal of
any of the assets or liabilities of Pan Pacific or Western Properties. With
respect to the financial forecasts provided to Prudential Securities by the
management of Western Properties, Prudential Securities assumed such information
and the assumptions and bases for this information represented the best
currently available estimates and judgments of Western Properties' management as
to the future financial performance of Western Properties. The Prudential
Securities opinion is predicated on the merger qualifying as a tax-free
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. Further, the Prudential Securities opinion was necessarily based on
economic, financial and market conditions as they existed, and can only be
evaluated as of August 21, 2000.
The Prudential Securities opinion does not address nor should it be
construed to address the relative merits of the merger and alternative business
strategies which may be available to Pan Pacific. In addition, the Prudential
Securities opinion does not in any manner address the prices at which Pan
Pacific's common stock will actually trade following consummation of the merger.
In addition, the Prudential Securities opinion and the presentation to the
Pan Pacific board was one of the many factors taken into consideration by the
Pan Pacific board in making its determination to recommend approval of the
merger agreement and the merger. Consequently, the analyses of Prudential
Securities described below should not be viewed as determinative of the opinion
of the Pan Pacific board with respect to the exchange ratio in connection with
the merger. The exchange ratio was determined through arm's-length negotiations
between Pan Pacific and Western Properties and was approved by the Pan Pacific
board. The exchange ratio was not determined on the basis of any recommendation
by Prudential Securities.
In arriving at the Prudential Securities opinion, Prudential Securities
performed a variety of financial analyses, including those summarized in this
document. The summary, set forth below, of the analyses presented to the Pan
Pacific board at the August 21, 2000 meeting does not purport to be a complete
description of the analyses performed. The preparation of a fairness opinion is
a complex process that involves various determinations as to the most
appropriate and relevant methods of financial analyses and
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the application of these methods to the particular circumstance. Therefore, an
opinion is not necessarily susceptible to partial analysis or summary
description.
Prudential Securities believes that its analyses must be considered as a
whole and that selecting portions of the Prudential Securities opinion or
portions of the factors considered by it, without considering all analyses and
factors, could create an incomplete view of the evaluation process underlying
the Prudential Securities opinion. Prudential Securities made numerous
assumptions with respect to industry performance, general business, economic,
market and financial conditions and other matters, many of which are beyond the
control of Pan Pacific and Western Properties. Any estimates contained in
Prudential Securities' analyses are not necessarily indicative of actual values
or future results, which may be significantly more or less favorable than
suggested by such analyses. Additionally, estimates of the values of businesses
and securities do not purport to be appraisals or necessarily reflect the prices
at which businesses or securities may be sold. Accordingly, these analyses and
estimates are inherently subject to substantial uncertainty. Subject to the
foregoing, the following is a summary of the material financial analyses
presented by Prudential Securities to the Pan Pacific board in connection with
the Prudential Securities opinion.
COMPARABLE COMPANIES ANALYSIS
Prudential Securities compared selected financial ratios for Western
Properties with a group of companies engaged in the acquisition, operation and
management of anchored retail centers which Prudential Securities considered to
be reasonably comparable to Western Properties for purposes of its analysis. The
comparable companies analyzed included: Acadia Realty Trust; First Washington
Realty Trust; Mid-Atlantic Realty Trust; and Pan Pacific Retail Properties.
The projected funds from operations, or FFO, per share for Western
Properties and the comparable companies were obtained from reports of First
Call, a data service that monitors and publishes a compilation of earnings
estimates produced by selected research analysts regarding companies of interest
to institutional investors, as of August 15, 2000. The estimates published by
First Call were not prepared in connection with the merger or at Prudential
Securities' request and may or may not prove to be accurate. The trading
multiples of the comparable companies were based on closing stock prices on
August 16, 2000. Prudential Securities' calculations resulted in the following
relevant ranges for the comparable companies and Western Properties:
- a range of market value as a multiple of actual 1999 FFO per share of
8.0x to 9.0x, with a median of 8.8x;
- a range of market value as a multiple of projected 2000 FFO per share of
7.5x to 8.3x, with a median of 7.9x; and
- a range of market value as a multiple of projected 2001 FFO per share of
7.0x to 7.8x, with a median of 7.4x.
Applying the foregoing multiples to Western Properties' actual 1999 FFO per
share, and projected 2000 and 2001 FFO per share resulted in:
- a range of implied exchange ratios of 0.54 to 0.61, with a median of
0.60, based on Western Properties' actual 1999 FFO per share of $1.40 and
Pan Pacific's closing price of $20.69 on August 16, 2000;
- a range of implied exchange ratios of 0.53 to 0.59, with a median of
0.56, based on Western Properties' projected 2000 FFO per share of $1.47
and Pan Pacific's closing price of $20.69 on August 16, 2000; and
- a range of implied exchange ratios of 0.54 to 0.59, with a median of
0.56, based on Western Properties' projected 2001 FFO per share of $1.58
and Pan Pacific's closing price of $20.69 on August 16, 2000.
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Prudential Securities observed that the exchange ratio is above the ranges
of, and greater than the medians of the exchange ratios implied by the foregoing
multiples.
None of the comparable companies is, of course, identical to Western
Properties. Accordingly, a complete analysis of the results of the foregoing
calculations cannot be limited to a quantitative review of such results and
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the comparable companies and other
factors that could affect the public valuation of the comparable companies, as
well as that of Western Properties.
COMPARABLE TRANSACTIONS ANALYSIS
Prudential Securities also analyzed the consideration paid in several
recent merger and acquisition transactions deemed by Prudential Securities to be
reasonably similar to the merger, and considered the multiple of the equity
purchase price to the target company's latest twelve months funds from
operations and to the target company's forward twelve months funds from
operations, based upon publicly available information for such transactions.
Prudential Securities considered the following transactions:
- Equity Office Properties Trust with Cornerstone Properties Inc.;
- Olympus Real Estate Fund II, L.P. with Walden Residential Properties,
Inc.;
- Berkshire Realty Holdings, L.P. with Berkshire Realty Company, Inc.;
- Duke Realty Investments, Inc. with Weeks Corporation;
- TIC Acquisition LLC with Irvine Apartment Communities, Inc.;
- Reckson Associates Realty Corp. with Tower Realty Trust, Inc.;
- Prologis Trust with Meridian Industrial Trust, Inc.;
- Public Storage, Inc. with Storage Trust Realty;
- Equity Residential Properties Trust and Merry Land & Investment Company,
Inc.;
- New Plan Realty Trust and Excel Realty Trust, Inc.; and
- Bay Apartment Communities, Inc. and Avalon Properties, Inc.
Prudential Securities calculations resulted in a range of equity purchase
price as a multiple of latest twelve months FFO per share of 9.2x to 14.8x, with
a median of 11.3x and a range of equity purchase price as a multiple of forward
twelve months FFO per share of 9.0x to 13.2x, with a median of 10.5x.
Applying the foregoing multiples to Western Properties' latest twelve
months FFO per share and forward twelve months FFO per share resulted in:
- a range of implied exchange ratios of 0.63 to 1.01, with a median of
0.78, based on Western Properties' latest twelve months FFO per share of
$1.42 and Pan Pacific's closing price of $20.69 on August 16, 2000; and
- a range of implied exchange ratios of 0.68 to 0.99, with a median of
0.79, based on Western Properties' latest twelve months FFO per share of
$1.55 and Pan Pacific's closing price of $20.69 on August 16, 2000.
Prudential Securities observed that the exchange ratio is below the ranges
of, and less than the medians of the exchange ratios implied by the foregoing
multiples.
None of the target companies in any of the comparable transactions is
identical to Western Properties, and none of the comparable transactions is
identical to the merger. Accordingly, a complete analysis of the results of the
foregoing calculations cannot be limited to a quantitative review of such
results and involves complex considerations and judgments concerning differences
in financial and operating characteristics of
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the target companies and applicable transactions and other factors that could
affect the public valuation and consideration paid for each of the target
companies, as well as Western Properties.
NET ASSET VALUE ANALYSIS
Prudential Securities analyzed Western Properties' net asset value per
share in relation to Pan Pacific's net asset value per share. The net asset
values were calculated based on an asset-by-asset real estate valuation and an
estimate of the current values for other assets, liabilities and debt balances
as of June 30, 2000 on a pro forma basis. The real estate valuation used 2001
property-specific projections. Net asset values were calculated by applying
blended capitalization rates of 9.75% for Pan Pacific and 10.00% for Western
Properties. This analysis indicated a net asset value of $24.36 per share for
Pan Pacific and $15.95 per share for Western Properties. Prudential Securities
observed that the net asset value resulted in an implied exchange ratio of 0.65,
which was above the 0.62 exchange ratio.
HISTORICAL STOCK TRADING ANALYSIS
Prudential Securities also analyzed historical stock and trading volumes of
Pan Pacific common stock and Western Properties common shares on August 16,
2000, as well as one month, three months and six months prior to such date.
Prudential Securities also analyzed the 1999 average closing prices,
year-to-date average closing prices and 52-week high and low closing prices of
each company's common stock. Prudential Securities observed that the foregoing
prices resulted in a range of implied exchange ratios of 0.56 to 0.62.
CONTRIBUTION ANALYSIS
Prudential Securities reviewed Pan Pacific's and Western Properties'
financial contributions to the combined company on a pro forma basis without
giving effect to the potential transaction synergies and observed that, based on
the exchange ratio, Pan Pacific stockholders would own 65.8% of the combined
company's common stock outstanding after the merger. Prudential Securities
reviewed the relative contributions of each company to:
- the actual FFO of the combined company for the year ended December 31,
1999, and the projected FFO of the combined company for the years ended
December 31, 2000 and December 31, 2001 (based on estimates of First
Call);
- the pro forma book value of the combined company as of June 30, 2000; and
- the net asset value of the combined company as of June 30, 2000, adjusted
for acquisitions and dispositions completed since June 30, 2000 or
expected to be completed by merger closing.
Prudential Securities observed that Pan Pacific would contribute (without
giving effect to potential transaction synergies) 66.0% of the pro forma 1999
FFO, 66.8% of the projected pro forma 2000 FFO and 67.0% of the projected pro
forma 2001 FFO. Prudential Securities also observed that Pan Pacific would
contribute 66.9% of the combined book value and 64.6% of the combined net asset
value.
Projected financial and other information concerning Pan Pacific and
Western Properties and the impact of the merger upon the holders of Pan Pacific
common stock are not necessarily indicative of future results. All projected
financial information is subject to numerous contingencies, many of which are
beyond the control of management of Pan Pacific and Western Properties.
Pan Pacific selected Prudential Securities to provide a fairness opinion
because it is a nationally recognized investment banking firm engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions and for other purposes and has substantial experience in
transactions similar to the merger and because of Prudential Securities'
familiarity with Pan Pacific.
Pursuant to an engagement letter with Prudential Securities, Pan Pacific is
obligated to pay Prudential Securities an advisory fee of $1.0 million upon the
delivery of the Prudential Securities opinion and an additional fee of $3.0
million upon completion of the merger. In addition, the engagement letter with
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Prudential Securities provides that Pan Pacific will reimburse Prudential
Securities for its reasonable out-of-pocket expenses and will indemnify
Prudential Securities and certain related persons against specified liabilities,
including liabilities under securities laws, arising out of the merger or its
engagement.
Prudential Securities has, in the past, provided investment banking and
other financial advisory services to Pan Pacific and may continue to do so, and
has received, and may receive, customary fees for the rendering of these
services.
In the ordinary course of business, Prudential Securities may actively
trade the shares of Pan Pacific common stock and Western Properties common
shares for its own account and for the accounts of customers, and accordingly,
may at any time hold a long or short position in such securities.
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OPINION OF FINANCIAL ADVISOR TO WESTERN PROPERTIES
Western Properties required Donaldson, Lufkin & Jenrette, in its role as
financial advisor to Western Properties, to render an opinion to the Western
Properties board as to the fairness, from a financial point of view, to Western
Properties and holders of Western Properties common shares of the exchange ratio
in the merger. On August 21, 2000, Donaldson, Lufkin & Jenrette delivered to the
Western Properties board its written opinion, dated August 21, 2000, to the
effect that, as of that date, based on and subject to the assumptions,
limitations and qualifications set forth in its written opinion, the exchange
ratio in the merger was fair to Western Properties and holders of Western
Properties common shares from a financial point of view. The full text of
Donaldson, Lufkin & Jenrette's opinion is attached as Annex C to this joint
proxy statement/prospectus. Donaldson, Lufkin & Jenrette expressed no opinion as
to the prices at which Pan Pacific common stock or Western Properties common
shares would actually trade at any time. Donaldson, Lufkin & Jenrette's opinion
did not address the relative merits of the merger and the other business
strategies considered by the Western Properties board nor did it address the
Western Properties board's decision to proceed with the merger. Donaldson,
Lufkin & Jenrette was not retained as an adviser or agent to the shareholders of
Western Properties. Donaldson, Lufkin & Jenrette's opinion did not constitute a
recommendation to any shareholder as to how such shareholder should vote on the
merger.
Donaldson, Lufkin & Jenrette, as part of its investment banking business,
is regularly engaged in the valuation of businesses and securities in connection
with mergers, acquisitions, underwritings, sales and distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. Western Properties did not impose any restrictions or limitations upon
Donaldson, Lufkin & Jenrette with respect to the investigations made or the
procedures followed by Donaldson, Lufkin & Jenrette in rendering its opinion.
In arriving at its opinion, Donaldson, Lufkin & Jenrette:
- reviewed other proposals to acquire Western Properties including ones
offering consideration with higher face value;
- reviewed the draft dated August 18, 2000 of the merger agreement and the
related exhibits, and assumed the final form of the merger agreement
would not vary in any respect material to Donaldson, Lufkin & Jenrette's
analysis;
- reviewed the letter of intent, dated August 21, 2000, regarding the
proposed development arrangements, attached as an exhibit to the merger
agreement;
- reviewed financial and other information that was publicly available or
furnished to Donaldson, Lufkin & Jenrette by Western Properties and Pan
Pacific, including information provided during discussions with their
respective management teams. Included in the information provided during
discussions with Western Properties and Pan Pacific were financial
projections of Western Properties for the period beginning January 1,
2000 and ending December 31, 2004 prepared by the management of Western
Properties and financial projections of Pan Pacific for the period
beginning January 1, 2000 and ending December 31, 2002 prepared by the
management of Pan Pacific;
- compared financial and securities data of Western Properties and Pan
Pacific with various other companies whose securities are traded in
public markets that Donaldson, Lufkin & Jenrette deemed comparable;
- reviewed the historical stock prices and trading volumes of Western
Properties common shares and Pan Pacific common stock;
- reviewed prices in other business combinations that Donaldson, Lufkin &
Jenrette deemed comparable; and
- conducted other financial studies, analyses and investigations as
Donaldson, Lufkin & Jenrette deemed appropriate for purposes of rendering
its opinion.
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<PAGE> 63
In rendering its opinion, Donaldson, Lufkin & Jenrette relied upon and
assumed the accuracy and completeness of all of the financial and other
information that was available to it from public sources, that was provided to
it by Western Properties, Pan Pacific and their respective representatives, or
that Donaldson, Lufkin & Jenrette otherwise reviewed. With respect to the
financial projections supplied to Donaldson, Lufkin & Jenrette, Donaldson,
Lufkin & Jenrette relied on representations that the projections were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the management of Western Properties and Pan Pacific as to the
future operating and financial performance of Western Properties and Pan
Pacific, respectively. Donaldson, Lufkin & Jenrette expressed no opinion with
respect to these projections or the assumptions upon which they were based.
Donaldson, Lufkin & Jenrette did not assume any responsibility for making an
independent evaluation of the assets or liabilities, or for making any
independent verification of any of the information Donaldson, Lufkin & Jenrette
reviewed.
Donaldson, Lufkin & Jenrette necessarily based its opinion on economic,
market, financial and other conditions as they existed on, and on the
information made available to Donaldson, Lufkin & Jenrette as of, the date of
its opinion. Donaldson, Lufkin & Jenrette states in its opinion that, although
subsequent developments may affect the conclusions reached in its opinion,
Donaldson, Lufkin & Jenrette does not have any obligation to update, revise or
reaffirm its opinion.
SUMMARY OF FINANCIAL ANALYSIS PERFORMED BY DONALDSON, LUFKIN & JENRETTE
The following is a summary of the financial analyses Donaldson, Lufkin &
Jenrette presented to the Western Properties board on August 21, 2000 in
connection with the preparation of Donaldson, Lufkin & Jenrette's opinion. No
company or transaction used in the analyses described below is directly
comparable to Western Properties, Pan Pacific or the contemplated transaction.
In addition, mathematical analysis such as determining the mean or median is not
in itself a meaningful method of using selected company or transaction data. The
analyses Donaldson, Lufkin & Jenrette performed are not necessarily indicative
of actual values or future results, which may be significantly more or less
favorable than suggested by these analyses. The information summarized in the
tables that follow should be read in conjunction with the accompanying text.
HISTORICAL EXCHANGE RATIO ANALYSIS
Donaldson, Lufkin & Jenrette reviewed the historical exchange ratios
implied by the daily closing prices per share of Pan Pacific common stock to
those of Western Properties common shares for the period beginning on January 3,
2000 and ending on August 18, 2000. Donaldson, Lufkin & Jenrette noted that on
March 28, 2000, Western Properties filed an Annual Report on Form 10-K
disclosing that it had engaged Donaldson, Lufkin & Jenrette to explore Western
Properties' strategic alternatives. This analysis showed that the average
historical exchange ratios during the period ending on August 18, 2000 were as
follows:
<TABLE>
<CAPTION>
HISTORICAL
PERIOD ENDED AUGUST 18, 2000 EXCHANGE RATIO
---------------------------- --------------
<S> <C>
6 months.................................................... 0.57x
3 months.................................................... 0.58x
1 month..................................................... 0.58x
1 week...................................................... 0.57x
Current (8/18/00)........................................... 0.58x
Proposed exchange ratio..................................... 0.62x
</TABLE>
COMPARABLE PUBLICLY TRADED COMPANY ANALYSIS
Using publicly available information and estimates of future financial
results published by First Call, Donaldson, Lufkin & Jenrette analyzed the
market values and trading multiples of selected publicly traded shopping center
real estate investment trusts that Donaldson, Lufkin & Jenrette believed were
reasonably comparable to Western Properties and Pan Pacific. These comparable
companies were selected principally
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based on the consistency of property types owned with those owned by Western
Properties and Pan Pacific. The comparable companies included the following
large shopping center real estate investment trusts, each with a market
capitalization of over $1.0 billion:
- Weingarten Realty Investors;
- Kimco Realty Corp.;
- Regency Realty Corp.;
- Federal Realty Investment Trust;
- New Plan Excel Realty Trust; and
- Developers Diversified Realty Corp.
The comparable companies also included the following mid-size shopping
center real estate investment trusts, each with a market capitalization of less
than $1.0 billion:
- Saul Centers, Inc.;
- Acadia Realty Trust;
- IRT Property Co.;
- JDN Realty Corp.;
- Agree Realty Corp.;
- Center Trust, Inc.; and
- Kranzco Realty Trust.
Donaldson, Lufkin & Jenrette's calculations resulted in the following
relevant ranges for the comparable companies:
- a range of projected funds from operations, or FFO, multiples for 2001
for the large comparable companies of 6.1x to 9.2x, with a median of
8.0x.
- a range of projected FFO multiples for 2001 for the mid-size comparable
companies of 4.7x to 8.0x, with a median of 7.1x.
- a median projected FFO multiples for all comparable companies of 7.5x.
- The projected FFO multiple for 2001 for Western Properties was 7.6x, and
the projected FFO multiple for 2001 for Pan Pacific was 7.9x, which were
among the highest multiples of the mid-size comparable companies.
- The per share value for Western Properties was $12.06 and would be $11.85
using the median multiple for all comparable companies and $11.22 using
the median multiple for the mid-size comparable companies. The per share
value for Pan Pacific was $20.75 and would be $20.03 using the median
multiple for all comparable companies and $18.96 using the median
multiple for the mid-size comparable companies.
Donaldson, Lufkin & Jenrette noted that the implied exchange ratio
calculated using the minimum and maximum share values described above would
range between 0.54 and 0.64, as compared to the proposed exchange ratio of 0.62.
None of the companies utilized in the above analysis for comparative
purposes is identical to Western Properties or Pan Pacific. Accordingly, a
complete analysis of the results of the foregoing calculations cannot be limited
to a quantitative review of such results and involves complex considerations and
judgments concerning the differences in the financial and operating
characteristics of the comparable companies and other factors that could affect
the public trading value of the comparable companies as well as that of Western
Properties and Pan Pacific. In addition, the multiples of common stock price to
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projected 2001 FFO per share for the comparable companies are based on
projections prepared by research analysts using only publicly available
information. Accordingly, such estimates may or may not prove to be accurate.
CONTRIBUTION ANALYSIS
Donaldson, Lufkin & Jenrette reviewed Pan Pacific's and Western Properties'
financial contribution to the combined company on a projected pro forma basis.
Based on the exchange ratio, Donaldson, Lufkin & Jenrette noted that on a pro
forma basis, Western Properties shareholders will receive an approximate 34.2%
equity interest in the combined company on a fully diluted basis. Using
projected FFO results for 2001 and excluding potential synergistic savings from
the merger, Donaldson, Lufkin & Jenrette calculated that Western Properties
would contribute approximately 33.2% of the FFO of the combined company in 2001,
resulting in an implied exchange ratio of 0.59. However, by including the
potential synergistic savings of $2.9 million projected by Pan Pacific and fully
attributing such savings to Western Properties, Donaldson, Lufkin & Jenrette
calculated that Western Properties would contribute approximately 35.3% of the
projected FFO of the combined company in 2001, resulting in an implied exchange
ratio of 0.65. Donaldson, Lufkin & Jenrette observed that the proposed exchange
ratio of 0.62 was within the range of implied exchange ratios produced by the
FFO contribution analysis.
NET ASSET VALUATION ANALYSIS
Donaldson, Lufkin & Jenrette performed a net asset valuation analysis of
Western Properties by calculating the gross estimated value of the properties
and other assets and subtracting outstanding debt and other liabilities. The
gross estimated value for Western Properties was estimated by capitalizing 2001
net operating income as projected by Western Properties, including adjustments
for market rate management fees and reserves for recurring capital expenditures.
Theoretical net asset value assumes that each asset is sold at its best and
highest price and does not include all corporate liquidation costs. The
capitalization rates were based on industry surveys published by various
independent research firms and recent sales of comparable commercial properties
in Western Properties' primary markets. In applying capitalization rates ranging
from 9.75% to 10.25%, Donaldson, Lufkin & Jenrette took into consideration
current market conditions and property characteristics. The net asset valuation
analysis produced an estimated value range of approximately $241 million to $264
million, or $12.81 to $13.97 per fully diluted share.
Donaldson, Lufkin & Jenrette also performed a net asset valuation analysis
of Pan Pacific by calculating the gross estimated value of the properties and
other assets and subtracting outstanding debt and other liabilities. The gross
estimated value for Pan Pacific was estimated by capitalizing 2001 net operating
income, which was derived by annualizing Pan Pacific's historical second quarter
2000 net operating income, including adjustments for market rate management fees
and reserves for recurring capital expenditures. Theoretical net asset value
assumes that each asset is sold at its best and highest price and does not
include all corporate liquidation costs. The capitalization rates were based on
industry surveys published by various independent research firms and recent
sales of comparable commercial properties in Pan Pacific's primary markets. In
applying capitalization rates ranging from 9.25% to 9.75%, Donaldson, Lufkin &
Jenrette took into consideration current market conditions and property
characteristics. The net asset valuation analysis produced an estimated value
range of approximately $491 million to $539 million, or $21.80 to $23.78 per
fully diluted share. Based on an analysis of this data and the net asset
valuation analysis performed on Western Properties' operating properties,
Donaldson, Lufkin & Jenrette derived implied exchange ratios ranging from 0.54
to 0.64, as compared to the proposed exchange ratio of 0.62.
The summary set forth above does not purport to be a complete description
of the analyses performed by Donaldson, Lufkin & Jenrette, but describes, in
summary form, the material elements of the presentation that Donaldson, Lufkin &
Jenrette made to Western Properties' board on August 21, 2000 in connection with
the preparation of Donaldson, Lufkin & Jenrette's fairness opinion. The
preparation of a fairness opinion involves various determinations as to the most
appropriate and relevant methods of
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financial analysis and the application of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Donaldson, Lufkin & Jenrette conducted each of the analyses
in order to provide a different perspective on the transaction and to add to the
total mix of information available. Donaldson, Lufkin & Jenrette did not form a
conclusion as to whether any individual analysis, considered in isolation,
supported or failed to support an opinion as to fairness from a financial point
of view. Rather, in reaching its conclusion, Donaldson, Lufkin & Jenrette
considered the results of the analyses in light of each other and ultimately
reached its opinion based on the results of all analyses taken as a whole.
Donaldson, Lufkin & Jenrette did not place any particular reliance or weight on
any individual analysis, but instead concluded that its analyses, taken as a
whole, supported its determination. Accordingly, notwithstanding the separate
factors summarized above, Donaldson, Lufkin & Jenrette has indicated to Western
Properties that it believes that its analyses must be considered as a whole and
that selecting portions of its analyses and the factors considered by it,
without considering all analyses and factors, could create an incomplete view of
the evaluation process underlying its opinion. The analyses Donaldson, Lufkin &
Jenrette performed are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than suggested by
these analyses.
Pursuant to the terms of an engagement agreement dated January 8, 2000,
Western Properties has agreed to pay Donaldson, Lufkin & Jenrette a fee of
$400,000 for delivery of its opinion. Western Properties has also agreed to pay
Donaldson, Lufkin & Jenrette an additional fee of approximately $2.4 million
upon completion of the merger for financial advisory services provided to
Western Properties. In addition, Western Properties agreed to reimburse
Donaldson, Lufkin & Jenrette, upon Donaldson, Lufkin & Jenrette's request from
time to time, for all out-of-pocket expenses (including the reasonable fees and
expenses of counsel) Donaldson, Lufkin & Jenrette incurred in connection with
its engagement thereunder and to indemnify Donaldson, Lufkin & Jenrette and
certain related persons against certain liabilities in connection with its
engagement, including liabilities under United States federal securities laws.
Donaldson, Lufkin & Jenrette and Western Properties negotiated the terms of the
fee arrangement.
In the ordinary course of business, Donaldson, Lufkin & Jenrette and its
affiliates may own or actively trade the securities of Western Properties and
Pan Pacific for their own accounts and for the accounts of their customers and,
accordingly, may at any time hold a long or short position in Western Properties
or Pan Pacific securities.
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POTENTIAL CONFLICTS OF INTEREST; INTERESTS OF EXECUTIVE OFFICERS
AND TRUSTEES OF WESTERN PROPERTIES IN THE MERGER
In considering the recommendation of the Western Properties board of
trustees to approve the merger and the merger agreement, shareholders of Western
Properties should be aware that conflicts of interest exist because certain
members of Western Properties' board and management have certain interests in,
and will receive benefits from, the merger that are separate from the interests
of, and benefits to, the shareholders of Western Properties generally.
Shareholders that are not trustees or officers of Western Properties will not
receive these benefits. The members of the Western Properties board (including
its independent trustees) knew about these additional interests, and considered
them, when they unanimously approved the merger. Certain of these interests are
set forth below.
DEVELOPMENT ARRANGEMENTS
Following consummation of the merger, the combined company expects to enter
into development arrangements with Bradley N. Blake and L. Gerald Hunt described
in Exhibit E to the merger agreement, to complete Western Properties' three
existing development projects. Under these proposed arrangements, Mr. Blake and
Mr. Hunt would form an entity that would enter into two joint ventures with an
entity to be formed by the combined company. Mr. Blake's and Mr. Hunt's entity
would receive a minority equity interest in one of the development projects. It
would also provide certain management, development and leasing services to the
combined company's entity and would receive fees in return. The combined company
would contribute to the joint venture certain rights and obligations of Western
Properties with respect to these projects.
SEVERANCE PAYMENTS; ACCELERATION OF SHARE AWARDS
Under the terms of their existing employment agreements with Western
Properties and the merger agreement, Western Properties' executive officers will
be entitled to the following benefits as a result of the merger:
- severance payments equal to one year's salary and bonus or, in the case
of Mr. Blake, two years' salary and bonus unless Mr. Blake continues to
provide services in any capacity to Pan Pacific or its subsidiaries after
the merger, in which case he would receive one year's salary and bonus;
- lapse of restrictions on restricted stock held by them; and
- full vesting of all share options held by them.
In addition, in connection with the merger, pursuant to the terms of employee
agreements and stock acquisition loans made by Western Properties in 1998 to its
executive officers, the outstanding balances under the stock acquisition loans
will be forgiven. Additionally, Western Properties may make a cash payment to
Western Properties' executive officers in exchange for the cancellation of share
options held by
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them. The maximum amount of the above-described benefits to be received by each
of Western Properties' executive officers is set forth below:
<TABLE>
<CAPTION>
SEVERANCE LOAN ACCELERATED CASH PAYMENT
NAME/TITLE PAYMENT FORGIVENESS RESTRICTED STOCK FOR OPTIONS
---------- --------- ----------- ---------------- ------------
<S> <C> <C> <C> <C>
Bradley N. Blake......................... $930,000 $300,000 26,635 shares $261,000
Chief Executive Officer and President
Dennis D. Ryan........................... $246,000 $180,000 10,609 shares $150,890
Chief Financial Officer and
Executive Vice President
L. Gerald Hunt........................... $226,500 $150,000 10,303 shares $124,855
Chief Operations Officer and
Senior Vice President
Josh Smith............................... $224,000 $150,000 9,222 shares $124,855
Chief Investments Officer and
Senior Vice President
</TABLE>
PURCHASES OF WESTERN REAL ESTATE SERVICES, INC. STOCK
In connection with the merger, Stuart Tanz and Joseph Tyson will purchase
all of the shares of stock of Western Real Estate Services, Inc., owned by
Bradley N. Blake and Dennis D. Ryan for payments of $336,000, plus interest at a
rate of 6.0% per annum from August 21, 2000, to each of them on the completion
of the merger.
Mr. Blake and Mr. Ryan intend to use a portion of the proceeds of the sale
of their stock in Western Real Estate Services, as well as a portion of the
severance payments and money received by them for their stock options, to repay
loans in the approximate amount of $325,000 that they borrowed to finance their
purchases of the shares of Western Real Estate Services.
INDEMNIFICATION
Pursuant to the terms of the merger agreement, Pan Pacific has agreed to
provide the officers, trustees and directors of Western Properties and its
subsidiaries with rights to indemnification and exculpation which are the same
as the rights to indemnification and exculpation under their respective charter
documents or bylaws as in effect immediately before the merger with respect to
matters occurring at or prior to the merger, including, without limitation, all
transactions contemplated by the merger agreement. The merger agreement also
obligates Pan Pacific to provide exculpation and indemnification for Mr. Blake
and Mr. Ryan in their capacities as shareholders, officers and/or directors of
Western Real Estate Services, Inc. for all actions on or before the merger,
including, without limitation, all transactions contemplated by the merger
agreement, to the maximum extent permitted by law. For a period of six years
following the merger, Pan Pacific will maintain in effect a directors' and
officers' liability insurance policy covering the persons currently covered by
Western Properties' trustees' and officers' liability insurance policy,
including Western Properties' current trustees and officers. The new directors'
and officers' liability insurance policy will have coverage in amount and scope
at least as favorable as Western Properties' existing coverage, provided that
Pan Pacific will not be required to expend in excess of 150% per year of the
annual premium for this coverage paid by Western Properties in 1999 on an
annualized basis. If, for any given year within this six-year period, the
premium for a policy having comparable coverage exceeds 150% of the 1999
premiums paid by Western Properties, then Pan Pacific will be only obligated to
maintain in place a policy which provides the maximum coverage that is
reasonably available at such amount. Pan Pacific has further agreed to indemnify
and hold harmless, to the fullest extent permitted by applicable law, the
officers, directors, and trustees of Western Properties and its subsidiaries,
and Mr. Blake and Mr. Ryan in their capacities as shareholders and/or directors
of Western Real Estate Services Inc., for all claims and actions that are
brought against them relating to the fact that any such person was a director,
officer, employee or trustee of Western Properties, or any actions or omissions
that any such person was alleged to have taken in his capacity as a director,
officer, or trustee or that relate in any way to the merger agreement.
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DIRECTORSHIPS
Two of the four independent trustees of Western Properties will become
directors of Pan Pacific following consummation of the merger. Pan Pacific has
the right to select the independent trustees. Pan Pacific's directors currently
receive the following compensation:
- a $16,000 per annum director's fee;
- a fee of $1,500 for each Pan Pacific board meeting attended in person and
$750 for each Pan Pacific board meeting attended by telephone;
- a fee of $750 for each committee meeting attended in person, and $500 for
each committee meeting attended by telephone, on a day that does not
include a Pan Pacific board meeting;
- a fee of $500 for each committee meeting chaired by that director whether
or not a Pan Pacific board meeting occurred on the same day; and
- reimbursement for reasonable expenses incurred to attend director and
committee meetings.
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THE MERGER AGREEMENT
The following is a brief summary of the material provisions of the merger
agreement, a copy of which is attached as Annex A and is incorporated by
reference in this joint proxy statement/prospectus. This summary is qualified in
its entirety by reference to the merger agreement. We urge all stockholders of
Pan Pacific and shareholders of Western Properties to read the merger agreement
in its entirety.
THE INCORPORATION OF WESTERN PROPERTIES
The merger agreement provides that, immediately before the merger, Western
Properties will be converted into WPT, Inc., a California corporation. As a
result of this incorporation:
- all of the rights and property of Western Properties before the
incorporation will vest in WPT, and all debts and liabilities of Western
Properties before the incorporation will become the debts and liabilities
of WPT; and
- each outstanding Western Properties common share will automatically
become a share of common stock of WPT.
THE MERGER
The merger agreement provides that WPT will be merged into Pan Pacific. At
the effective time of the merger, Pan Pacific will continue as the surviving
corporation in accordance with the Maryland General Corporation Law. At the
effective time of the merger, all the rights and property of WPT before the
merger will vest in Pan Pacific, and all of the debts and liabilities of WPT
before the merger will become the debts and liabilities of Pan Pacific.
CLOSING AND EFFECTIVE TIME OF THE MERGER
The merger agreement provides that the closing of the merger will take
place at 10:00 a.m., Pacific Time, as soon as practicable, but no later than the
fifth business day, after the last of all of the merger agreement conditions
have been satisfied, or at such other time and date as Pan Pacific and Western
Properties agree.
The merger will become effective at 2:00 p.m., Pacific Time, on such date
that is the later of :
- the filing of the articles of merger with, and acceptance for record of
such articles of merger by, the State Department of Assessments and
Taxation of Maryland;
- the filing of the merger agreement or other appropriate document with,
and acceptance for record of the merger agreement or such other document
by, the California Secretary of State; or
- such other time as Western Properties and Pan Pacific agree as specified
in such filings in accordance with applicable law.
CONVERSION OF SECURITIES
Treatment of WPT Common Stock and the Exchange Ratio. At the effective time
of the merger, each issued and outstanding share of WPT common stock (other than
dissenting shares, which are discussed below, and shares of common stock of WPT
held in the treasury of WPT or owned by any wholly owned subsidiary of WPT or by
Pan Pacific or its subsidiaries, which will be canceled) will be converted into
the right to receive 0.62 of a share of Pan Pacific common stock. As of the
effective time of the merger, each share of WPT common stock will be canceled
and retired.
Shares of WPT common stock which are dissenting shares, as defined in
Section 1300(b) of the California General Corporation Law, will not be converted
into or represent a right to receive any shares of Pan Pacific common stock, but
the holders thereof will be entitled only to such rights as are granted by the
California General Corporation Law.
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No fractional shares of Pan Pacific common stock will be issued in the
merger. Instead of fractional shares, WPT shareholders shall receive cash,
without interest, in an amount equal to such fractional amount multiplied by the
average of the closing prices of Pan Pacific common stock, as reported on the
New York Stock Exchange, on each of the ten trading days immediately preceding
the date of the merger.
TREATMENT OF WESTERN PROPERTIES SHARE OPTIONS
At the effective time of the merger, each outstanding Western Properties
share option, whether vested or unvested, shall constitute an option to acquire,
on the same terms and conditions as were applicable under the Western Properties
share option, the same number of shares of Pan Pacific common stock as the
holder of such option would have been entitled to receive pursuant to the merger
had such holder exercised such option in full immediately prior to the effective
time of the merger at a price per share (rounded to the nearest whole cent)
equal to the following equation:
1. the aggregate exercise price for Western Properties' common shares
purchasable pursuant to such option immediately prior to the effective
time; divided by
2. the number of full shares of Pan Pacific common stock deemed purchasable
pursuant to such option in accordance with the foregoing.
At the effective time of the merger, the vesting of each restricted Western
Properties common share granted under any Western Properties stock plan set
forth in the merger agreement shall be fully accelerated and the contractual
restrictions thereon shall terminate.
Western Properties intends to offer to purchase some of the Western
Properties share options at prices set forth in a schedule to the merger
agreement.
EXCHANGE OF SHARE CERTIFICATES
Surrender of Shares of WPT Common Stock; Stock Transfer Books. Pan Pacific
has designated The Bank of New York to serve as exchange agent for the exchange
of certificates representing WPT common stock (which will be the same
certificates as represented Western Properties common shares before the
incorporation) for certificates representing Pan Pacific common stock and the
payment of cash in lieu of fractional shares. Promptly after the merger, the
exchange agent will mail to each record holder of certificates representing
shares of WPT common stock a letter of transmittal and instructions for
surrendering the certificates for exchange and payment. Holders of certificates
who surrender their certificates to the exchange agent together with a duly
completed and validly executed letter of transmittal, will receive certificates
representing the number of whole shares of Pan Pacific common stock, cash in
lieu of any fractional shares of Pan Pacific common stock, and any dividends or
distributions to which they are entitled. The surrendered certificates will be
canceled.
Failure to Exchange. One year after the completion of the merger, Pan
Pacific can require the exchange agent to deliver to Pan Pacific all unclaimed
cash and shares of Pan Pacific common stock. Thereafter, WPT shareholders must
look only to Pan Pacific for payment of their consideration on their WPT shares
and they will have no greater rights against Pan Pacific than general creditors
of Pan Pacific will have.
No Liability. Neither Pan Pacific nor the exchange agent will be liable to
any holder of a certificate representing WPT common stock for shares of Pan
Pacific common stock or any cash payable in lieu of any fractional shares of Pan
Pacific common stock if such certificate is delivered to a public official under
any applicable abandoned property, escheat or similar law.
No Further Registration or Transfer of WPT Common Stock. Upon the
completion of the merger, there will be no further registration of transfers of
shares of WPT common stock on the records of WPT.
No Further Rights. Upon the completion of the merger, and from then on, the
holders of certificates evidencing ownership of WPT common stock outstanding
immediately before the completion of the
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merger shall cease to have rights with respect to such shares of WPT common
stock, except as otherwise provided for by the merger agreement or applicable
law.
Dividends and Distributions. No dividends or other distributions declared
or made after the completion of the merger with respect to shares of Pan Pacific
common stock will be paid to the holder of any unsurrendered certificates which
previously represented shares of WPT common stock, and no cash payment in lieu
of fractional shares will be paid to any such holder until the holder surrenders
such certificate as provided above. Upon surrender of the certificate, Pan
Pacific will pay to the holder, without interest, any dividends or distributions
with respect to such shares of Pan Pacific common stock that have become payable
between the effective time of the merger and the time of such surrender.
Lost Certificates. If any certificates evidencing WPT stock are lost,
stolen or destroyed, WPT shareholders must provide an appropriate affidavit to
the exchange agent in order to receive Pan Pacific certificates. Pan Pacific may
require the owner of such lost, stolen or destroyed certificates to deliver a
bond as indemnity against any claim that may be made against Pan Pacific or the
exchange agent with respect to any such certificates.
Withholding Rights. If the Internal Revenue Code or any provision of state,
local or foreign tax law so requires, Pan Pacific and the exchange agent are
entitled to withhold and deduct required amounts from the shares of Pan Pacific
common stock, dividends, distributions or cash otherwise payable to any holder
of certificates in lieu of any fractional shares of Pan Pacific common stock.
Any amounts withheld will be treated as having been paid to the holder of the
shares of WPT common stock.
HOLDERS OF WESTERN PROPERTIES COMMON SHARES SHOULD NOT SEND IN THEIR
CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL LETTER FROM THE EXCHANGE AGENT.
REPRESENTATIONS AND WARRANTIES
Pan Pacific and Western Properties have made representations and warranties
in the merger agreement, many of which are qualified as to materiality or
subject to matters disclosed by the parties, and none of which survive the
completion of the merger, relating to, among other things:
- the organization and qualification of themselves and subsidiaries;
- the authorization, execution, delivery and enforceability of the merger
agreement and related matters;
- their capital structures;
- their subsidiaries and their interests and investments in other
companies;
- that the transactions will not result in a violation of Western
Properties' or Pan Pacific's organizational documents or the
organizational documents of any of their subsidiaries, contracts to which
Pan Pacific or Western Properties is a party, or violate any law, rule or
regulation;
- consents and regulatory approvals necessary to complete the merger;
- compliance with laws, required licenses and permits;
- documents and financial statements filed with the SEC and the accuracy of
information contained therein;
- the absence of undisclosed liabilities;
- the absence of adverse changes or events;
- litigation;
- taxes and tax returns;
- employee benefit plans;
- properties;
- contracts;
- labor relations;
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- environmental matters;
- the opinions received from financial advisors regarding the merger;
- brokers and finders' fees;
- the votes of shareholders required to approve the merger;
- accounting and tax matters;
- insurance; and
- the absence of material adverse effects.
The merger agreement also contains representations and warranties made by
Western Properties relating to:
- disclosure of affiliate transactions; and
- the confidentiality agreement with Pan Pacific regarding negotiations
with a third party.
COVENANTS
Conduct of Business Prior to the Merger. Pan Pacific and Western Properties
have agreed that, until the earlier of the termination of the merger agreement
or the completion of the merger, each of Pan Pacific and Western Properties and
their subsidiaries will:
- maintain its respective qualification as a "real estate investment trust"
under the Internal Revenue Code;
- carry on its business in the ordinary course;
- pay its debts and taxes when due, subject to good faith disputes;
- pay or perform other material obligations when due;
- maintain insurance coverage and its books, accounts and records in the
usual manner;
- comply in all material respects with all applicable laws, ordinances and
regulations of governmental entities;
- maintain and keep its properties and equipment in good repair, working
order and condition; and
- use all reasonable efforts to preserve intact its present business
organization, keep available the services of its present officers and key
employees and preserve its relationships with customers, suppliers,
distributors and others with which it has business dealings.
During the same period, Western Properties has also agreed that each of
Western Properties and its subsidiaries will not:
- adopt or propose any amendment to its organizational documents, except as
provided for in the merger agreement;
- issue, pledge or sell or propose or authorize the issuance, pledge or
sale or grant of any options or make any agreements with respect to, any
of its shares of beneficial interest or any other of its securities,
except as provided in the merger agreement;
- amend or waive any terms of any option, warrant or stock option plan of
Western Properties or any of its subsidiaries or authorize cash payments
for any options granted under any of such plans;
- adopt or implement any shareholder rights plan;
- declare, set aside or pay any dividend or other distribution in respect
of any of its capital stock other than:
(a) any dividends necessary to enable Western Properties to make
aggregate dividend distributions during its final taxable period to
holders of Western Properties common shares in an amount specified in
the merger agreement;
(b) the regular quarterly dividend paid by Western Properties in an
amount not to exceed $0.28 per Western Properties common share,
which, in the case of the dividend payable in Western
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Properties' fourth quarter, may be declared and paid earlier than
Western Properties has done in prior years; and
(c) distributions required to be made by Western Properties'
subsidiaries;
(d) certain other inter-company and limited dividends and distributions;
and
(e) any other dividends that Western Properties might be required to pay
to maintain its status as a real estate investment trust.
- split, combine, subdivide, reclassify, redeem, purchase or otherwise
acquire any shares of its capital stock, or any of its other securities,
except in limited circumstances;
- increase the compensation of directors, officers or employees or
otherwise increase employee benefits other than:
(a) as required by law;
(b) under any existing collective bargaining agreement or Western
Properties employee benefit plan;
(c) salary and benefit increases in the ordinary course of business to
employees other than officers of Western Properties earning an annual
base salary in excess of $100,000;
(d) pursuant to the conversion of Western Properties securities as
specified in the merger agreement;
(e) pursuant to existing agreements or policies previously disclosed in
writing to Pan Pacific;
(f) pursuant to the severance payments, bonuses, 401(k) profit sharing
and matching contributions and vacation accrual payments disclosed by
Western Properties in the merger agreement; and
(g) as otherwise disclosed by Western Properties in the merger agreement.
- sell, lease or encumber any material properties or assets of Western
Properties or any of its subsidiaries, except as provided in the merger
agreement; provided that Western Properties and its subsidiaries are not
prohibited from entering into leases of their real property;
- acquire any real property or other material assets, except as provided in
the merger agreement;
- acquire any other assets or any interest in a corporation, partnership,
other business organization or any division thereof in an aggregate
amount exceeding $5.0 million;
- incur, assume or prepay any debt other than under existing agreements or
guarantee the obligations of any other person, make any loans or
investments in any other person, other than between or with any
wholly-owned subsidiaries, or enter into any "keep well" or other
agreement to maintain the financial condition of another entity, other
than Western Properties or any of its wholly-owned subsidiaries;
- make or rescind any material tax elections, settle any tax claims or
amend any material tax return;
- pay, discharge or satisfy any claim, liability or obligation other than
in the ordinary course of business;
- other than in the ordinary course of business, waive any rights of
substantial value or make any payment of any material liability before it
comes due, except for those payments specified in the merger agreement
and except for repayments of amounts owed under revolving lines of
credit;
- fail to maintain its existing insurance coverages;
- change its methods of accounting as in effect on June 30, 2000, unless
required by generally accepted accounting principles or the SEC;
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- modify, terminate or assign any rights under any of Western Properties'
material contracts except in the ordinary course of business;
- take any action that would cause its representations or warranties set
forth in the merger agreement not to be true and correct in all material
respects;
- enter into any agreement with any Western Properties affiliates other
than a subsidiary which involves the transfer of consideration or has a
financial impact on Western Properties other than those agreements
existing on the date of the merger agreement or as disclosed to Pan
Pacific prior to the date of the merger agreement;
- take or agree to take or cause to be taken any action that would prevent
the merger from qualifying as a reorganization as described in Section
368(a) of the Internal Revenue Code;
- make or commit any capital expenditures (other than capital expenditures
for the repair or maintenance of capital assets) that exceed $2.5 million
in the aggregate, excluding capital expenditures made with funds (a) held
in like kind escrows established in accordance with Section 1031 of the
Internal Revenue Code or (b) obtained as proceeds from insurance policies
due to the destruction, loss or impairment of capital assets;
- compromise or settle any litigation or arbitration proceedings involving
payments by Western Properties or its subsidiaries in excess of $100,000
per litigation or arbitration, or $500,000 in the aggregate; or
- enter into an agreement, contract, commitment or arrangement to do any of
the foregoing, or to authorize, publicly recommend, publicly propose or
publicly announce an intention to do any of the foregoing, except as
expressly permitted in the merger agreement.
During the same period, Pan Pacific has also agreed that each of Pan
Pacific and its subsidiaries will not:
- adopt or propose any amendment to its organizational documents, except in
furtherance of the merger agreement;
- issue, pledge or sell, or propose or authorize the issuance, pledge or
sale or grant any options or make any other agreements with respect to,
any of its shares of stock or any other securities, except as provided
for in the merger agreement;
- declare, set aside or pay any dividend or make any other distribution or
payment with respect to any of its securities, other than:
(a) the regular quarterly dividend paid by Pan Pacific in an amount not to
exceed $0.42 per share of Pan Pacific common stock;
(b) a special dividend payable in the amount of $0.28 per share of Pan
Pacific common stock;
(c) distributions required to be made by Pan Pacific's subsidiaries;
(d) certain other inter-company dividends; and
(e) distributions or a dividend required to be made to maintain Pan
Pacific's status as a real estate investment trust.
- split, combine, subdivide, reclassify or redeem any shares of its capital
stock, or any of its other securities, except in limited circumstances;
- sell, pledge, dispose of, grant or encumber any of the assets of Pan
Pacific or any of its subsidiaries, in an aggregate amount in excess of
$40.0 million, or acquire any assets consisting of fee interests in real
property, other than assets in an aggregate amount not to exceed $50.0
million; or acquire all or substantially all of the capital stock or
equity securities of any entity, or all or substantially all of the
assets of any division of any entity if the aggregate value of the assets
of such person, division or lien of business exceeds $50.0 million;
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- take or agree to take any action that would prevent the merger from
qualifying as a reorganization as described in Section 368(a) of the
Internal Revenue Code; or
- enter into any agreement, contract, commitment or arrangement to do any
of the foregoing, or to authorize, recommend, propose or announce an
intention to do any of the foregoing.
Notwithstanding the foregoing restrictions on Pan Pacific's actions, during
the same period, Pan Pacific and any subsidiaries of Pan Pacific will be
permitted, without the prior consent of Western Properties to:
- enter into leases of their real property assets; and
- make the following redemptions and transfers: (i) redemptions and
transfers of Pan Pacific common stock required under Pan Pacific's
charter in order to preserve the status of Pan Pacific as a real estate
investment trust under the Internal Revenue Code, and (ii) conversion or
redemptions of partnership units in subsidiaries of Pan Pacific for cash,
Pan Pacific common stock or otherwise, in accordance with the
organizational documents of the partnership units in subsidiaries of Pan
Pacific.
ADDITIONAL AGREEMENTS
No Solicitation. Western Properties has agreed to terminate any existing
solicitation, discussion or negotiation with any third party regarding an
acquisition transaction. Western Properties has also agreed that, without Pan
Pacific's consent, it will not:
- solicit, encourage or facilitate an Acquisition Proposal, as described
below;
- engage in negotiations or discussions with, or provide any nonpublic
information to, any third party regarding an Acquisition Proposal;
- enter into any agreement with respect to an Acquisition Proposal; or
- publicly recommend any Acquisition Proposal, except as may be required by
law.
However, Western Properties and the Western Properties board may take all
of the actions above as well as withdraw or modify, in a manner adverse to Pan
Pacific, its approval or recommendation of the merger agreement, or the merger,
if the following conditions are met:
- the Western Properties board believes in good faith, after consulting
with its financial advisor, that the Acquisition Proposal is more
favorable or is likely to result in an Acquisition Proposal that is more
favorable to the Western Properties shareholders from a financial point
of view than the merger and is made by a person believed by the Western
Properties board to be reasonably capable of completing such Acquisition
Proposal;
- the Western Properties board determines in good faith, after consulting
with its outside legal counsel, that the failure to take such action
would reasonably be expected to cause the members of the Western
Properties board to breach their legal duties to the shareholders of
Western Properties under applicable law; and
- the party making such proposal has entered into a confidentiality
agreement pertaining to nonpublic information regarding Western
Properties containing terms in the aggregate no more favorable to the
third party than those in the confidentiality agreement Western
Properties has entered into with Pan Pacific.
Western may enter into an agreement to consummate an Acquisition Proposal
that meets the above conditions if it terminates the merger agreement and pays
the break-up fee to Pan Pacific discussed below. The Western Properties board
has agreed to submit the merger agreement to Western Properties' shareholders
for approval, whether or not an Acquisition Proposal has been commenced,
publicly proposed, or communicated to Western Properties. Unless the Western
Properties board has withdrawn or modified its recommendation of the merger
agreement in compliance with the foregoing, Western Properties has
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agreed to use all reasonable efforts to obtain the required vote of its
shareholders and Pan Pacific has agreed to use all reasonable efforts to obtain
the required vote of its stockholders.
When used in this joint proxy statement/prospectus, the term "Acquisition
Proposal" means an offer or proposal to acquire all or any part of Western
Properties' business, assets or capital shares whether by merger, consolidation,
purchase of assets, tender or exchange offer or otherwise, other than sales of
assets permitted by the merger agreement.
Western Properties has agreed to notify Pan Pacific reasonably promptly of
any inquiries, offers or proposals or any request for nonpublic information in
connection with an Acquisition Proposal and to furnish to Pan Pacific the
specific terms of any Acquisition Proposal other than the name of the party
making such Acquisition Proposal.
Dividend Coordination. Western Properties will set a record date for its
regular dividend to be paid in the fourth quarter of 2000 that is on or before
the date of the Western Properties special meeting and before November 26, 2000.
Western Properties is permitted to pay a dividend of $0.28 per share to its
shareholders of record on that date. Pan Pacific will set a record date for a
special dividend in the fourth quarter of 2000 that is on or before the date of
the Pan Pacific special meeting. Pan Pacific is permitted to pay a special
dividend of $0.28 per share to its stockholders of record on that date.
Adjustment to Pan Pacific Dividend Payments. Pan Pacific shall change its
record date for its regular quarterly dividend payable in its first quarter of
2001 to a date on or about the last Friday of February and the payment date for
such dividend to a date as close as practicable to March 15, 2001. After the
merger, Pan Pacific intends to change the record dates for its regular quarterly
dividends to dates on or about the last Friday of February, May, August and
November in each year, and payment dates for such dividends to dates as close as
practicable to March 15, June 15, September 15 and December 15 in each year, but
the timing of such dividends shall be at the discretion of the Pan Pacific
board. The regular dividend paid by Pan Pacific in the first calendar quarter
after the effective time of the merger will be in a per share amount equal to or
exceeding the quotient of $0.28 divided by the exchange ratio. Pan Pacific
intends to match or exceed this amount for subsequent quarters. The amount of
subsequent dividends, however, shall be at the discretion of the Pan Pacific
board.
Access to Information. Pan Pacific and Western Properties will each provide
access to the other upon reasonable notice during normal business hours during
the period prior to the effective time of the merger, to all its personnel,
properties, books, contracts, commitments and records and shall exchange monthly
financial reports and development reports and provide information on request
(subject to confidentiality obligations of third parties). All non-public
information received will be held in confidence.
Governmental Approvals and Defense of Litigation. Pan Pacific and Western
Properties have agreed to promptly prepare and file all necessary documentation
to obtain as promptly as practicable all approvals and authorizations of all
third parties and governmental entities which are necessary to complete the
merger.
Affiliate Agreements. No later than 45 days prior to the closing of the
merger, Western Properties will provide Pan Pacific with a list of affiliates
(as such term is defined by Rule 144 under the Securities Act of 1933) of
Western Properties. Western Properties will notify Pan Pacific regarding any
changes in the identity of Western Properties affiliates prior to the closing
date of the merger. Western Properties will use its reasonable best efforts to
deliver or cause to be delivered to Pan Pacific as promptly as practicable, but
in no event later than 15 days prior to the effective time of the merger, an
affiliate agreement from each of its affiliates. See "The Merger -- Resales of
Pan Pacific Common Stock Issued in Connection With the Merger; Affiliate
Agreements."
Tax Treatment of Reorganization. Pan Pacific and Western Properties shall
use their best efforts to cause the merger to qualify as a reorganization under
Section 368(a) of the Internal Revenue Code. Pan Pacific and Western Properties
shall cooperate and use their best efforts in obtaining the opinions of
O'Melveny & Myers LLP, counsel to Western Properties, and Latham & Watkins,
counsel to Pan Pacific,
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to the effect that the merger will qualify for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code.
Further Assurances and Actions; Obtaining Consents. Pan Pacific and Western
Properties agree to use their reasonable efforts to take all appropriate action
and to do all things necessary, proper or advisable on its part under applicable
laws and regulations to complete and make effective the transactions
contemplated by the merger agreement. In addition, Pan Pacific and Western
Properties have agreed to use their reasonable best efforts to obtain all
material third party consents.
Stock Exchange Listing. Pan Pacific shall use its best efforts to list on
the New York Stock Exchange, prior to the effective time of the merger, the
shares of Pan Pacific common stock to be issued in the merger.
Employee Benefits. At the effective time of the merger, the employees of
Western Properties listed in the disclosure schedules to the merger agreement
shall be entitled to the severance payments, bonuses, 401(k) profit sharing and
matching contributions and vacation accrual payments listed therein. Western
Properties shall also have the right to offer each employee listed in a schedule
to the merger agreement a cash amount in exchange for their Western Properties
options listed in the schedule to the merger agreement. In order to receive the
cash amount, however, the Western Properties employee must sign a written
agreement to cancel the Western Properties options being exchanged for cash.
Non-Solicitation of Employees. From the date of the merger agreement to the
earlier of either the completion of the merger, or one year after the
termination of the merger agreement, neither Pan Pacific nor Western Properties
will permit their respective subsidiaries to employ or solicit any of the
officers or management level employees of the other company.
Acquisition of WRESI Stock. Pursuant to the merger agreement Stuart A. Tanz
and Joseph B. Tyson will acquire, at the effective time of the merger, all of
the capital stock of Western Real Estate Services, Inc. held by Bradley N. Blake
and Dennis D. Ryan for payments in cash of $336,000, plus interest at a rate of
6.00% per annum, to each of Mr. Blake and Mr. Ryan.
Director, Trustee and Officer Insurance and Indemnification. Pan Pacific
will provide the officers, trustees and directors of Western Properties and its
subsidiaries with rights to indemnification and exculpation which are the same
as the rights to indemnification and exculpation under their respective charter
documents or bylaws as in effect immediately before the merger with respect to
matters occurring at or prior to the merger, including, without limitation, all
transactions contemplated by the merger agreement. Pan Pacific will also provide
exculpation and indemnification for Mr. Blake and Mr. Ryan in their capacities
as shareholders, officers and/or directors of Western Real Estate Services, Inc.
for all actions on or before the merger, including, without limitation, all
transactions contemplated by the merger agreement, to the maximum extent
permitted by law. For a period of six years following the merger, Pan Pacific
will maintain in effect a directors' and officers' liability insurance policy
covering the persons currently covered by Western Properties' trustees' and
officers' liability insurance policy, including Western Properties' current
trustees and officers. The new directors' and officers' liability insurance
policy will have coverage in amount and scope at least as favorable as Western
Properties' existing coverage, provided that Pan Pacific will not be required to
expend in excess of 150% per year of the annual premium for this coverage paid
by Western Properties in 1999 on an annualized basis. If, for any given year
within this six-year period, the premium for a policy having comparable coverage
exceeds 150% of the 1999 premiums paid by Western Properties, then Pan Pacific
will be only obligated to maintain in place a policy which provides the maximum
coverage that is reasonably available at such amount. Pan Pacific has further
agreed to indemnify and hold harmless, to the fullest extent permitted by
applicable law, the officers, directors, and trustees of Western Properties and
its subsidiaries, and Mr. Blake and Mr. Ryan in their capacities as shareholders
and/or directors of Western Real Estate Services Inc., for all claims and
actions that are brought against them relating to the fact that any such person
was a director, officer, employee or trustee of Western Properties, or any
actions or omissions that any such person was alleged to have taken in his
capacity as a director, officer, or trustee or that relate in any way to the
merger agreement.
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CONDITIONS TO OBLIGATIONS TO COMPLETE THE MERGER
The respective obligations of Pan Pacific and Western Properties to
complete the merger are subject to the satisfaction or waiver of several
conditions at or prior to the closing date, including:
- the shareholders of Western Properties have approved the merger and the
incorporation in the manner required under the California General
Corporation Law and the organizational documents of Western Properties;
- the stockholders of Pan Pacific have approved the merger in the manner
required by the Maryland General Corporation Law, the rules of the New
York Stock Exchange and the organizational documents of Pan Pacific;
- no statute, rule, regulation, order, executive order, decree, ruling or
injunction or other order shall be in effect that prohibits or restricts
the completion of the merger; except that Pan Pacific and Western
Properties will use their reasonable best efforts to cause any such
decree, ruling, injunction or other order to be lifted;
- there shall not be instituted or pending any action by a governmental
entity as a result of the merger agreement or any of the transactions
contemplated in the merger agreement which causes a material adverse
effect on either Pan Pacific or Western Properties;
- the registration statement on Form S-4 of which this joint proxy
statement/prospectus is a part shall have become effective and shall not
be the subject of any stop order, and any material blue sky law permit or
approval will have been obtained;
- all filings required to be made prior to the closing of the merger by
either Pan Pacific or Western Properties with any governmental entity
shall have been made;
- all consents or approvals of all persons (other than governmental
entities) required for or in connection with the merger agreement or the
transactions contemplated by the merger agreement shall have been
obtained other than any approvals which, if not obtained, would not
result in a material adverse effect on either Pan Pacific or Western
Properties; and
- the approval shall have been obtained for listing of the shares of Pan
Pacific common stock to be issued in connection with the merger on the
New York Stock Exchange upon official notice of issuance.
Except as may be waived in writing by Western Properties, the obligation of
Western Properties to complete the merger is also subject to the satisfaction of
the following conditions:
- the representations and warranties of Pan Pacific in the merger agreement
shall be true and correct in all material respects as of the date of the
completion of the merger except:
(a) as contemplated by the merger agreement;
(b) those representations and warranties that address matters only as of a
particular date, other than the date of the merger agreement, which
shall remain true and correct as of such particular date; and
(c) to the extent that any failures of such representations and warranties
to be true and correct do not result in a material adverse effect on
Pan Pacific;
- Pan Pacific shall have performed in all material respects all obligations
required to be performed by it under the merger agreement at or prior to
the completion of the merger;
- Western Properties shall have received a certificate executed on behalf
of Pan Pacific by Pan Pacific's chief executive officer or chief
financial officer, as to the truth of Pan Pacific's representations and
warranties and the performance of Pan Pacific's obligations, as required
by the merger agreement;
- Western Properties shall have received an opinion of O'Melveny & Myers
LLP, to the effect that the merger will qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code and
that no gain or loss will be recognized by WPT or any of WPT's
shareholders as a result of the merger, except to the extent that WPT
shareholders receive cash pursuant to the
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transactions contemplated by the merger agreement and that no gain or
loss will be recognized by Western Properties or WPT or their respective
shareholders as a result of the incorporation;
- Western Properties shall have received the opinion of Latham & Watkins to
the effect that Pan Pacific has qualified to be taxed as a real estate
investment trust commencing with its taxable year ended December 31,
1997, Pan Pacific was organized in conformity with the requirements for
qualification and taxation as a real estate investment trust under the
Internal Revenue Code and that Pan Pacific's method of operation has
enabled it and its proposed method of operation will enable it to
continue to qualify for taxation as a real estate investment trust under
the Internal Revenue Code; and
- the average closing price of Pan Pacific common stock on the New York
Stock Exchange for the period of ten trading days prior to the closing
date of the merger shall not be less than $15.00 per share.
Except as may be waived in writing by Pan Pacific, the obligation of Pan
Pacific to complete the merger is also subject to the satisfaction of the
following conditions:
- the representations and warranties of Western Properties in the merger
agreement shall be true and correct in all material respects as of the
date of the completion of the merger except:
(a) as contemplated by the merger agreement;
(b) those representations and warranties which address matters only as of
a particular date, other than the date of the merger agreement, which
shall remain true and correct as of such particular date; and
(c) to the extent that any failures of such representations and warranties
to be true and correct do not result in a material adverse effect on
Western Properties;
- Western Properties shall have performed in all material respects all
obligations required to be performed by it under the merger agreement on
or before the completion of the merger;
- Pan Pacific shall have received a certificate executed on behalf of
Western Properties by Western Properties' chief executive officer or
chief financial officer as to the truth of Western Properties'
representations and warranties and the performance of Western Properties'
obligations, as required by the merger agreement;
- Pan Pacific shall have received an opinion of Latham & Watkins to the
effect that the merger will qualify as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code and no gain or
loss will be recognized by Pan Pacific or any of its stockholders as a
result of the merger;
- Pan Pacific shall have received the opinion of O'Melveny & Myers LLP, to
the effect that, commencing with its taxable year ended December 31,
1992, and without regard to whether such opinion is true or accurate for
any prior taxable year, Western was organized in conformity with the
requirements for qualification and taxation as a real estate investment
trust under the Internal Revenue Code and Western Properties' method of
operation has enabled it to meet through the completion of the merger,
the requirements for qualification and taxation as a real estate
investment trust under the Internal Revenue Code;
- KPMG LLP shall have delivered to Pan Pacific a letter of the customary
scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
registration statement on Form S-4 of which this joint proxy
statement/prospectus is a part; and
- Neither Western Properties nor WPT shall have received effective demands
for payment under Chapter 13 of the California General Corporation Law
with respect to 5% or more of its shares.
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TERMINATION; BREAK-UP FEES AND EXPENSES
Termination. The merger agreement provides that prior to the completion of
the merger, the merger agreement may be terminated:
- by mutual written consent of Pan Pacific and Western Properties;
- by either Pan Pacific or Western Properties if:
(a) the merger has not occurred on or before February 28, 2001, so long as
the terminating party did not prevent completion of the merger by
failing to fulfill any of its obligations under the merger agreement;
(b) any court or other governmental entity has issued an order, decree or
ruling which cannot be appealed and which makes the merger illegal or
permanently prohibits the completion of the merger;
(c) the stockholders of Pan Pacific do not vote to approve the merger or
the shareholders of Western Properties do not approve the merger, the
merger agreement and the incorporation in the manner required by the
merger agreement; or
(d) there has been a material breach of a representation, warranty,
covenant or agreement by the other party which is either not curable,
or for which a good faith attempt to cure such breach is not being
made; or
- by Pan Pacific if:
(a) after receipt by Western Properties of an Acquisition Proposal, as
described above, the Western Properties board withdraws or modifies
its recommendation of the voting proposals for the merger, the merger
agreement and the incorporation;
(b) after receipt by Western Properties of a public Acquisition Proposal,
the Western Properties board fails to reconfirm its recommendation of
the merger, or the merger agreement or the incorporation within thirty
business days of a request to do so by Pan Pacific;
(c) the Western Properties board approves or recommends to shareholders of
Western Properties an Alternative Transaction, as described below;
(d) a tender offer or exchange offer for 27.5% or more of the outstanding
Western Properties common shares is commenced and the Western
Properties board recommends that the shareholders of Western
Properties tender their shares in such tender or exchange offer; or
(e) after the receipt by Western Properties of an Acquisition Proposal,
Western Properties fails to call and hold the Western Properties
shareholders meeting by the termination date specified in the merger
agreement;
- by Western Properties if, prior to the approval of the voting proposals
submitted by Western Properties to its shareholders, Western Properties
has complied in all respects with the merger agreement provisions
regarding solicitation and the Western Properties board has determined to
accept a Superior Proposal, as described below.
When used in this joint proxy statement/prospectus, the term "Alternative
Transaction" means either
- a transaction pursuant to which any third party acquires more than 27.5%
of Western Properties' outstanding common shares pursuant to a tender or
exchange offer or otherwise;
- a merger or other business combination involving Western Properties
pursuant to which any third party acquires (or the stockholders of the
third party acquire) more than 27.5% of Western Properties' outstanding
common shares or 27.5% of the equity securities of the entity surviving
such merger or business combination, or
- any other transaction pursuant to which any third party acquires control
of assets of Western Properties having a fair market value equal to more
than 27.5% of the fair market value of all the assets of Western
Properties and its subsidiaries, taken as a whole, immediately prior to
such transaction.
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When used in this joint proxy statement/prospectus, the term "Superior
Proposal" means an Acquisition Proposal that the Western Properties board
believes in good faith (after consultation with its financial advisor) is more
favorable, or is likely to result in an Acquisition Proposal that is more
favorable, to the shareholders of Western Properties from a financial point of
view than the merger and is made by a person believed by the Western Properties
board to be reasonably capable of completing such Acquisition Proposal.
Break-Up Fees. Western Properties has agreed to pay Pan Pacific a break-up
fee $7.0 million if any of the following events occur:
- Pan Pacific or Western Properties terminates the merger agreement due to
a failure to obtain the requisite vote of Western Properties'
shareholders in favor of the merger and the incorporation after a
publicly announced proposal for an Alternative Transaction, provided that
the break-up fee will only be payable if the Alternative Transaction is
completed or a definitive agreement for the Alternative Transaction is
entered into within 12 months of the termination date;
- Pan Pacific terminates the merger agreement because any of the events
described under the third bullet point under "-- Termination; Break-up
Fees and Expenses" occurs; and
- Western Properties terminates the merger agreement because, prior to the
approval by the shareholders of Western Properties of the voting
proposals submitted to them, the Western Properties board determines to
accept a Superior Proposal.
The break-up fee may be paid by Western Properties in two installments, the
first due on the occurrence of any of the events described above and the second
90 days later.
Expenses. Except as described below, Pan Pacific and Western Properties
will bear their own expenses in connection with the merger. If Pan Pacific
terminates the merger agreement because Western Properties has breached a
representation, warranty, covenant or agreement that would result in the failure
of Western Properties to satisfy one of the conditions of the merger, then
Western Properties has agreed to reimburse Pan Pacific, up to a maximum of $2.0
million, for its fees and expenses paid in connection with the merger. If
Western Properties terminates the merger agreement because Pan Pacific has
breached a representation, warranty or covenant in the merger agreement which
would result in the failure of Pan Pacific to satisfy one of the conditions to
the merger, Pan Pacific has agreed to reimburse Western Properties, up to a
maximum of $2.0 million, for its fees and expenses paid in connection with the
merger. Western Properties will not be required to pay Pan Pacific's expenses if
it is also required to pay Pan Pacific a break-up fee.
AMENDMENT AND WAIVER
Pan Pacific and Western Properties may amend the merger agreement at any
time, but, after approval of the merger agreement by the Pan Pacific
stockholders and Western Properties shareholders, no amendment may be made that
by law requires further approval by the stockholders of Pan Pacific or
shareholders of Western Properties without such further approval.
At any time prior to the agreed upon time for the closing of the merger, or
any other date agreed to by Pan Pacific and Western Properties, Pan Pacific and
Western Properties may:
- extend the time for the performance of any of the obligations or other
acts of the other party required by the merger agreement;
- waive any inaccuracies in the representations and warranties contained in
the merger agreement or in any document delivered in connection with the
merger agreement; and
- waive compliance with any of the agreements or conditions of the other
party contained in the merger agreement.
Extensions or waivers must be in writing and signed by the party granting the
extension or waiver.
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THE PAN PACIFIC SPECIAL MEETING
DATE, TIME AND PLACE
The special meeting of Pan Pacific stockholders will be held at 10:00 a.m.,
local time, on November 9, 2000, at The Hilton San Diego Resort, 1775 East
Mission Bay Drive, San Diego, California 92109.
PURPOSE
The purpose of the Pan Pacific special meeting is to consider and vote on
the proposals to approve:
- the merger of WPT into Pan Pacific, with Pan Pacific continuing as the
surviving corporation;
- an amendment to Pan Pacific's 2000 Stock Incentive Plan to increase the
number of shares of common stock available for issuance under the plan by
1,296,724, from 489,971 to 1,786,695 shares; and
- any other matters that are properly brought before the Pan Pacific
special meeting or any adjournment or postponement of the Pan Pacific
special meeting.
PAN PACIFIC BOARD OF DIRECTORS' RECOMMENDATION
The Pan Pacific board, after careful consideration, has unanimously adopted
a resolution declaring the merger advisable, and recommends a vote FOR approval
of the Pan Pacific merger proposal and the amendment to Pan Pacific's 2000 Stock
Incentive Plan.
RECORD DATE, OUTSTANDING SHARES AND VOTING RIGHTS
The Pan Pacific board has fixed the close of business on September 29, 2000
as the record date for the Pan Pacific special meeting. Accordingly, only
holders of record of shares of Pan Pacific common stock on the record date are
entitled to notice of, and to vote at, the Pan Pacific special meeting. As of
the record date, there were 21,252,512 outstanding shares of Pan Pacific common
stock held by approximately 86 holders of record. At the Pan Pacific special
meeting, each share of Pan Pacific common stock will be entitled to one vote.
VOTE REQUIRED; QUORUM; SHARES BENEFICIALLY OWNED BY PAN PACIFIC DIRECTORS AND
OFFICERS
Approval of the Pan Pacific merger proposal requires the affirmative vote
of the holders of at least a majority of the shares of Pan Pacific common stock
outstanding as of the Pan Pacific record date. Approval of the amendment to Pan
Pacific's 2000 Stock Incentive Plan requires the affirmative vote of the holders
of a majority of the shares of Pan Pacific common stock represented at the Pan
Pacific special meeting, provided that a majority of the outstanding shares of
Pan Pacific common stock are cast on this proposal.
The representation, in person or by properly executed proxy, of the holders
of a majority of the shares of Pan Pacific common stock entitled to vote at the
Pan Pacific special meeting is necessary to constitute a quorum at the Pan
Pacific special meeting. Shares of Pan Pacific common stock represented in
person or by proxy will be counted for the purposes of determining whether a
quorum is present at the Pan Pacific special meeting. Abstentions will have the
same effect as votes against approval of the Pan Pacific merger proposal since
this proposal requires the affirmative vote of a majority of outstanding shares
of Pan Pacific common stock. Abstentions by stockholders represented at the
meeting will have the same effect as a vote against the amendment of Pan
Pacific's 2000 Stock Incentive Plan since this proposal requires the affirmative
vote of a majority of the shares of Pan Pacific common stock represented at the
meeting. If a broker or nominee holding shares of record for a customer submits
a properly executed proxy, but indicates that it does not have discretionary
authority to vote as to a particular matter, those shares, which are referred to
as broker non-votes, will be treated as present and entitled to vote at the Pan
Pacific special
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meeting for purposes of determining whether a quorum exists. Under New York
Stock Exchange rules, brokers and nominees holding shares of record for
customers are not entitled to vote on the Pan Pacific merger proposal or the
proposal to amend Pan Pacific's 2000 Stock Incentive Plan unless they receive
specific voting instructions from the beneficial owner of the shares.
Accordingly, broker non-votes will have the same effect as shares voted against
approval of the Pan Pacific merger proposal and the proposal to amend Pan
Pacific's 2000 Stock Incentive Plan.
As of the record date, Pan Pacific's directors and executive officers and
their affiliates beneficially owned 3.8% of the votes represented by the
outstanding shares of Pan Pacific common stock. Pan Pacific's directors and
executive officers have expressed their intent to vote their shares in favor of
approval of the Pan Pacific merger proposal. In addition, Revenue Properties
(U.S.), Inc. and its wholly-owned subsidiaries, which collectively owned 50.9%
of the shares of common stock of Pan Pacific as of the record date, have agreed
to vote in favor of the merger pursuant to a voting agreement with Western
Properties.
VOTING OF PROXIES
All shares of Pan Pacific common stock that are entitled to vote and are
represented at the Pan Pacific special meeting by properly executed proxies
received prior to or at such meeting, and not revoked, will be voted at such
meeting in accordance with the instructions indicated on such proxies. If no
instructions are indicated, such proxies, not including broker non-votes, will
be voted for approval of the Pan Pacific merger proposal and the proposal to
amend Pan Pacific's 2000 Stock Incentive Plan.
If a motion to adjourn the special meeting to another time or place for the
purposes of soliciting additional proxies or allowing additional time for the
satisfaction of conditions to the merger, the persons named in the enclosed form
of proxy and acting thereunder generally will have discretion to vote on such
matters in accordance with their discretion, except that any shares which were
voted against the Pan Pacific merger proposal or the proposal to amend Pan
Pacific's 2000 Stock Incentive Plan will not be voted in favor of the
adjournment or postponement of the Pan Pacific special meeting in order to
solicit additional proxies.
REVOCATION OF PROXIES
Any proxy given pursuant to this solicitation may be revoked, and the vote
changed, by the person giving it at any time before it is voted. Proxies may be
revoked by:
- delivering to the secretary of Pan Pacific, at or before the vote is
taken at the Pan Pacific special meeting, a later-dated written notice
stating that you would like to revoke your proxy and change your vote;
- signing a later-dated proxy relating to the same shares and delivering it
to the secretary of Pan Pacific before the vote is taken at the Pan
Pacific special meeting; or
- attending the Pan Pacific special meeting and voting in person, although
attendance at the Pan Pacific special meeting will not in and of itself
constitute a revocation of a proxy or a change of your vote.
If you have instructed your broker to vote your shares and you wish to
revoke those instructions, you must follow your broker's revocation procedures.
Any written notice of revocation or subsequent proxy should be sent to Pan
Pacific Retail Properties, Inc., 1631-B South Melrose Drive, Vista, California
92083, Attention: Corporate Secretary, so as to be received prior to the Pan
Pacific special meeting, or hand delivered to the Corporate Secretary of Pan
Pacific at or before the taking of the vote at the Pan Pacific special meeting.
Stockholders that have instructed a broker to vote their shares must follow
directions received from such broker in order to change their vote or to vote at
the Pan Pacific special meeting.
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SOLICITATION OF PROXIES; EXPENSES
All expenses of Pan Pacific's solicitation of proxies, including the cost
of mailing this joint proxy statement/prospectus to Pan Pacific stockholders,
will be borne by Pan Pacific. In addition to solicitation by use of the mail,
proxies may be solicited from Pan Pacific stockholders by directors, officers
and employees of Pan Pacific in person or by telephone, facsimile or other means
of communication. Such directors, officers and employees will not be
additionally compensated, but may be reimbursed for reasonable out-of-pocket
expenses in connection with such solicitation. Arrangements will also be made
with brokerage houses, custodians, nominees and fiduciaries for forwarding of
proxy solicitation materials to beneficial owners of shares held of record by
such brokerage houses, custodians, nominees and fiduciaries, and Pan Pacific
will reimburse such brokerage houses, custodians, nominees and fiduciaries for
their reasonable expenses incurred in forwarding such materials.
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THE WESTERN PROPERTIES SPECIAL MEETING
DATE, TIME AND PLACE
The Western Properties special meeting will be held at 10:00 a.m., San
Francisco time, on November 9, 2000, at the Holiday Inn, 1800 Powell Street,
Gold Room, Emeryville, California 94608.
PURPOSE
At the Western Properties special meeting, holders of Western Properties
common shares will be asked to consider a proposal to approve and adopt the
principal terms of the merger agreement and the merger, and to approve the
incorporation of Western Properties into WPT immediately before the merger. At
the Western Properties special meeting, holders of Western Properties common
shares will be voting on the merger and incorporation proposal as both
shareholders of Western Properties and as shareholders of WPT.
WESTERN PROPERTIES BOARD OF TRUSTEES' RECOMMENDATION
The board of trustees of Western Properties has unanimously determined the
incorporation and the merger to be fair to, and in the best interests of,
Western Properties and its shareholders, has approved the incorporation and
approved and adopted the merger and the merger agreement and unanimously
recommends that holders of Western Properties common shares vote FOR the merger
and incorporation proposal. See "The Merger -- Background of the Merger" and
"-- Recommendation of the Board of Trustees of Western Properties," and
"Potential Conflicts of Interest; Interests of Executive Officers and Trustees
of Western Properties in the Merger."
RECORD DATE, OUTSTANDING SHARES AND VOTING RIGHTS
The Western Properties board has fixed the close of business on September
29, 2000 as the record date for the Western Properties special meeting.
Accordingly, only holders of record of issued and outstanding Western Properties
common shares at the close of business on the record date are entitled to vote
at the Western Properties special meeting. At the close of business on September
29, 2000, there were 17,347,250 Western Properties common shares outstanding,
held by approximately 1,705 holders of record. Each holder is entitled to one
vote for each Western Properties common share held on the record date.
VOTE REQUIRED; QUORUM; SHARES BENEFICIALLY OWNED BY WESTERN PROPERTIES TRUSTEES
AND OFFICERS
A majority of the outstanding Western Properties common shares entitled to
vote at a meeting of shareholders, represented in person or by proxy, will
constitute a quorum at the Western Properties special meeting. For the purposes
of determining the presence of a quorum at the Western Properties special
meeting and the number of votes cast with respect to the merger and the
incorporation, all votes cast for or against and abstentions will be included.
Abstentions will have the same legal effect as a vote against the proposal.
Broker nonvotes, if any, will be treated as present but not entitled to vote for
the proposal. If a quorum is not present, the Western Properties special meeting
may be adjourned from time to time, up to and including the 45th day following
the originally noticed meeting date by an affirmative vote of a majority of the
Western Properties common shares entitled to vote and represented in person or
by proxy at the meeting. Shareholders are, therefore, urged to sign the
accompanying form of proxy and return it promptly.
Although Western Properties' Amended and Restated Declaration of Trust
requires the affirmative vote of only a majority of the votes cast at a meeting
of shareholders to approve the merger and the incorporation, Section 200.5 of
the California General Corporation Law requires an affirmative vote of the
holders of a majority of the outstanding Western Properties common shares to
approve the incorporation. The provisions of Western Properties' Amended and
Restated Declaration of Trust would only prevail over the California General
Corporation Law if the declaration of trust required a greater proportion of the
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outstanding Western Properties common shares to approve the incorporation.
Because it does not, the California General Corporation Law controls, and the
incorporation must be approved by the affirmative vote of the holders of a
majority of the outstanding Western Properties common shares.
As of the record date, trustees and officers of Western Properties, all of
whom have indicated that they would vote for approval of the merger and the
incorporation, and their affiliates were owners of approximately 2.4% of the
outstanding Western Properties common shares.
VOTING OF PROXIES
When a signed proxy card is returned with choices specified with respect to
voting matters, the Western Properties common shares represented thereby will be
voted by the proxies designated on the proxy card in accordance with the
shareholder's instructions to the tabulator. A shareholder wishing to name
another person as his or her proxy may do so by crossing out the names of the
designated proxies and inserting the name of such other person to act as his or
her proxy. In that case, it will be necessary for the shareholder to sign the
proxy card and deliver it to the person named as his or her proxy and for the
person so named to be present and to vote at the Western Properties special
meeting. Proxy cards so marked should not be mailed directly to Western
Properties.
Shareholders may choose to vote for, against or abstain from voting on the
merger and the incorporation as a single proposal. If no instructions are
indicated, the Western Properties common shares represented by a properly
executed and submitted proxy card will be voted FOR the merger and incorporation
proposal.
DISSENTERS' RIGHTS
Under California law, shareholders of Western Properties will not have the
right to dissent and obtain payment with respect to the merger unless demands
for such payment are received from shareholders holding 5% or more of the
outstanding Western Properties common shares. As of September 29, 2000, there
were 17,347,250 Western Properties common shares outstanding. Consequently, no
Western Properties shareholder will have the right to dissent and receive
payment for Western Properties common shares in lieu of shares of Pan Pacific
common stock unless shareholders holding in the aggregate no less than 867,363
Western Properties common shares file a demand that Western Properties purchase
those shares at their fair market value. The merger agreement provides that Pan
Pacific is not obligated to complete the merger if shareholders holding 5% or
more of the outstanding Western Properties common shares or WPT Common Stock
file a demand that Western Properties purchase those shares at their fair market
value. See "The Merger -- Appraisal or Dissenters' Rights."
REVOCATION OF PROXIES
A proxy card is enclosed. Any shareholder who executes and delivers the
proxy card may revoke the authority granted under the proxy at any time before
its use by giving written notice of such revocation to Western Properties, or by
executing and delivering a proxy bearing a later date. A shareholder may also
revoke a proxy by attending and voting at the Western Properties special
meeting.
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SOLICITATION OF PROXIES; EXPENSES
All expenses of Western Properties' solicitation of proxies, including the
cost mailing this joint proxy statement/prospectus to Western Properties'
shareholders, will be borne by Western Properties. In addition to solicitation
by use of the mail, proxies may be solicited from Western Properties
shareholders by trustees, officers and employees of Western Properties in person
or by telephone, facsimile or other means of communication. Such directors,
officers and employees will not be additionally compensated, but may be
reimbursed for reasonable out-of-pocket expenses in connection with such
solicitation. Arrangements will also be made with brokerage houses, custodians,
nominees and fiduciaries for forwarding of proxy solicitation materials to
beneficial owners of shares held of record by such brokerage houses, custodians,
nominees and fiduciaries, and Western Properties will reimburse such brokerage
houses, custodians, nominees and fiduciaries for their reasonable expenses
incurred in forwarding such materials. In addition, Western Properties has
engaged the outside proxy solicitation firm of Innisfree M&A Incorporated and
will pay Innisfree a base fee of $7,500, plus $5 per telephone call with Western
Properties shareholders, plus reimbursement of out-of-pocket expenses in the
approximate amount of $4,000.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of the material United States federal
income tax consequences of the merger to WPT and Western Properties (together,
"Western"), and to Pan Pacific and the holders of Pan Pacific common stock and
Western common securities. The following discussion is based upon:
- current provisions of the Internal Revenue Code;
- currently applicable Treasury Regulations promulgated under the Internal
Revenue Code;
- judicial and administrative rulings and decisions; and
- the legislative history of the Internal Revenue Code,
all as of the date of this joint proxy statement/prospectus. Legislative,
judicial or administrative changes may be forthcoming that could alter or modify
the statements included in this summary, possibly on a retroactive basis. The
summary does not purport to deal with all aspects of federal income taxation
that may affect particular holders of Pan Pacific common stock or Western common
securities in light of their individual circumstances, nor with holders subject
to special treatment under the federal income tax laws, including:
- life insurance companies;
- tax-exempt organizations;
- financial institutions or broker-dealers;
- traders in securities that elect to mark to market;
- holders owning stock as part of a "straddle," "hedge" or "conversion
transaction;"
- holders whose functional currency is not the U.S. dollar,
- holders who acquired their Pan Pacific common stock or Western common
securities as a result of the exercise of an employee stock option or
otherwise as compensation; and
- holders of Pan Pacific common stock or Western common securities who are
neither citizens nor residents of the United States, or that are foreign
corporations, foreign partnerships or foreign estates or trusts for U.S.
federal income tax purposes.
This summary assumes that each Pan Pacific stockholder and each Western
securityholder holds his or her shares of Pan Pacific common stock and Western
common securities as capital assets. In addition, this summary does not consider
the effect of any foreign, state or local or other tax laws that may be
applicable to Pan Pacific stockholders or Western securityholders.
Pan Pacific and Western have not requested, and do not plan to request, any
rulings from the Internal Revenue Service concerning Pan Pacific's or Western's
tax treatment, or the tax treatment of the merger. The statements in this joint
proxy statement/prospectus and the opinions of counsel referred to in this joint
proxy statement/prospectus are not binding on the Internal Revenue Service or
any court. As a result, neither Pan Pacific nor Western can assure you that the
tax considerations or opinions contained in this discussion will not be
challenged by the Internal Revenue Service or, if so challenged, will be
sustained by a court.
PAN PACIFIC STOCKHOLDERS AND WESTERN SECURITYHOLDERS ARE URGED TO CONSULT
THEIR TAX ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES TO THEM OF:
- THE INCORPORATION TRANSACTION;
- THE MERGER;
- THE ACQUISITION, OWNERSHIP AND SALE OR OTHER DISPOSITION OF PAN PACIFIC
COMMON STOCK, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES;
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- WESTERN'S AND PAN PACIFIC'S ELECTION TO BE TAXED AS REAL ESTATE
INVESTMENT TRUSTS FOR FEDERAL INCOME TAX PURPOSES; AND
- POTENTIAL CHANGES IN THE TAX LAWS.
TAX CONSEQUENCES OF THE INCORPORATION AND MERGER TO WESTERN, WESTERN
SECURITYHOLDERS, PAN PACIFIC AND PAN PACIFIC STOCKHOLDERS
As a condition to the closing of the merger, O'Melveny & Myers LLP, counsel
to Western Properties, will deliver an opinion to Western Properties to the
effect that, none of Western Properties, WPT or their securityholders will
recognize any gain or loss for federal income tax purposes as a result of the
Western Properties' Incorporation into WPT. Based on this opinion, the tax bases
and holding periods of WPT in its assets, and the WPT shareholders in their
shares of WPT common stock, will be the same as the tax bases and include the
holding periods of Western Properties in its assets and the Western Properties
securityholders in their Western Properties common securities.
As additional conditions to closing the merger, O'Melveny & Myers LLP will
deliver an opinion to Western, and Latham & Watkins, counsel to Pan Pacific,
will deliver an opinion to Pan Pacific, in each case based on facts,
representations and assumptions stated in those opinions, to the effect that,
for federal income tax purposes the merger will constitute a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code. The Latham &
Watkins opinion will also state that no gain or loss will be recognized by Pan
Pacific or Pan Pacific stockholders as a result of the merger. The O'Melveny &
Myers LLP opinion will also state that no gain or loss will be recognized by WPT
or by shareholders of WPT who receive shares of Pan Pacific stock in exchange
for shares of WPT common stock, except to the extent that such shareholders
receive cash pursuant to the transactions contemplated by the merger agreement.
Based on the opinions described above, the basis of the Pan Pacific stock
received by WPT shareholders in the merger will be the same as the basis of the
WPT common stock for which it is exchanged, less any basis attributable to
fractional shares of Pan Pacific common stock for which cash is received. In
addition, the holding period of the Pan Pacific common stock received by WPT
shareholders in the merger will include the holding period of the WPT common
stock for which it is exchanged.
If the merger does not constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code, holders of WPT common stock will
recognize gain or, except in limited cases, loss, in an amount equal to the
difference between:
(a) the fair market value of the consideration received by such holders in
the merger; and
(b) their adjusted tax basis in the WPT common stock being exchanged.
In addition, if the merger does not constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, WPT will recognize
corporate-level gain, but not loss, for federal income tax purposes equal to the
difference between:
(a) the fair market value of WPT's assets at the effective time of the
merger; and
(b) WPT's adjusted tax basis in its assets at the effective time of the
merger,
Pan Pacific would succeed to WPT's tax liability resulting from gain recognized
if the merger were to fail to qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code.
NON-DEDUCTIBILITY OF PARACHUTE PAYMENTS
It is anticipated that some members of Western management may receive
"parachute payments" in connection with the merger that exceed the limits
established under Section 280G of the Internal Revenue Code. Any "excess"
parachute payments will not be deductible by Western or Pan Pacific.
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BACKUP WITHHOLDING
In order to avoid "backup withholding" on a payment of cash to a WPT common
shareholder who exchanges WPT common stock in the merger, such shareholder must,
unless an exception applies under the applicable law and regulations, provide
Pan Pacific with his or her correct taxpayer identification number on a
Substitute Form W-9, and certify under penalty of perjury that he or she is not
subject to backup withholding and that the taxpayer identification number they
have provided is correct. A Substitute Form W-9 will be included as part of the
letter of transmittal to be sent to WPT common shareholders by the exchange
agent. If a WPT common shareholder fails to provide his or her correct taxpayer
identification number or the required certifications, he or she may be subject
to penalty by the Internal Revenue Service, and any cash payments he or she
would otherwise receive in consideration for shares of WPT common stock in the
merger may be subject to backup withholding at a rate of 31%.
PAN PACIFIC'S QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST
General. Pan Pacific elected to be taxed as a real estate investment trust
under Sections 856 through 860 of the Internal Revenue Code, commencing with its
taxable year ended December 31, 1997. Pan Pacific believes it has been organized
and has operated in a manner which allows it to qualify for taxation as a real
estate investment trust under the Internal Revenue Code commencing with its
taxable year ended December 31, 1997. Pan Pacific intends to continue to operate
in this manner. However, neither Pan Pacific nor Western can assure you that Pan
Pacific has operated or will continue to operate in a manner so as to qualify or
remain qualified as a real estate investment trust. See "-- Failure to Qualify."
The sections of the Internal Revenue Code that relate to the qualification
and operation as a real estate investment trust are highly technical and
complex. The following describes the material aspects of these sections of the
Internal Revenue Code that govern the federal income tax treatment of a real
estate investment trust and its shareholders. This summary is qualified in its
entirety by the Internal Revenue Code, relevant rules and Treasury Regulations
promulgated under the Internal Revenue Code, and administrative and judicial
interpretations of the Internal Revenue Code, and these rules and Treasury
Regulations.
Latham & Watkins has acted as Pan Pacific's tax counsel in connection with
the merger and Pan Pacific's election to be taxed as a real estate investment
trust. As a condition to closing, Latham & Watkins is required to render an
opinion that, commencing with Pan Pacific's taxable year ended December 31,
1997, Pan Pacific has been organized and has operated in conformity with the
requirements for qualification and taxation as a real estate investment trust
under the Internal Revenue Code, and Pan Pacific's proposed method of operation
will enable it to continue to meet the requirements for qualification and
taxation as a real estate investment trust under the Internal Revenue Code.
Latham & Watkins has no obligation to update its opinion subsequent to the date
it is issued.
The opinion of Latham & Watkins will be based on various assumptions and
representations made by Pan Pacific as to factual matters, including
representations made by Pan Pacific in this joint proxy statement/prospectus and
a factual certificate provided by one of Pan Pacific's officers. Moreover, Pan
Pacific's qualification and taxation as a real estate investment trust depends
upon Pan Pacific's ability to meet the various qualification tests imposed under
the Internal Revenue Code and discussed below, relating to Pan Pacific's actual
annual operating results, asset diversification, distribution levels, and
diversity of stock ownership, the results of which have not been and will not be
reviewed by Latham & Watkins. Accordingly, neither Latham & Watkins nor Pan
Pacific can assure you that the actual results of Pan Pacific's operation for
any particular taxable year will satisfy the requirements for qualification and
taxation as a real estate investment trust. See "-- Failure to Qualify."
Further, the anticipated income tax treatment described in this joint proxy
statement/prospectus may be changed, perhaps retroactively, by legislative,
administrative or judicial action at any time.
For so long as it continues to qualify for taxation as a real estate
investment trust, Pan Pacific generally will not be required to pay federal
corporate income taxes on its net income that is currently distributed to its
stockholders. This treatment substantially eliminates the "double taxation" that
generally
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results from investment in a corporation. Double taxation means taxation once at
the corporate level when income is earned and once again at the stockholder
level when that same income is distributed. Pan Pacific will be required to pay
federal income taxes, however, as follows:
- Pan Pacific will be required to pay tax at regular corporate rates on any
undistributed "real estate investment trust taxable income," including
undistributed net capital gains;
- Pan Pacific may be required to pay the "alternative minimum tax" on Pan
Pacific's items of tax preference;
- If Pan Pacific has (a) net income from the sale or other disposition of
"foreclosure property," which is held primarily for sale to customers in
the ordinary course of business or (b) other nonqualifying income from
foreclosure property, Pan Pacific will be required to pay tax at the
highest corporate rate on this income. Foreclosure property is generally
defined as property acquired through foreclosure or after a default on a
loan secured by the property or on a lease of the property and with
respect to which property an election has been made to treat the property
as foreclosure property;
- Pan Pacific will be required to pay a 100% tax on any net income from
prohibited transactions. Prohibited transactions are, in general, sales
or other taxable dispositions of property, other than foreclosure
property, held primarily for sale to customers in the ordinary course of
business;
- If Pan Pacific fails to satisfy the 75% or 95% gross income test, as
described below, but has maintained its qualification as a real estate
investment trust, Pan Pacific will be required to pay a 100% tax on an
amount equal to (a) the gross income attributable to the greater of the
amount by which Pan Pacific fails the 75% or 95% gross income test
multiplied by (b) a fraction intended to reflect Pan Pacific's
profitability;
- Pan Pacific will be required to pay a 4% excise tax on the excess of the
required distribution over the amounts actually distributed if Pan
Pacific fails to distribute during each calendar year at least the sum of
(a) 85% of Pan Pacific's ordinary income for the year, (b) 95% of Pan
Pacific's real estate investment trust capital gain net income for the
year, and (c) any undistributed taxable income from prior periods;
- If Pan Pacific acquires any asset from a corporation which is or has been
a C corporation in a transaction in which the basis of the asset in Pan
Pacific's hands is determined by reference to the basis of the asset in
the hands of the C corporation, and Pan Pacific subsequently recognizes
gain on the disposition of the asset during the ten-year period beginning
on the date on which Pan Pacific acquired the asset, then Pan Pacific
will be required to pay tax at the highest regular corporate tax rate on
this gain to the extent of the excess of (a) the fair market value of the
asset over (b) Pan Pacific's adjusted basis in the asset, in each case
determined as of the date on which Pan Pacific acquired the asset. A C
corporation is generally defined as a corporation required to pay full
corporate-level tax. The results described in this paragraph with respect
to the recognition of gain assume that Pan Pacific has made or will make
an election under Internal Revenue Service Notice 88-19 or Treasury
Regulation Section 1.337(d)-5T.
Requirements for Qualification as a Real Estate Investment Trust. The
Internal Revenue Code defines a real estate investment trust as a corporation,
trust or association:
(1) that is managed by one or more trustees or directors;
(2) that issues transferable shares or transferable certificates to
evidence beneficial ownership;
(3) that would be taxable as a domestic corporation, but for Sections 856
through 860 of the Internal Revenue Code;
(4) that is not a financial institution or an insurance company within the
meaning of the Internal Revenue Code;
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(5) that is beneficially owned by 100 or more persons;
(6) not more than 50% in value of the outstanding stock of which is owned,
actually or constructively, by five or fewer individuals, including
specified entities, during the last half of each taxable year; and
(7) that meets other tests, described below, regarding the nature of its
income and assets and the amount of its distributions.
The Internal Revenue Code provides that all of conditions (1) to (4) must
be met during the entire taxable year and that condition (5) must be met during
at least 335 days of a taxable year of twelve months, or during a proportionate
part of a taxable year of less than twelve months. Conditions (5) and (6) do not
apply until after the first taxable year for which an election is made to be
taxed as a real estate investment trust. For purposes of condition (6),
specified tax-exempt entities are treated as individuals, except that a
"look-through" exception generally applies with respect to pension funds.
Pan Pacific believes that it has satisfied conditions (1) through (7)
inclusive during the relevant time periods. In addition, Pan Pacific's charter
provides for restrictions regarding the transfer and, in some cases, ownership
of shares of its capital stock. These restrictions are intended to assist Pan
Pacific in continuing to satisfy the share ownership requirements described in
(5) and (6) above. These stock ownership and transfer restrictions are described
in "Description of Pan Pacific Capital Stock -- Restrictions on Ownership and
Transfer." These restrictions, however, may not ensure that Pan Pacific will, in
all cases, be able to satisfy the share ownership requirements described in (5)
and (6) above. If Pan Pacific fails to satisfy these share ownership
requirements, Pan Pacific's status as a real estate investment trust will
terminate. See "-- Failure to Qualify" below. If, however, Pan Pacific complies
with the rules contained in the Treasury Regulations that require Pan Pacific to
ascertain the actual ownership of its shares, and Pan Pacific does not know, and
would not have known through the exercise of reasonable diligence, that it
failed to meet the requirement described in condition (6) above, Pan Pacific
will be treated as having met this requirement. In addition, following the
merger, approximately 33.8% of Pan Pacific's common stock will be owned directly
or indirectly by Revenue Properties Company Limited, a publicly-held Canadian
real estate company. There are no ownership or transfer restrictions of the type
described above in effect with respect to Revenue Properties Company Limited's
stock. Approximately 43.8% of Revenue Properties Company Limited's outstanding
shares of common stock are currently owned by Mark Tanz and members of his
family, and approximately an additional 22.5% are owned by Acktion Corporation,
a publicly traded Canadian corporation. If the ownership concentration of the
Tanz family or Acktion Corporation (or some other party) in Revenue Properties
Company Limited were to increase, then Pan Pacific might no longer satisfy
conditions (5) and (6) above, and therefore, might no longer be qualified as a
real estate investment trust. See "-- Failure to Qualify" below. However, Pan
Pacific's charter permits it to cause the transfer of a sufficient number of
shares of common stock owned by Revenue Properties Company Limited to a trust
having a charitable beneficiary so as to avoid real estate investment trust
disqualification.
In addition, a corporation may not elect to become a real estate investment
trust unless its taxable year is the calendar year. Pan Pacific has and will
continue to have a calendar taxable year.
Ownership of Partnership Interests. Pan Pacific owns, directly or
indirectly, interests in various partnerships and limited liability companies.
Treasury Regulations provide that if Pan Pacific is a partner in a partnership
or member of a limited liability company treated as a partnership for federal
income tax purposes, Pan Pacific will be deemed to own its proportionate share
of the assets of the partnership or limited liability company, as the case may
be. Also, Pan Pacific will be deemed to be entitled to its proportionate share
of the income of the partnership or limited liability company. The character of
the assets and gross income of the partnership or limited liability company, as
the case may be, retains the same character in Pan Pacific's hands for purposes
of Section 856 of the Internal Revenue Code, including satisfying the gross
income tests and the asset tests. As a result, Pan Pacific's proportionate share
of the assets and items of income of the partnerships and limited liability
companies in which it owns a direct or indirect interest are treated as Pan
Pacific's assets and items of income for purposes of applying the
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requirements described in this joint proxy statement/prospectus, including the
income and asset tests described below. A brief summary of the rules governing
the federal income taxation of partnerships and their partners is included below
in "-- Tax Aspects of Partnerships and Limited Liability Companies in Which Pan
Pacific Owns an Interest." Pan Pacific has control of all of the partnerships
and limited liability companies in which it owns an interest, and intends to
operate them in a manner consistent with the requirements for qualification as a
real estate investment trust.
Qualified Real Estate Investment Trust Subsidiaries. Pan Pacific owns a
number of properties through wholly-owned subsidiaries that Pan Pacific believes
will be treated as "qualified real estate investment trust subsidiaries" under
Internal Revenue Code Section 856(i). A qualified real estate investment trust
subsidiary will not be treated as a separate corporation, and all assets,
liabilities, and items of income, deduction and credit of a qualified real
estate investment trust subsidiary will be treated as assets, liabilities and
items of income, deduction and credit, as the case may be, of the real estate
investment trust. In applying the real estate investment trust requirements
described in this joint proxy statement/prospectus, Pan Pacific's qualified real
estate investment trust subsidiaries will be ignored, and all assets,
liabilities and items of income, deduction and credit of such subsidiaries will
be treated as Pan Pacific's assets, liabilities and items of income, deduction
and credit, as the case may be. A qualified real estate investment trust
subsidiary will not be subject to federal income tax, and Pan Pacific's
ownership of the voting stock of a qualified real estate investment trust
subsidiary will not violate the restrictions against Pan Pacific owning
securities of any one issuer which constitutes more than 10% of that issuer's
voting securities or more than 5% of the value of Pan Pacific's total assets.
Income Tests. Pan Pacific must satisfy two gross income requirements
annually to maintain its qualification as a real estate investment trust:
- First, in each taxable year Pan Pacific must derive directly or
indirectly at least 75% of its gross income, excluding gross income from
prohibited transactions, from (1) investments relating to real property
or mortgages on real property, including "rents from real property" and,
in some circumstances, interest, or (2) specified types of temporary
investments; and
- Second, in each taxable year Pan Pacific must derive at least 95% of its
gross income, excluding gross income from prohibited transactions, from
(1) the real property investments described above, (2) dividends,
interest and gain from the sale or disposition of stock or securities, or
(3) any combination of the foregoing.
For these purposes, the term "interest" generally does not include any
amount received or accrued, directly or indirectly, if the determination of all
or some of the amount depends in any way on the income or profits of any person.
An amount received or accrued generally will not be excluded from the term
"interest," however, solely by reason of being based on a fixed percentage or
percentages of receipts or sales.
Rents Pan Pacific receives will qualify as "rents from real property" in
satisfying the gross income requirements for a real estate investment trust
described above only if all of the following conditions are met:
- the amount of rent must not be based in any way on the income or profits
of any person. An amount received or accrued generally will not be
excluded from the term "rents from real property," however, solely by
reason of being based on a fixed percentage or percentages of receipts or
sales;
- Pan Pacific, or an actual or constructive owner of 10% or more of Pan
Pacific's capital stock, does not actually or constructively own 10% or
more of the interests in a tenant whose rents payable to Pan Pacific are
to be included in "rents from real property;"
- no rent is attributable to personal property, other than personal
property leased in connection with a lease of real property, and for
which the rent attributable to personal property is not greater than
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15% of the total rent received under the lease (otherwise the portion of
rent attributable to personal property will not qualify as "rents from
real property"); and
- Pan Pacific generally does not operate or manage the property or furnish
or render services to the tenants of the property, subject to a 1% de
minimis exception, other than through an independent contractor from whom
Pan Pacific derives no revenue. Pan Pacific may, however, directly
perform services that are "usually or customarily rendered" in connection
with the rental of space for occupancy only or are not otherwise
considered "rendered to the occupant" of the property. Examples of
permitted services include the provision of light, heat, or other
utilities, trash removal and general maintenance of common areas. Under
recently enacted legislation, described in greater detail below,
beginning in 2001, Pan Pacific may employ a "taxable real estate
investment trust subsidiary" which may be wholly or partially owned by
Pan Pacific, to provide both customary and noncustomary services to
tenants without causing the rent Pan Pacific receives from those tenants
to fail to qualify as "rents from real property."
Pan Pacific generally does not intend to receive rent which fails to
qualify as "rents from real property." Pan Pacific may, however, have failed to
satisfy, and may continue to fail to satisfy, some of the conditions described
above to the extent Pan Pacific determines, based on the advice of its tax
counsel, that these actions will not jeopardize Pan Pacific's status as a real
estate investment trust.
Pan Pacific believes that the aggregate amount of nonqualifying income from
all sources in any taxable year will not exceed the limit on nonqualifying
income under the gross income tests. If Pan Pacific fails to satisfy one or both
of the 75% or 95% gross income tests for any taxable year, Pan Pacific may
nevertheless qualify as a real estate investment trust for the year if Pan
Pacific is entitled to relief under the Internal Revenue Code. Generally, Pan
Pacific may avail itself of the Internal Revenue Code's relief provisions if:
- Pan Pacific's failure to meet these tests was due to reasonable cause and
not due to willful neglect;
- Pan Pacific attaches a schedule of the sources of its income to its
federal income tax return; and
- any incorrect information on the schedule was not due to fraud with
intent to evade tax.
It is not possible, however, to state whether in all circumstances Pan Pacific
would be entitled to the benefit of these relief provisions. For example, if Pan
Pacific fails to satisfy the gross income tests because nonqualifying income
that Pan Pacific intentionally accrues or receives exceeds the limits on
nonqualifying income, the Internal Revenue Service could conclude that Pan
Pacific's failure to satisfy the tests was not due to reasonable cause. If these
relief provisions do not apply to a particular set of circumstances, Pan Pacific
will not qualify as a real estate investment trust. As discussed above in
"-- Pan Pacific's Qualification as a Real Estate Investment Trust -- General,"
even if these relief provisions apply, and Pan Pacific retains its status as a
real estate investment trust, a tax would be imposed with respect to Pan
Pacific's non-qualifying income. Pan Pacific may not always be able to maintain
compliance with the gross income tests for real estate investment trust
qualification despite its periodic monitoring of its income.
Prohibited Transaction Income. Any gain realized by Pan Pacific on the sale
of any property held as inventory or other property held primarily for sale to
customers in the ordinary course of business will be treated as income from a
prohibited transaction that is subject to a 100% penalty tax. Pan Pacific's gain
would include Pan Pacific's share of any gain realized by any of the
partnerships or limited liability companies in which Pan Pacific owns an
interest. This prohibited transaction income may also adversely affect Pan
Pacific's ability to satisfy the income tests for qualification as a real estate
investment trust. Under existing law, whether property is held as inventory or
primarily for sale to customers in the ordinary course of a trade or business
depends on all the facts and circumstances surrounding the particular
transaction. Pan Pacific intends to hold its properties for investment with a
view to long-term appreciation, and to engage in the business of acquiring,
developing and owning its properties and other properties. Pan Pacific intends
to make occasional sales of its properties consistent with Pan Pacific's
investment objectives. Pan Pacific does not intend to enter into any sales that
are prohibited transactions. The Internal
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Revenue Service may contend, however, that one or more of these sales are
subject to the 100% penalty tax.
Asset Tests. At the close of each quarter of Pan Pacific's taxable year,
Pan Pacific also must satisfy three tests relating to the nature and
diversification of Pan Pacific's assets:
- First, at least 75% of the value of Pan Pacific's total assets, including
assets held by Pan Pacific's qualified real estate investment trust
subsidiaries and Pan Pacific's allocable share of the assets held by the
partnerships and limited liability companies in which Pan Pacific owns an
interest, must be represented by real estate assets, cash, cash items and
government securities. For purposes of this test, real estate assets
include stock or debt instruments that are purchased with the proceeds of
a stock offering or a public debt offering with a term of at least five
years, but only for the one-year period commencing on the date of the
offering;
- Second, not more than 25% of Pan Pacific's total assets may be
represented by securities, other than those securities included in the
75% asset test; and
- Third, of the investments included in the 25% asset class, the value of
any one issuer's securities may not exceed 5% of the value of Pan
Pacific's total assets, and Pan Pacific may not own more than 10% of any
one issuer's outstanding voting securities.
After initially meeting the asset tests at the close of any quarter, Pan
Pacific will not lose its status as a real estate investment trust for failure
to satisfy the asset tests at the end of a later quarter solely by reason of
changes in asset values. If Pan Pacific fails to satisfy the asset tests because
Pan Pacific acquires securities or other property during a quarter, Pan Pacific
might be able to cure this failure by disposing of sufficient nonqualifying
assets within 30 days after the close of that quarter. For this purpose, an
increase in Pan Pacific's interests in a partnership or limited liability
company will be treated as an acquisition of a portion of the securities or
other property owned by the partnership or limited liability company. Pan
Pacific believes it has maintained and intends to continue to maintain adequate
records of the value of its assets to ensure compliance with the asset tests. In
addition, Pan Pacific intends to take such other actions within the 30 days
after the close of any quarter as may be required to cure any noncompliance. If
Pan Pacific fails to cure noncompliance with the asset tests within this time
period, Pan Pacific would cease to qualify as a real estate investment trust.
As discussed above, a real estate investment trust cannot currently own
more than 10% of the outstanding voting securities of any one issuer. Recently,
legislation was enacted that, beginning in 2001, limits a real estate investment
trust's ability to own more than 10% by vote or value of the securities of any
single issuer. This legislation, however, allows a real estate investment trust
to own up to 100% of the vote and/or value of a corporation which jointly elects
with the real estate investment trust to be treated as a "taxable real estate
investment trust subsidiary," provided that, in the aggregate, a real estate
investment trust's total investment in its taxable real estate investment trust
subsidiaries does not exceed 20% of the value of the real estate investment
trust's total assets, and at least 75% of the real estate investment trust's
total assets are real estate or other qualifying assets. In addition, dividends
from taxable real estate investment trust subsidiaries will be nonqualifying
income for purposes of the 75%, but not the 95%, gross income test. Other than
certain activities relating to lodging and health care facilities, a taxable
real estate investment trust subsidiary may generally engage in any business,
including the provision of customary or noncustomary services to tenants of its
parent real estate investment trust.
This new legislation contains provisions generally intended to insure that
transactions between a real estate investment trust and its taxable real estate
investment trust subsidiary occur "at arm's length" and on commercially
reasonable terms. These requirements include a provision that prevents a taxable
real estate investment trust subsidiary from deducting interest on direct or
indirect indebtedness to its parent real estate investment trust if, under a
specified series of tests, the taxable real estate investment trust subsidiary
is considered to have an excessive interest expense level or debt to equity
ratio. In some cases the new legislation also imposes a 100% tax on the real
estate investment trust if its rental, service and/or other agreements with its
taxable real estate investment trust subsidiary are not on arm's length terms.
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This new legislation will require Pan Pacific to monitor its investments in
the entities in which it owns an interest and, in some circumstances, modify
those investments if Pan Pacific owns more than 10% of the voting power or value
of another entity, other than a qualified real estate investment trust
subsidiary or a taxable real estate investment trust subsidiary, as described
above. The legislation concerning taxable real estate investment trust
subsidiaries is generally effective only for taxable years beginning after
December 31, 2000. In the merger, Pan Pacific will acquire Western's interest in
Western/Kienow L.P, a Delaware limited partnership, which partnership holds 100%
of the non-voting preferred stock, representing approximately 97% of the
economic value, of Western Real Estate Services, Inc., a California corporation.
Pan Pacific believes that its indirect ownership of Western Real Estate
Services, Inc., will not cause it to violate the 5% asset test described above.
In addition, because Pan Pacific's ownership of Western Real Estate Services,
Inc., will consist exclusively of non-voting preferred stock, Pan Pacific
believes that for the taxable year ending December 31, 2000, it will be in
compliance with the 10% asset test described above. Because it is expected to
own indirectly in excess of 10% of the value of Western Real Estate Services,
Inc., however, Pan Pacific may be required to restructure its ownership of this
subsidiary in order to comply with the newly enacted legislation discussed in
the preceding paragraphs.
Annual Distribution Requirements. To maintain its qualification as a real
estate investment trust, Pan Pacific is required to distribute dividends, other
than capital gain dividends, to its shareholders in an amount at least equal to
the sum of:
- 95% of Pan Pacific's "real estate investment trust taxable income"; and
- 95% of Pan Pacific's after tax net income, if any, from foreclosure
property; minus
- the excess of the sum of specified items of noncash income over 5% of
"real estate investment trust taxable income" as described above.
Pan Pacific's "real estate investment trust taxable income" is computed
without regard to the dividends paid deduction and Pan Pacific's net capital
gain. In addition, for purposes of this test, non-cash income means income
attributable to leveled stepped rents, original issue discount on purchase money
debt, or a like-kind exchange that is later determined to be taxable.
In addition, if Pan Pacific disposes of any asset Pan Pacific acquired from
a corporation which is or has been a C corporation in a transaction in which Pan
Pacific's basis in the asset is determined by reference to the basis of the
asset in the hands of the C corporation, within the ten-year period following
Pan Pacific's acquisition of such asset, Pan Pacific would be required, under
Treasury Regulations, to distribute at least 95% of the after-tax gain, if any,
recognized by Pan Pacific on the disposition of the asset, to the extent that
gain does not exceed the excess of (a) the fair market value of the asset on the
date Pan Pacific acquired the asset over (b) Pan Pacific's adjusted basis in the
asset on the date Pan Pacific acquired the asset.
These distributions must be paid in the taxable year to which they relate,
or in the following taxable year if they are declared before Pan Pacific timely
files its tax return for such year and if paid on or before the first regular
dividend payment after such declaration. Except as provided in "-- Taxation of
Taxable U.S. Stockholders," these distributions are taxable to holders of Pan
Pacific's stock, other than tax-exempt entities, as discussed below, in the year
in which paid. This is so even though these distributions relate to the prior
year for purposes of Pan Pacific's 95% distribution requirement. The amount
distributed must not be preferential. To avoid this treatment, every stockholder
of the class of stock to which a distribution is made must be treated the same
as every other stockholder of that class, and no class of stock may be treated
other than according to its dividend rights as a class. To the extent that Pan
Pacific does not distribute all of Pan Pacific's net capital gain or distributes
at least 95%, but less than 100%, of Pan Pacific's "real estate investment trust
taxable income," as adjusted, Pan Pacific will be required to pay tax on this
income at regular ordinary and capital gain corporate tax rates. Pan Pacific
believes it has made and intends to continue to make timely distributions
sufficient to satisfy these annual distribution requirements.
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Pan Pacific expects that its "real estate investment trust taxable income"
will be less than its cash flow due to the allowance for depreciation and other
non-cash charges allowed in computing "real estate investment trust taxable
income." Accordingly, Pan Pacific anticipates that it will generally have
sufficient cash or liquid assets to enable it to satisfy the distribution
requirements described above. It is possible, however, that Pan Pacific may not
have sufficient cash or other liquid assets to meet these distribution
requirements due to timing differences between the actual receipt of income and
actual payment of deductible expenses, and the inclusion of income and deduction
of expenses in arriving at Pan Pacific's taxable income. If these timing
differences occur, in order to meet the distribution requirements, Pan Pacific
may need to arrange for short-term, or possibly long-term, borrowings or may
need to pay dividends in the form of taxable stock dividends. In addition,
pursuant to recently enacted legislation, the 95% distribution requirement
discussed above will be reduced to 90% effective for taxable years beginning
after December 31, 2000.
Pan Pacific may be able to rectify an inadvertent failure to meet the 95%
distribution requirement for a year by paying "deficiency dividends" to
shareholders in a later year, which may be included in Pan Pacific's deduction
for dividends paid for the earlier year. Thus, Pan Pacific may be able to avoid
being subject to tax on amounts distributed as deficiency dividends. Pan Pacific
will be required, however, to pay interest to the Internal Revenue Service based
upon the amount of any deduction claimed for deficiency dividends.
Furthermore, Pan Pacific would be required to pay a 4% excise tax on the
excess of the required distribution over the amount, if any, by which Pan
Pacific's actual annual distributions during a calendar year are less than the
sum of 85% of Pan Pacific's ordinary income for the year, 95% of Pan Pacific's
capital gain income for the year and any undistributed taxable income from prior
periods. Any taxable income and net capital gain on which this excise tax is
imposed for any year is treated as an amount distributed during that year for
purposes of calculating such tax.
Distributions with declaration and record dates falling in the last three
months of the calendar year, which are made by the end of January immediately
following such year, will be treated for all income tax purposes as made on
December 31 of the prior year.
Tax Aspects of Partnerships and Limited Liability Companies in Which Pan
Pacific Owns an Interest. Pan Pacific currently owns interests in several
partnerships and limited liability companies, and may own additional interests
in such entities in the future. The ownership of an interest in a partnership or
limited liability company treated as a partnership for federal income tax
purposes may involve special tax risks, including the possible challenge by the
Internal Revenue Service of:
- allocations of income and expense items, which could affect the
computation of Pan Pacific's taxable income; and
- the status of the partnership or limited liability company as a
partnership, as opposed to an association taxable as a corporation, for
federal income tax purposes.
If any of the partnerships or limited liability companies in which Pan
Pacific owns an interest were treated as an association taxable as a corporation
for federal income tax purposes, the partnership or limited liability company
would be treated as a taxable entity. In addition, in such a situation, the
following would occur:
- If Pan Pacific owned more than 10% of the outstanding voting securities
of the partnership or limited liability company, or the value of such
securities exceeded 5% of the value of Pan Pacific's assets, Pan Pacific
would fail to satisfy the asset tests described above and would therefore
fail to qualify as a real estate investment trust.
- Distributions from the partnership or limited liability company to Pan
Pacific would be treated as dividends, which are not taken into account
in satisfying the 75% gross income test described above and could,
therefore, make it more difficult for Pan Pacific to satisfy the 75%
gross income test.
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- The interest in the partnership or limited liability company held by Pan
Pacific would not qualify as a "real estate asset," which could make it
more difficult for Pan Pacific to meet the 75% asset test described
above.
- Pan Pacific would not be able to deduct its share of any losses generated
by the partnership or limited liability company in computing Pan
Pacific's taxable income.
See "-- Failure to Qualify" below for a discussion of the effect of Pan
Pacific's failure to meet such tests for a taxable year. Pan Pacific believes
that each of the partnerships and limited liability companies in which Pan
Pacific owns an interest will be treated as a partnership, rather than an
association taxable as a corporation. Pan Pacific cannot assure you, however,
that the Internal Revenue Service will not successfully challenge the Federal
income tax status of the partnerships and limited liability companies as
partnerships.
A partnership or limited liability company agreement will generally
determine the allocation of income and losses among partners or members. These
allocations, however, will be disregarded for tax purposes if they do not comply
with the provisions of Section 704(b) of the Internal Revenue Code and the
Treasury Regulations. Generally, Section 704(b) of the Internal Revenue Code and
the related Treasury Regulations require that partnership and limited liability
company allocations respect the economic arrangement of the partners and
members. If an allocation is not respected for federal income tax purposes, the
relevant item will be reallocated according to the partners' or members'
interests in the partnership or limited liability company. This reallocation
will be determined by taking into account all of the facts and circumstances
relating to the economic arrangement of the partners or members with respect to
such item. The allocations of taxable income and loss in each of the
partnerships and limited liability companies in which Pan Pacific owns an
interest are intended to comply with the requirements of Section 704(b) of the
Internal Revenue Code and the Treasury Regulations thereunder.
Under Section 704(c) of the Internal Revenue Code, income, gain, loss and
deduction attributable to appreciated or depreciated property that is
contributed to a partnership or limited liability company in exchange for an
interest in the partnership or limited liability company must be allocated in a
manner so that the contributing partner or member is charged with the unrealized
gain or benefits from the unrealized loss associated with the property at the
time of the contribution. The amount of the unrealized gain or unrealized loss
is generally equal to the difference between the fair market value or book value
and the adjusted tax basis of the contributed property at the time of
contribution. These allocations are solely for federal income tax purposes.
These allocations do not affect the book capital accounts or other economic or
legal arrangements among the partners or members. Some of the partnerships
and/or limited liability companies in which Pan Pacific owns an interest were
formed by way of contributions of appreciated property. The relevant partnership
and/or limited liability company agreements require that allocations be made in
a manner consistent with Section 704(c) of the Internal Revenue Code.
Earnings And Profits Distribution Requirements. A real estate investment
trust is not permitted to have accumulated earnings and profits attributable to
non-real estate investment trust years. A real estate investment trust has until
the close of its first taxable year in which it has non-real estate investment
trust earnings and profits to distribute all such earnings and profits. Pan
Pacific's failure to comply with this rule would result in the loss of its real
estate investment trust status. See "-- Failure to Qualify." As part of the
transactions consummated in connection with its formation and initial public
offering in August 1997, Pan Pacific may have acquired earnings and profits
attributable to non-real estate investment trust years from certain of Revenue
Properties (U.S.), Inc.'s wholly-owned subsidiaries. While not free from doubt,
Pan Pacific believes, and intends to take the position, that the earnings and
profits of the Revenue Properties (U.S.), Inc. subsidiaries remained with the
Revenue Properties (U.S.), Inc. affiliated group and were not acquired by Pan
Pacific. For purposes of applying the rules requiring the distribution of
non-real estate investment trust earnings and profits, however, Pan Pacific has
assumed that the earnings and profits of the Revenue Properties (U.S.), Inc.
subsidiaries did carry over to Pan Pacific, and therefore that Pan Pacific was
required to have distributed, or been deemed to have distributed, those earnings
and profits prior to the end of 1997 in order to avoid a loss of its status as a
real estate investment trust in 1997. The
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calculation of the amount of Revenue Properties (U.S.), Inc. earnings and
profits that Pan Pacific would have acquired, and the amount of distributions
necessary to distribute those earnings and profits, is subject to challenge by
the Internal Revenue Service. However, even if the Internal Revenue Service
should challenge the calculation of the amount of acquired earnings and profits,
Pan Pacific believes that it did not have earnings and profits attributable to
non-real estate investment trust years as of the close of 1997, and therefore
that Pan Pacific qualified as a real estate investment trust for 1997.
Failure to Qualify. If Pan Pacific fails to qualify for taxation as a real
estate investment trust in any taxable year, and the relief provisions of the
Internal Revenue Code do not apply, Pan Pacific will be required to pay tax,
including any alternative minimum tax and possibly increased state and local
taxes, on Pan Pacific's taxable income at regular corporate rates. Distributions
to shareholders in any year in which Pan Pacific fails to qualify as a real
estate investment trust will not be deductible by Pan Pacific, and Pan Pacific
will not be required to distribute any amounts to Pan Pacific's stockholders. As
a result, Pan Pacific anticipates that its failure to qualify as a real estate
investment trust would reduce the cash available for distribution by Pan Pacific
to its stockholders. In addition, if Pan Pacific fails to qualify as a real
estate investment trust, stockholders will be required to pay tax on all
distributions to them at ordinary income rates to the extent of Pan Pacific's
current and accumulated earnings and profits. In this event, corporate
distributees may be eligible for the dividends received deduction. Unless
entitled to relief under specific statutory provisions, Pan Pacific will also be
disqualified from taxation as a real estate investment trust for the four
taxable years following the year during which Pan Pacific lost its
qualification. It is not possible to state whether in all circumstances Pan
Pacific would be entitled to this statutory relief.
Tax Liabilities and Attributes Inherited from Western. If Western fails to
qualify as a real estate investment trust in any taxable year, it will be
subject to federal income tax (including any applicable alternative minimum tax)
on its taxable income at regular corporate rates. Unless statutory relief
provisions apply, Western would be disqualified from treatment as a real estate
investment trust for the four taxable years following the year during which it
lost qualification. Pan Pacific, as successor-in-interest to Western, would be
required to pay this tax. The built-in gain rules described under "Pan Pacific's
Qualification as a Real Estate Investment Trust -- General" above would apply
with respect to any assets acquired by Pan Pacific from Western in connection
with the merger if the merger qualified as a tax-free reorganization under the
Internal Revenue Code and if Western failed to qualify as a real estate
investment trust at any time during the ten-year period prior to the merger. In
addition, if Western did not qualify as a real estate investment trust for its
taxable year ending with the merger and if Pan Pacific were not to make an
election under Treasury Regulation section 1.337(d)-5T, Western would recognize
taxable gain as a result of the merger under the built-in gain rules, even
though the merger otherwise qualified as a tax-free reorganization under the
Internal Revenue Code. The liability for any tax due with respect to the gain
described above would be assumed by Pan Pacific in the merger. Pan Pacific
intends, however, to make a protective election under Treasury Regulation
section 1.337(d)-5T with respect to the merger to prevent the recognition of
this gain. Even having made this election, under these circumstances, if Pan
Pacific disposed of any of the assets acquired from Western during the ten-year
period following the merger, any resulting gain, to the extent of the built-in
gain at the time of the merger, would be subject to tax at the highest corporate
tax rate under the built-in gain rules. Furthermore, as a result of the merger,
and assuming the merger is treated as a tax-free reorganization under Section
368(a) of the Internal Revenue Code, Pan Pacific will succeed to various tax
attributes of Western, including any undistributed C corporation earnings and
profits of Western. If Western qualified as a real estate investment trust for
all years prior to the merger and the merger is treated as a tax-free
reorganization under the Internal Revenue Code, then Western will not have any
undistributed C corporation earnings and profits. If, however, Western failed to
qualify as a real estate investment trust for any year, then it is possible that
Pan Pacific would acquire undistributed C corporation earnings and profits from
Western. If Pan Pacific did not distribute these C corporation earnings and
profits prior to the end of its taxable year in which the merger occurs, Pan
Pacific would fail to qualify as a real estate investment trust. In addition,
after the merger, the asset and income tests described in "-- Pan Pacific's
Qualification as a Real Estate Investment Trust -- Income Tests" and "-- Asset
Tests" will apply to all of Pan Pacific's assets, including the assets it
acquires from Western, and to all of Pan Pacific's income, including the income
derived from the assets it
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acquires from Western. As a result, the nature of the assets that Pan Pacific
acquires from Western and the income derived from those assets may have an
effect on Pan Pacific's tax status as a real estate investment trust.
As is the case with Pan Pacific, qualification as a real estate investment
trust requires Western to satisfy numerous requirements, some on an annual
basis, others on a quarterly basis and still others on an ongoing basis,
established under highly technical and complex Internal Revenue Code provisions.
These include requirements relating to Western's:
- actual annual operating results;
- asset diversification;
- distribution levels; and
- diversity of stock ownership.
There are only limited judicial and administrative interpretations of these
requirements and qualification as a real estate investment trust involves the
determination of various factual matters and circumstances not entirely within
Western's control.
As a condition to closing, O'Melveny & Myers LLP will render an opinion to
the effect that, based on the facts, representations and assumptions stated
therein, commencing with its taxable year ended December 31, 1992, and without
regard to whether such opinion is true or accurate for any taxable year prior to
Western's taxable year ended December 31, 1992, Western was organized in
conformity with the requirements for qualification and taxation as a real estate
investment trust under the Internal Revenue Code, and its method of operation
has enabled Western to meet, through the effective time of the merger, the
requirements for qualification and taxation as a real estate investment trust
under the Internal Revenue Code.
Assuming the merger is treated as a reorganization under Section 368(a) of
the Internal Revenue Code, Western's tax basis in the assets transferred in the
merger will carry over to Pan Pacific. Because many of the properties owned by
Western have fair market values in excess of their tax bases, this lower tax
basis will cause Pan Pacific to have lower depreciation deductions and higher
gain on sale with respect to these properties than would have been the case if
these properties had been acquired in a taxable transaction.
Taxation of Taxable U.S. Stockholders. As used in this summary, the term
"U.S. stockholder" means a holder of shares of Pan Pacific common stock who is,
for United States federal income tax purposes:
- a citizen or resident of the United States;
- a corporation, partnership, or other entity created or organized in or
under the laws of the United States or of any state or in the District of
Columbia, unless, in the case of a partnership, Treasury Regulations
provide otherwise;
- an estate which is required to pay United States federal income tax
regardless of the source of its income; or
- a trust whose administration is under the primary supervision of a United
States court and which has one or more United States persons who have the
authority to control all substantial decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in Treasury
Regulations, some trusts in existence on August 20, 1996, and treated as U.S.
persons prior to this date that elect to continue to be treated as U.S. persons,
are also considered U.S. stockholders.
Distributions Generally. Distributions out of Pan Pacific's current or
accumulated earnings and profits not designated as capital gains dividends will
constitute dividends taxable to Pan Pacific's taxable U.S.
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stockholders as ordinary income. As long as Pan Pacific qualifies as a real
estate investment trust, these distributions will not be eligible for the
dividends-received deduction in the case of U.S. stockholders that are
corporations. For purposes of determining whether distributions to holders of
common stock are out of current or accumulated earnings and profits, earnings
and profits will be allocated first to outstanding preferred stock, if any, and
then to common stock.
To the extent that Pan Pacific makes distributions, other than capital gain
dividends discussed below, in excess of Pan Pacific's current and accumulated
earnings and profits, these distributions will be treated first as a tax-free
return of capital to each U.S. stockholder. This treatment will reduce the
adjusted tax basis each U.S. stockholder has in his shares of stock by the
amount of the distribution, but not below zero. Distributions in excess of a
U.S. stockholder's adjusted tax basis in its shares will be taxable as capital
gain, provided that the shares have been held as capital assets. This gain will
be taxable as long-term capital gain if the shares have been held for more than
one year. Dividends Pan Pacific declares in October, November, or December of
any year and payable to a stockholder of record on a specified date in any of
these months will be treated as both paid by Pan Pacific and received by the
stockholder on December 31 of that year, provided Pan Pacific actually pays the
dividend on or before January 31 of the following year. Stockholders may not
include in their own income tax returns any of Pan Pacific's net operating
losses or capital losses.
Capital Gain Distributions. Distributions that Pan Pacific properly
designates as capital gain dividends will be taxable to Pan Pacific's taxable
U.S. stockholders as gain, to the extent this gain does not exceed Pan Pacific's
actual net capital gain for the taxable year, from the sale or disposition of a
capital asset. Depending on the characteristics of the assets which produced
these gains, and on designations, if any, which Pan Pacific may make, these
gains may be taxable to non-corporate U.S. stockholders at a maximum 20% or 25%
rate. U.S. stockholders that are corporations may, however, be required to treat
up to 20% of some capital gain dividends as ordinary income.
Passive Activity Losses and Investment Interest Limitations. Distributions
Pan Pacific makes, and gain arising from the sale or exchange by a U.S.
stockholder of Pan Pacific's shares, will not be treated as passive activity
income. As a result, U.S. stockholders generally will not be able to apply any
"passive losses" against this income or gain. Distributions Pan Pacific makes,
to the extent they do not constitute a return of capital, generally will be
treated as investment income for purposes of computing the investment interest
limitation. Gain arising from the sale or other disposition of Pan Pacific's
shares, however, may not be treated as investment income depending upon a
shareholder's particular situation.
Retention of Net Long-Term Capital Gains. Pan Pacific may elect to retain,
rather than distribute as a capital gain dividend, Pan Pacific's net long-term
capital gains. If Pan Pacific makes this election, it would pay tax on its
retained net long-term capital gains. In addition, to the extent Pan Pacific
designates, a U.S. stockholder generally would:
- include its proportionate share of Pan Pacific's undistributed long-term
capital gains in computing its long-term capital gains in its return for
its taxable year in which the last day of Pan Pacific's taxable year
falls;
- be deemed to have paid the capital gains tax imposed on Pan Pacific on
the designated amounts included in the U.S. stockholder's long-term
capital gains;
- receive a credit or refund for the amount of tax deemed paid by it;
- increase the adjusted basis of its common stock by the difference between
the amount of includable gains and the tax deemed to have been paid by
it; and
- in the case of a U.S. stockholder that is a corporation, appropriately
adjust its earnings and profits for the retained capital gains as
required by Treasury Regulations to be prescribed by the Internal Revenue
Service.
Dispositions of Pan Pacific Common Stock. If you are a U.S. stockholder and
you sell or dispose of your shares of common stock in a taxable transaction, you
will recognize gain or loss for federal income
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tax purposes in an amount equal to the difference between the amount of cash and
the fair market value of any property you receive on the sale or other
disposition and your adjusted basis in the shares for tax purposes. This gain or
loss will be capital if you have held the common stock as a capital asset. This
gain or loss, except as provided below, will be long-term capital gain or loss
if you have held the common stock for more than one year. Long-term capital
gains of a non-corporate U.S. stockholder will generally be subject to a maximum
tax rate of 20%. In general, if you are a U.S. stockholder and you recognize
loss upon the sale or other disposition of common stock that you have held for
six months or less, the loss you recognize will be treated as a long-term
capital loss to the extent you received distributions from Pan Pacific which
were required to be treated as long-term capital gains.
Backup Withholding. Pan Pacific reports to its U.S. stockholders and the
Internal Revenue Service the amount of dividends paid during each calendar year
and the amount of any tax withheld. Under the backup withholding rules, a
stockholder may be subject to backup withholding at the rate of 31% with respect
to dividends paid unless the holder is a corporation or is otherwise exempt and,
when required, demonstrates this fact or provides a taxpayer identification
number, certifies as to no loss of exemption from backup withholding, and
otherwise complies with the backup withholding rules. A U.S. stockholder that
does not provide Pan Pacific with his correct taxpayer identification number may
also be subject to penalties imposed by the Internal Revenue Service. Backup
withholding is not an additional tax. Any amount paid as backup withholding will
be creditable against the shareholder's income tax liability. In addition, Pan
Pacific may be required to withhold a portion of capital gain distributions to
any stockholders who fail to certify their non-foreign status. See "-- Taxation
of Non-U.S. Stockholders."
TAXATION OF TAX-EXEMPT STOCKHOLDERS
The Internal Revenue Service has ruled that amounts distributed as
dividends by a qualified real estate investment trust do not constitute
unrelated business taxable income when received by a tax-exempt entity. Based on
that ruling, except as described below, dividend income from Pan Pacific and
gain arising upon a sale of shares generally will not be unrelated business
taxable income to a tax-exempt stockholder. This income or gain will be
unrelated business taxable income, however, if the tax-exempt stockholder holds
its shares as "debt financed property" within the meaning of the Internal
Revenue Code or if the shares are used in a trade or business of the tax-exempt
stockholder. Generally, debt financed property is property the acquisition or
holding of which was financed through a borrowing by the tax-exempt stockholder.
For tax-exempt stockholders that are social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts, and qualified
group legal services plans exempt from federal income taxation under Sections
501(c)(7), (c)(9), (c)(17) and (c)(20) of the Internal Revenue Code,
respectively, income from an investment in Pan Pacific's shares will constitute
unrelated business taxable income unless the organization is able to properly
claim a deduction for amounts set aside or placed in reserve for specific
purposes so as to offset the income generated by its investment in Pan Pacific's
shares. Prospective investors that are exempt from taxation under these
provisions of the Internal Revenue Code should consult their tax advisors
concerning these "set aside" and reserve requirements.
Notwithstanding the above, however, a portion of the dividends paid by a
"pension-held real estate investment trust" will be treated as unrelated
business taxable income as to specified tax exempt trusts which hold more than
10%, by value, of the interests in the real estate investment trust. A real
estate investment trust's tax status as a "pension held real estate investment
trust" depends, in part, on the ownership of its stock. As a result of the
limitations on the transfer and ownership of stock contained in its charter, Pan
Pacific does not expect to be classified as a "pension-held real estate
investment trust."
TAXATION OF NON-U.S. STOCKHOLDERS
The preceding discussion does not address the rules governing United States
federal income taxation of the ownership and disposition of common stock or
preferred stock by persons that are non-U.S. stockholders. As used in this
summary, the term "non-U.S. stockholder" means stockholders of Pan
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Pacific who are not U.S. stockholders. In general, non-U.S. stockholders may be
subject to special tax withholding requirements on distributions from Pan
Pacific and with respect to their sale or other disposition of Pan Pacific
common stock, except to the extent reduced or eliminated by an income tax treaty
between the United States and the non-U.S. stockholder's country. A non-U.S.
stockholder who is a stockholder of record and is eligible for reduction or
elimination of withholding must file an appropriate form with Pan Pacific in
order to claim this treatment. Non-U.S. stockholders should consult their tax
advisors concerning the federal income tax consequences to them of an
acquisition of shares of Pan Pacific common stock, including the federal income
tax treatment of dispositions of interests in and the receipt of distributions
from Pan Pacific.
OTHER TAX CONSEQUENCES
Pan Pacific may be required to pay state or local taxes in state or local
jurisdictions, including those in which Pan Pacific transacts business, and Pan
Pacific's stockholders may be required to pay state or local taxes in state or
local jurisdictions, including those in which they reside. Pan Pacific's state
and local tax treatment may not conform to the federal income tax consequences
summarized above. In addition, the state and local tax treatment of holders of
Pan Pacific common stock may not conform to the federal income tax consequences
summarized above. Consequently, holders of Pan Pacific common stock should
consult their tax advisors regarding the effect of state and local tax laws on
the acquisition, ownership, and disposition of Pan Pacific common stock.
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COMPARISON OF RIGHTS OF STOCKHOLDERS OF PAN PACIFIC
AND SHAREHOLDERS OF WESTERN PROPERTIES
GENERAL
Pan Pacific is incorporated in Maryland, and Western Properties is
organized as an unincorporated business trust governed by California law.
Immediately before the completion of the merger, Western Properties will
incorporate in California. This incorporation is necessary because California
law does not specifically allow for the merger of a California real estate
investment trust with a corporation, but it does allow for the merger of two
corporations. Upon the completion of the merger, Western Properties'
shareholders will become stockholders of Pan Pacific. The rights of Western
Properties' shareholders are governed currently by Western Properties' Amended
and Restated Declaration of Trust and California law. Once Western Properties'
shareholders become shareholders of Pan Pacific, their rights will be governed
by the Maryland General Corporation Law, the Pan Pacific charter and the Pan
Pacific bylaws.
Western Properties' Amended and Restated Declaration of Trust provides that
it is governed by the laws of California. Although some California statutes
specifically relate to business trusts, such as the California statute that
authorizes a business trust to convert into a corporation, the statutory law
governing California business trusts is much less extensive than the statutory
law governing California corporations. In the absence of statutory law, the
rights of Western Properties' shareholders are governed by California common
law. Common law consists of decisions and principles articulated by courts in
response to lawsuits. California courts have repeatedly stated the rule that a
California business trust is governed by its declaration of trust. Apart from
this general rule, there are few California common law principles that relate
specifically to business trusts. In matters about which a declaration of trust
is silent, California courts tend to apply the well-developed rules applicable
to traditional trusts. It remains unclear how a court would resolve many
potential conflicts between a business trust's declaration of trust and the
rules applicable to traditional trusts. For example, it is unclear whether a
court would give effect to the provisions of Western Properties' declaration of
trust that purport to lower its trustees' fiduciary duties from the strict
duties owed by a traditional common law trustee to a lesser standard. In
contrast, a corporation such as Pan Pacific is specifically authorized by
statutes, and the rights and liabilities of corporate shareholders, officers and
directors are governed by extensive bodies of statutory law and case law
interpreting those statutes.
CERTAIN MATERIAL DIFFERENCES BETWEEN THE RIGHTS OF STOCKHOLDERS OF PAN PACIFIC
AND SHAREHOLDERS OF WESTERN PROPERTIES
The following is a summary of the material differences between the rights
of Western Properties' shareholders and the rights of Pan Pacific's
stockholders. This summary does not purport to be a complete description of the
differences between the rights of Western Properties' shareholders and Pan
Pacific's stockholders.
<TABLE>
<CAPTION>
PAN PACIFIC/MARYLAND LAW WESTERN PROPERTIES/CALIFORNIA LAW
------------------------ ---------------------------------
<S> <C>
AUTHORIZED CAPITAL STOCK
The total number of authorized shares of Pan Western Properties is authorized to issue an
Pacific stock is 130,000,000, which consists unlimited number of common shares of
of 100,000,000 shares of common stock, par beneficial interest, without par value, and
value $.01 per share, and 30,000,000 shares 2,000,000 preferred shares of beneficial
of preferred stock, par value $.01 per interest, without par value.
share.
</TABLE>
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<TABLE>
<CAPTION>
PAN PACIFIC/MARYLAND LAW WESTERN PROPERTIES/CALIFORNIA LAW
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<S> <C>
VOTING RIGHTS
The Maryland General Corporation Law Each holder of Western Properties common
provides that, unless otherwise provided in shares is entitled to one vote per share and
a corporation's charter: to the same and identical voting rights as
other holders of Western Properties common
- each share of a corporation's stock is shares.
entitled to one vote;
- the presence in person or by proxy of
stockholders entitled to cast a majority
of all the votes entitled to be cast at a
meeting constitutes a quorum; and
- in matters other than the election and
removal of directors or the approval of
extraordinary transactions (discussed
below), a majority of all the votes cast
at a meeting at which a quorum is present
is sufficient to approve a matter which
properly comes before a stockholder
meeting.
The Maryland General Corporation Law limits There is no similar limitation under the
the voting rights of "control shares" held California common law of trust or Western
by persons who, directly or indirectly, have Properties' Amended and Restated Declaration
the power to exercise: of Trust.
- one-tenth or more, but less
than one-third;
- one-third or more, but less than a
majority; or
- a majority or more of all voting power in
the election of directors. See "-- State
Law Takeover Legislation."
The Pan Pacific bylaws provide that these
limitations on control shares do not apply
to acquisitions of shares of Pan Pacific.
However, the Pan Pacific bylaws provide that
the holders of a majority of the outstanding
shares of Pan Pacific common stock may
repeal the provision of the Pan Pacific
bylaws that removes such limitations and,
upon such repeal, a new bylaw may be adopted
that causes such limitations to apply
retroactively to prior acquisitions of
shares of Pan Pacific.
Subject to the restrictions on transfer of Western Properties' Amended and Restated
Pan Pacific common stock discussed in Declaration of Trust permits the Western
"Description of Pan Pacific Properties board to classify and issue
Stock -- Restrictions on Ownership and preferred stock in one or more series that
Transfer," each holder of Pan Pacific common may have voting power that differs from that
stock is entitled to one vote per share and of the Pan Pacific common stock and/or
to the same voting rights as other holders Western Properties common shares.
of Pan Pacific common stock. However, Pan
Pacific's charter permits the Pan Pacific
board to classify and issue Pan Pacific
preferred stock in one or more series that
may have voting powers that differ from
those of the Pan Pacific common stock. See
"Description of Pan Pacific Stock."
</TABLE>
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<TABLE>
<CAPTION>
PAN PACIFIC/MARYLAND LAW WESTERN PROPERTIES/CALIFORNIA LAW
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<S> <C>
ADVANCE NOTICE PROVISION
The Pan Pacific bylaws provide that with Western Properties' Amended and Restated
respect to an annual meeting of Declaration of Trust does not contain
stockholders, nominations of persons for restrictions on the business that may be
election to the Pan Pacific board and the conducted at an annual meeting of
proposal of business to be considered by shareholders. Also, Western Properties'
stockholders may be made only: Amended and Restated Declaration of Trust
- pursuant to Pan Pacific's notice of the does not impose any advance notice
meeting; requirements for submission of shareholder
proposals for consideration at an annual
- by the Pan Pacific board; or meeting. Western Properties is not aware of
any advance notice requirement for
- by a stockholder who is entitled to vote shareholder proposals under the California
at the meeting and has complied with the common law of trusts. However, in order for
advance notice procedures set forth in the a proposal to be included in the proxy
Pan Pacific bylaws, which generally statement relating to an annual meeting,
require delivery of a notice to the Western Properties' trustees have in the
Secretary of Pan Pacific not more than 90 past required that the proposal must have
days nor less than 60 days before the been received by Western Properties at least
first anniversary of the last annual 120 days before the first anniversary of the
meeting. mailing of the prior year's proxy statement,
With respect to special meetings of as permitted by the rules of the SEC.
stockholders, only the business specified in
Pan Pacific's notice of meeting may be With respect to special meetings of
brought before the meeting of stockholders. shareholders, only the business specified in
Nominations of persons for election to the Western Properties' notice of special
Pan Pacific board may be made at a special meeting may be brought before the meeting of
meeting of stockholders: shareholders.
- pursuant to Pan Pacific's notice of the
meeting;
- by the Pan Pacific board; or
- provided that the Pan Pacific board has
determined that directors shall be elected
at such meeting, by a stockholder who is
entitled to vote at the meeting and has
complied with the advance notice
procedures in the Pan Pacific bylaws,
which generally require delivery of a
notice to the Secretary of Pan Pacific not
earlier than 90 days before the special
meeting nor later than the later of 60
days before the meeting or ten days after
Pan Pacific's public announcement of the
date of the meeting and the nominees
proposed to be elected to the Pan Pacific
board.
For both annual and special meetings,
nominations and proposals of business to be
considered can only be made by persons who
were stockholders of record both at the time
of giving their notice and at the time of
the meeting.
</TABLE>
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<TABLE>
<CAPTION>
PAN PACIFIC/MARYLAND LAW WESTERN PROPERTIES/CALIFORNIA LAW
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<S> <C>
SIZE OF THE BOARD OF DIRECTORS
Under the Maryland General Corporation Law,
a corporation must have at least one
director. Subject to this provision, a
corporation's bylaws may alter the number of
directors and authorize a majority of the
entire board of directors to alter within
specified limits the number of directors set
by the corporation's charter or its bylaws.
The Pan Pacific charter and bylaws provide California's common law of trusts does not
that the number persons constituting the Pan require a business trust to have more than
Pacific board may not be less than the one trustee. The Amended and Restated
minimum number required by Maryland General Declaration of Trust requires Western
Corporation Law, nor more than 15. The Pan Properties' board of trustees to have not
Pacific bylaws provide that, within the less than three nor more than seven
parameters stated above, the number of trustees. Subject to that limit, the number
directors may be increased or decreased by of trustees is set by the trustees. There
resolution of a majority of the Pan Pacific are currently six trustees on the Western
board, except that the term of a directors Properties board of trustees.
may not be affected by a decrease in the
number of directors. The number of persons
currently constituting the Pan Pacific board
is five. Pursuant to the merger agreement,
at the effective time of the merger, the Pan
Pacific board will be increased to seven.
CLASSIFICATION OF THE BOARD OF DIRECTORS
The Maryland General Corporation Law permits
staggered terms for directors. If a
corporation has staggered terms for
directors, the term of each director may be
provided in the corporation's bylaws, except
that:
- the term of office of a director may not
be longer than five years or, except in
the case of an initial or substitute
director, shorter than the period between
annual meetings; and
- the term of office of at least one class
shall expire each year.
The directors of Pan Pacific are divided The trustees of Western Properties are
into three classes, as nearly equal in divided into three classes, with
number as possible, with the term of one approximately one-third of the trustees
class expiring each year. Consequently, elected by the shareholders annually.
members of the Pan Pacific board serve Consequently, members of the Western
staggered three-year terms. Properties board serve staggered three-year
terms.
</TABLE>
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<TABLE>
<CAPTION>
PAN PACIFIC/MARYLAND LAW WESTERN PROPERTIES/CALIFORNIA LAW
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<S> <C>
ELECTION OF THE BOARD OF DIRECTORS
The Maryland General Corporation Law Western Properties' Amended and Restated
provides that, unless its charter or bylaws Declaration of Trust provides that trustees
provide otherwise, which Pan Pacific's shall be elected by a vote of a majority of
charter and bylaws do not, a corporation's the shares represented in person or by proxy
directors shall be elected by a plurality of at an annual meeting of shareholders.
the votes cast at a meeting at which a
quorum is present.
Western Properties' Amended and Restated
Under the Maryland General Corporation Law, Declaration of Trust does not grant
a corporation's charter may provide that cumulative voting rights with respect to the
stockholders of a corporation can elect election of trustees to holders of Western
directors by cumulative voting. Neither the Properties shares.
Pan Pacific charter nor the Pan Pacific
bylaws grant cumulative voting rights with
respect to the election of directors to
holders of Pan Pacific common stock.
REMOVAL OF DIRECTORS
Under the Maryland General Corporation Law, Western Properties' Amended and Restated
unless the corporation's charter provides Declaration of Trust provides that any
otherwise, the stockholders of a corporation trustee may be removed from his office at
with a classified board of directors may any time by vote or written consent of the
remove any director, only for cause, by the holders of a majority of the outstanding
affirmative vote of a majority of all the shares of Western Properties, if such vote
votes entitled to be cast for the election or consent shall be joined with a
of directors. The Pan Pacific charter declaration by those so voting or
provides that directors may be removed only consenting, which sets forth their
for cause and only by the affirmative vote determination that the trustee so removed
of the holders of a majority of the votes has willfully violated any of the provisions
entitled to be cast in the election of the of Western Properties' Amended and Restated
directors. Declaration of Trust or that he has
willfully acted contrary to the interest of
the shareholders as a whole.
FILLING VACANCIES
Under the Pan Pacific charter and bylaws, Under the Western Properties Amended and Re-
vacancies on the Pan Pacific board caused by stated Declaration of Trust, vacancies in
the removal or resignation of a director may the Western Properties board caused by the
be filled by the vote of a majority of the death or resignation of a trustee may be
remaining directors or, if the vacancy is filled by the remaining trustees and the
caused by the removal of a director, by the appointee shall hold office for the
shareholders at an annual or special unexpired term of the predecessor. Vacancies
meeting, and the appointee shall hold office in the Western Properties board caused by
for the unexpired term of his predecessor. the removal of a trustee may be filled by
the shareholders at an annual or special
Newly created directorships may be filled by meeting.
a majority of the entire Pan Pacific board
and the appointee shall hold office until Newly created trusteeships may be filled by
the next election of directors by the the existing Western Properties trustees and
shareholders, or may be filled by the the appointee shall hold office until the
stockholders at an annual or special next annual meeting of shareholders.
meeting.
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STANDARD OF CONDUCT FOR DIRECTORS/TRUSTEES
Under Maryland law, the standard of conduct Under the California common law of trusts,
for directors is set forth in Section any trustee of a California business trust
2-405.1(a) of the Maryland General must act loyally, in good faith and within
Corporation Law, which requires that a the limits of his or her discretion. Western
director of a Maryland corporation perform Properties' Amended and Restated Declaration
his or her duties in "good faith," with a of Trust provides its trustees with full
reasonable belief that his or her actions discretionary control over Western
are "in the best interests of the Properties' assets, business and affairs to
corporation" and with the care of an the same extent as if the trustees were the
"ordinarily prudent person in a like sole owners of the assets, business and
position . . . under similar circumstances." affairs in their own right, subject only to
Section 2-405.1(c) provides that an act of a the limitations expressly stated in the
director is presumed to satisfy these Amended and Restated Declaration of Trust.
standards. Although Western Properties' trustees owe
fiduciary duties to Western Properties and
its shareholders, it is uncertain whether
their fiduciary duties are governed by the
principles of law and equity applicable to
traditional common law business trusts or by
the standards defined in the Amended and
Restated Declaration of Trust.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Maryland General Corporation Law Western Properties' Amended and Restated
requires a corporation, unless its charter Declaration of Trust provides that any
provides otherwise, which Pan Pacific's person made a party to any action, suit or
charter does not, to indemnify a director or proceeding or against whom a claim or
officer who has been successful, on the liability is asserted by reason of the fact
merits or otherwise, in the defense of any that he was or is a trustee, officer,
proceeding to which he is made a party by employee or agent of Western Properties or
reason of his service in that capacity. The active in such capacity on behalf of Western
Maryland General Corporation Law permits a Properties shall be indemnified and held
corporation to indemnify its present and harmless by Western Properties against
former directors and officers, among others, damages judgments, fines, amounts paid on
in connection with any proceeding to which account thereof and reasonable expenses,
they may be made a party by reason of their including attorneys' fees actually and
service in those or other capacities unless reasonably incurred by him in connection
it is established that: with the defense of such action, except that
Western Properties shall not indemnify any
- the act or omission of the director or person for any claim, obligation; or
officer was material to the matter giving liability which shall have been adjudicated,
rise to the proceeding and was committed or, in case of settlement, which in the
in bad faith or was the result of active opinion of counsel for Western Properties
and deliberate dishonesty; would, if adjudicated, have likely been
adjudicated to have arisen out of or been
- the director or officer actually received based upon such person's willful
an improper personal benefit in money, misfeasance, bad faith, gross negligence or
property or services; or reckless disregard of duty or for his
failure to act in good faith in the
- in the case of any criminal proceeding, reasonable belief that his action was in the
the director or officer had reasonable best interests of Western Properties.
cause to believe that the act or omission
was unlawful.
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The indemnity may include judgments,
penalties, fines, settlements and reasonable
expenses actually incurred by the director
or officer in connection with the
proceeding, except that if the proceeding is
one by or in the right of the corporation,
indemnification is not permitted with
respect to any proceeding in which the
director or officer has been adjudged to be
liable to the corporation. In addition, a
director or officer may not be indemnified
with respect to any proceeding charging
improper personal benefit to the director or
officer in which the director or officer was
adjudged to be liable on the basis that
personal benefit was improperly received.
Indemnification may be ordered by a court of
appropriate jurisdiction, both in connection
with proceedings by the corporation and
where the director or officer was adjudged
to be liable on the basis of improper
personal benefit, but only for expenses. The
termination of any proceeding by conviction
or upon a plea of nolo contendere or its
equivalent or an entry of an order of
probation prior to judgment creates a
rebuttable presumption that the director or
officer did not meet the requisite standard
of conduct required for permitted
indemnification. The termination of any
proceeding by judgment, order or settlement,
however, does not create a presumption that
the director or officer failed to meet the
requisite standard of conduct for permitted
indemnification.
In addition, the Maryland General
Corporation Law requires Pan Pacific, as a
condition to advancing expenses prior to
final disposition of the proceeding, to
obtain a written affirmation by the director
or officer of his good faith belief that he
has met the standard of conduct necessary
for indemnification by Pan Pacific and a
written undertaking by him or on his behalf
to repay the amount paid or reimbursed by
Pan Pacific if it is ultimately determined
that the standard of conduct was not met.
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The Pan Pacific charter permits Pan Pacific,
to the maximum extent permitted by Maryland
law, to obligate itself to indemnify and
advance expenses to any present or former
director or officer for any claim or
liability to which they may become subject
by reason of such status. The Pan Pacific
bylaws provide that Pan Pacific, to the
fullest extent permitted under the Maryland
General Corporation Law, will indemnify, and
pay expenses of, any person who is made a
party to any proceeding by reason of the
fact that such person is or was a director
or officer of Pan Pacific, or is or was
serving at the request of Pan Pacific as a
director, officer, trustee, partner, member,
agent or employee of another corporation,
partnership, limited liability company,
association, joint venture, trust or other
enterprise.
LIABILITY OF DIRECTORS AND OFFICERS
The Maryland General Corporation Law permits Western Properties' Amended and Restated
a Maryland corporation's charter to include Declaration of Trust provides that the
a provision expanding or limiting the trustees, officers, employees and agent of
liability of its directors and officers to Western Properties shall not be liable to
the corporation or its stockholders for Western Properties or to any other person
money damages, except for liability for any act or omission except for his or
resulting from: her own willful misfeasance, bad faith,
gross negligence or reckless disregard of
- actual receipt of an improper benefit or duty or his failure to act in good faith in
profit in money, property, or services to the reasonable belief that his actions are
the extent of the amount of the benefit or in the best interests of Western Properties.
profit actually received; or
- a judgment or other final adjudication
adverse to the person that is entered in a
proceeding based on a finding in the
proceeding that the person's action, or
failure to act, was the result of active
and deliberate dishonesty and was material
to the cause of action adjudicated in the
proceeding.
The Pan Pacific charter provides that, to
the fullest extent permitted by Maryland
law, Pan Pacific directors and officers are
not liable to Pan Pacific or its
stockholders for money damages. However,
these provisions do not limit the availa-
bility of equitable relief to Pan Pacific or
its stockholders.
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INSPECTION OF BOOKS AND RECORDS
The Maryland General Corporation Law Western Properties' Amended and Restated
provides that persons who together have been Declaration of Trust provides that the share
stockholders of record for more than six register for Western Properties, the books
months of at least 5% of the outstanding of account, and minutes of proceedings of
stock of any class of a Maryland corporation the shareholders and the board of trustees
may inspect and copy the corporation's books and of executive committees of the trustees,
of account and stock ledger, request and shall be open to inspection at any
receive a statement of the corporation's reasonable time upon the written demand of
affairs and request and receive a list of any shareholder, made upon the secretary or
its stockholders. In addition, any any assistant secretary of Western
stockholder of a Maryland corporation may Properties, for a purpose reasonably related
inspect and copy the bylaws, minutes of the to his interests as a shareholder, and shall
proceedings of stockholders and annual be exhibited at any time when required by
statements of affairs and request the the demand at any shareholders meeting of
corporation to provide a sworn statement ten percent of the shares represented at the
showing all stock and securities issued and meeting. Inspection by a shareholder may be
all consideration received by the made in person or by agent or attorney, and
corporation for such stock during the the right of such inspection includes the
preceding twelve months. right to make extracts. In addition, each
trustee has the right to inspect the records
and property of Western Properties.
CHARTER AMENDMENTS
The Maryland General Corporation Law allows Western Properties' Amended and Restated
a corporation to amend its charter if its Declaration of Trust provides that
board of directors adopts a resolution amendments to the Amended and Restated
setting forth the proposed amendment, Declaration of Trust may be initiated solely
declaring its advisability and directing by the Western Properties board. Any such
that it be submitted to the stockholders for amendment shall be in writing and shall
consideration and the stockholders of the require the affirmative vote or written
corporation approve the amendment by vote of consent of a majority of the trustees then
two-thirds of the votes entitled to be cast in office. Any changes must be approved by
on the matter. The Pan Pacific charter the holders of a majority of the shares of
provides that charter amendments must be Western Properties then outstanding. Any
approved by the stockholders by only a amendment that would change any rights with
majority of all votes entitled to be cast on respect to any outstanding securities of
the matter. Western Properties, by reducing the amount
payable thereon upon liquidation of Western
Properties, or by diminishing or eliminating
any voting rights pertaining thereto, must
be approved by the vote or written consent
of the holders of two-thirds of the
outstanding securities so affected. Any
amendments to Western Properties' Amended
and Restated Declaration of Trust that are
required for Western Properties' Amended and
Restated Declaration of Trust to comply with
the law may be effected by a majority vote
of the trustees without the need for a
shareholder vote.
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BYLAW AMENDMENTS
Under the Maryland General Corporation Law, Western Properties' Amended and Restated
the exclusive power to change the bylaws may Declaration of Trust authorizes the trustees
be vested in the stockholders or the to adopt, amend or repeal by-laws. Western
directors or shared by both groups. Properties currently does not have bylaws.
The Pan Pacific charter and bylaws vest the
power to adopt, alter and repeal the Pan
Pacific bylaws in the stockholders. Subject
to this power of the stockholders, the Pan
Pacific board is also authorized to adopt,
alter and repeal the Pan Pacific bylaws.
VOTE ON MERGER, CONSOLIDATION OR SALE OF SUBSTANTIALLY ALL ASSETS
Under the Maryland General Corporation Law, Western Properties' Amended and Restated
unless the charter provides otherwise, the Declaration of Trust does not impose
supermajority voting requirements for the
- sale, lease, exchange or transfer of all approval of mergers, sales of assets of
or substantially all of the assets of a Western Properties, or similar matters.
corporation not in the ordinary course of However, any amendment of Western
business conducted by it, and Properties' Amended and Restated Declaration
of Trust, whether in connection with a
- any merger, consolidation or share merger or otherwise, that materially and
exchange involving the corporation, adversely affects the rights of any
preferred shares issued by Western
requires approval by holders of two-thirds Properties, would require the consent of
of the shares of the corporation entitled to holders of two-thirds of the preferred
vote on such matters. Pan Pacific's charter shares. Western Properties currently has no
provides that each of these matters may be outstanding preferred shares.
approved by the stockholders by a majority
of all the votes entitled to be cast on the
matter.
The Maryland General Corporation Law also
provides that the vote of the stockholders
of a surviving corporation is not required
to approve a merger if:
- the merger does not reclassify or change
the terms of its outstanding stock or
otherwise amend the corporation's charter;
and
- the number of shares of stock of any class
or series outstanding immediately after
the merger becomes effective does not
increase by more than 20% of the number of
its shares of the same class or series
outstanding immediately before the merger
becomes effective.
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LIMITS ON OWNERSHIP AND TRANSFER OF SHARES
No person or entity may own, actually or Western Properties' Amended and Restated
constructively, more than 6.25% of Pan Declaration of Trust provides that Western
Pacific's outstanding common stock. Pan Properties may refuse to transfer shares to
Pacific's board of directors may, but is in a proposed transferee if the proposed
no event obligated to, permit ownership in transfer would, in the opinion of the
excess of 6.25% if it determines that Western Properties board, jeopardize the
permitting a higher level of ownership will status of Western Properties as a "real
not impair Pan Pacific's ability to qualify estate investment trust" under the Internal
as a real estate investment trust under the Revenue Code. In order to preserve Western
Internal Revenue Code. An owner of an Properties' status as a "real estate
interest in an entity, such as Revenue investment trust," not more than 50% in
Properties, Acktion Corporation, or LaSalle value of Western Properties' outstanding
Investment Management, Inc., which itself shares of capital stock may be owned,
holds, directly or indirectly, shares of Pan directly or indirectly, by five or fewer
Pacific common stock, is treated for this individuals (as defined in the Internal
purpose as holding a proportionate number Revenue Code to include certain entities)
the shares of Pan Pacific common stock held during the last half of a taxable year, and
by that entity. Percentage ownership is Western Properties shares must be
measured for this purpose using either the beneficially owned by 100 or more persons
monetary value or absolute number of common during at least 335 days of a taxable year
shares held, whichever measurement is more of 12 months or during a proportionate part
restrictive. To the extent any transfer of of a shorter taxable year.
Pan Pacific's common stock would cause a
stockholder or any other person or entity to
exceed the ownership limit described above,
that transfer will be void, and any shares
sought to be transferred in violation of the
ownership limit will be transferred
automatically by operation of law to a trust
for the benefit of a charitable organization
selected by Pan Pacific. The acquisition of
an interest in an entity that holds Pan
Pacific common stock and which causes that
entity to violate Pan Pacific's ownership
limit, or any greater limit permitted by Pan
Pacific's board of directors, would cause
the entity to be divested of a sufficient
number of shares of Pan Pacific common
stock, again in favor of a trust for the
benefit of a charitable organization, to
comply with the applicable limit. See
"Description of Pan Pacific
Stock -- Restrictions on Ownership and
Transfer."
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SHAREHOLDER MEETINGS
The Pan Pacific bylaws provide that an Western Properties' Amended and Restated
annual meeting of stockholders is to be held Declaration of Trust provides that annual
each year during the month of May, as meetings of shareholders are to be held each
designated by the Pan Pacific board, unless year between January 1 and May 16 at a
the board elects to hold the meeting in location determined by the board.
another month.
Under Western Properties' Amended and
Under the Maryland General Corporation Law, Restated Declaration of Trust, special
a special meeting of stockholders may be meetings of shareholders may be called at
called by the president, the board of any time and place by a majority of the
directors or any other person specified in trustees. The trustees are required to call
the corporation's charter or bylaws. Under a special meeting upon receipt of the
the Pan Pacific bylaws, a special meeting of written request of the holders of one-third
the stockholders of Pan Pacific may be of the outstanding shares of Western
called at any time by: Properties entitled to vote on any matter to
be voted on at such special meeting, which
- the Chief Executive Officer of Pan request shall specify the purpose or
Pacific; purposes for which such meeting is to be
called.
- the President of Pan Pacific; or
- the Pan Pacific board.
In addition, the Secretary of Pan Pacific is
required to call a special meeting of
stockholders upon the written request of
stockholders holding at least a majority of
all the votes entitled to be cast at a
special meeting. Such a request must state
the purpose of the meeting and matters
proposed to be acted on. The stockholders
calling such a special meeting are required
to pay the reasonably estimated costs of
preparing and mailing a notice of such a
meeting to the stockholders.
CORPORATE ACTION WITHOUT A MEETING
Because the Maryland General Corporation Law Western Properties' Amended and Restated
requires the unanimous written consent of Declaration of Trust permits any shareholder
all stockholders entitled to vote for action to be taken without a meeting if a
actions by written consent, it is unlikely written consent setting forth the action is
that stockholders of Pan Pacific will be signed by holders of a majority of all
able to take action by written consent under outstanding shares entitled to vote on such
the Maryland General Corporation Law. This action.
provision of the Maryland General
Corporation Law may deter hostile takeovers,
as a holder or group of holders controlling
a majority in interest of Pan Pacific common
stock will not be able to amend the Pan
Pacific bylaws or remove directors pursuant
to a stockholders' written consent unless
they obtain a unanimous written consent of
all stockholders or call a special meeting
of the stockholders. Any effect that this
provision may have on the operations of Pan
Pacific, however, is virtually eliminated
because the rules of the New York Stock
Exchange, Inc. generally prohibit listed
companies from using written consents in
lieu of meetings.
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DIVIDENDS
Under the Maryland General Corporation Law, Western Properties is not aware of any
the board of directors of a corporation has limitations imposed by the California common
the power to authorize and cause the law of trusts on the ability of a business
corporation to pay distributions in cash, trust to declare dividends. The Western
property or, subject to certain limitations, Properties Amended and Restated Declaration
securities of the corporation unless the of Trust requires Western Properties to
declaration of such distributions would be provide to each shareholder a statement
contrary to the corporation's charter. The identifying the source or sources to which
Maryland General Corporation Law further each distribution is charged.
provides that no distribution may be made:
- if the corporation would become unable to
pay its debts as they become due in the
usual course of business; or
- the corporation's total assets would be
less than the sum of its liabilities plus,
unless the charter permits otherwise, the
amount that would be needed, if the
corporation were to be dissolved at the
time of the distribution, to satisfy the
preferential rights upon dissolution of
stockholders whose preferential rights on
dissolution are superior to those
receiving the distribution.
APPRAISAL OR DISSENTERS' RIGHTS
Under the Maryland General Corporation Law, Shareholders of Western Properties do not
stockholders of a corporation are entitled currently have the right to dissent and
to dissenters' rights of appraisal in obtain payment for their shares in the event
connection with a: of mergers or similar transactions. However,
upon the completion of the incorporation,
- merger or consolidation; shareholders of Western Properties will
become shareholders of WPT, and will have
- share exchange, the right to dissent and obtain payment
under limited circumstances. Section 1300 of
- transfer of assets requiring stockholder the California General Corporation Law
approval; provides that a shareholder of a corporation
who is entitled to vote on a merger may
- amendment of charter which alters the require the corporation to purchase for
contract rights of any outstanding stock cash, at their fair market value, the shares
and substantially adversely affects owned by the shareholder, but only if
stockholder rights if the right to do so shareholders holding 5% or more of the
is not reserved in the charter; or corporation's common stock demand payment
for such shares. Because Western Properties
- certain business combinations. is not a corporation, Section 1300 of the
California General Corporation Code Law does
However, except with respect to certain not apply to it. It will apply to the
business combinations involving an shareholders of Western Properties once the
interested stockholder, stockholders Western Properties common shares are
generally have no dissenters' rights of converted into shares of common stock of WPT
appraisal with respect to their shares if: immediately before the merger between WPT
and Pan Pacific.
- the shares are listed on a national
securities exchange or are designated as
a national market system security on an
interdealer quotation system by the
National Association of Securities
Dealers, Inc. or is designated for
trading on the NASDAQ Small Cap Market;
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- the shares are that of the successor in
the merger, unless (1) the merger alters
the contractual rights of the shares as
expressly set forth in the charter and
the charter does not reserve the right
to do so or (2) the shares are to be
changed or converted in whole or in part
in the merger into something other than
either shares in the successor or cash,
scrip, or other rights or interests
arising out of provisions for the
treatment of fractional shares in the
successor;
- the shares are not entitled to be voted
on the transaction or the stockholder
did not own the shares on the record
date for determining stockholders
entitled to vote; or
- the charter provides that the holders of
the shares are not entitled to exercise
the rights of an objecting stockholder.
Accordingly, Pan Pacific stockholders are
generally not entitled to appraisal rights
because their shares are listed on the New
York Stock Exchange.
DERIVATIVE SUITS
There is no statutory right to bring a Western Properties' Amended and Restated
derivative suit under the Maryland General Declaration of Trust neither authorizes nor
Corporation Law; however, there is a clear prohibits its shareholders to bring a
common law right in Maryland to bring a derivative lawsuit in Western Properties'
derivative suit. name. Western Properties is not aware of any
dispute in which the shareholders of a
California business trust attempted to bring
a derivative action on behalf of the
business trust and, accordingly, it is
uncertain whether a court would permit
Western Properties' shareholders to maintain
a derivative suit.
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STATE LAW TAKEOVER LEGISLATION
Under the Maryland General Corporation Law, Western Properties is not aware of any anti-
many business combinations, including takeover limitations imposed by the
certain mergers, consolidations, share California common law of trusts or business
exchanges or significant asset transfers or trusts such as Western Properties.
issuances or reclassifications of equity
securities, between a Maryland corporation
and an interested stockholder who
beneficially owns 10% or more of the voting
power of the corporation's shares or an
affiliate or associate (as defined in the
Maryland General Corporation Law) of the
corporation who, at any time within the
two-year period prior to the date in
question, was the beneficial owner of 10% or
more of the voting power of the
then-outstanding voting stock of the
corporation or an affiliate of the
interested stockholder are prohibited for
five years after the most recent date on
which the interested stockholder becomes an
interested stockholder. Thereafter, any such
business combination must be recommended by
the board of directors of the corporation
and approved by the affirmative vote of at
least (1) 80% of the votes entitled to be
cast by holders of outstanding voting shares
of the corporation and (2) two-thirds of the
votes entitled to be cast by holders of
outstanding voting shares of the corporation
other than shares held by the interested
stockholder with whom (or with whose
affiliate) the business combination is to be
effected or by an affiliate or associate of
the interested stockholder, unless, among
other conditions, the corporation's common
stockholders receive a minimum price (as
defined in the Maryland General Corporation
Law) for their shares and the consid-
eration is received in cash or in the same
form as previously paid by the interested
stockholder for its shares. These provisions
of Maryland law do not apply, however, to
business combinations that are approved or
exempted by the board of directors of the
corporation prior to the time that the
interested stockholder becomes an interested
stockholder. Also, a person is not an
interested stockholder if, before the person
would otherwise have become an interested
stockholder, the board of directors approves
the transaction pursuant to which he would
otherwise have become an interested
stockholder.
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The Maryland General Corporation Law also
provides that "control shares" of a Maryland
corporation acquired in a "control share
acquisition" have no voting rights except to
the extent approved by a vote of two-thirds
of the votes entitled to be cast on the
matter, excluding shares owned by the
acquiror, by officers or by directors who
are employees of the corporation. "Control
shares" are voting shares which, if
aggregated with all other such shares
previously acquired by the acquiror, or in
respect of which the acquiror is able to
exercise or direct the exercise of voting
power (except solely by virtue of a
revocable proxy), would entitle the acquiror
to exercise voting power in electing
directors within one of the following ranges
of voting power:
- one-tenth or more but less than one-third,
- one-third or more but less than a
majority, or
- a majority or more of all voting power.
Control shares do not include shares the
acquiring person is then entitled to vote as
a result of having previously obtained
shareholder approval. A "control share
acquisition" means the acquisition of
control shares, subject to exceptions.
A person who has made or proposes to make a
control share acquisition, upon satisfaction
of various conditions (including an
undertaking to pay expenses), may compel the
board of directors of the corporation to
call a special meeting of stockholders to be
held within 50 days of demand to consider
the voting rights of the shares. If no
request for a meeting is made, the
corporation may itself present the question
at any stockholders meeting.
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If voting rights are not approved at the
meeting or if the acquiring person does not
deliver an acquiring person statement as
required by the statute, then the
corporation may generally redeem any or all
of the control shares (except those for
which voting rights have previously been
approved) for fair value determined, without
regard to the absence of voting rights for
the control shares, as of the date of the
last control share acquisition by the
acquiror or of any meeting of stockholders
at which the voting rights of such shares
are considered and not approved. If voting
rights for control shares are approved at a
stockholders meeting and the acquiror
becomes entitled to vote a majority of the
shares entitled to vote, all other
stockholders may exercise appraisal rights.
The fair value of the shares as determined
for purposes of such appraisal rights may
not be less than the highest price per share
paid by the acquiror in the control share
acquisition, and certain limitations and
restrictions otherwise applicable to the
exercise of appraisal rights do not apply in
the context of a control share acquisition.
The control share acquisition statute does
not apply to shares acquired in a merger,
consolidation or share exchange, if the
corporation is a party to the transaction,
or to acquisitions approved or exempted by a
provision in the charter or bylaws of the
corporation adopted before the acquisition
of shares. The Pan Pacific bylaws contain a
provision which generally makes the control
share acquisition statute inapplicable to
Pan Pacific, unless and until this provision
is repealed.
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PAN PACIFIC/MARYLAND LAW WESTERN PROPERTIES/CALIFORNIA LAW
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POTENTIAL ANTI-TAKEOVER EFFECT OF CHARTER DOCUMENTS
The Pan Pacific charter contains provisions Western Properties' Amended and Restated
limiting the ability of holders of its stock Declaration of Trust of Western Properties
to own more than a specified percentage (by provides that Western Properties may refuse
numbers or value, whichever is more to transfer shares to a proposed transferee
restrictive) of its stock. See "Description if the proposed transfer would, in the
of Pan Pacific Stock -- Restrictions on opinion of the Western Properties board,
Ownership and Transfer." jeopardize the status of Western Properties
as a "real estate investment trust" under
The issuance of Pan Pacific preferred stock, the Internal Revenue Code. This restriction
in some circumstances, may deter or makes it much more difficult for a third
discourage takeover attempts and other party to acquire control over Western
changes in control of Pan Pacific by making Properties.
it more difficult for a person who has
gained a substantial equity interest in Pan
Pacific to obtain control or to exercise
control effectively.
These and other provisions are expected to
discourage various types of coercive
takeover practices and inadequate takeover
bids and to encourage persons seeking to
acquire control of Pan Pacific to negotiate
first with the Pan Pacific board.
LIABILITY OF SHAREHOLDERS
In general, the limited liability of California courts have held a business
corporate shareholders, including Pan trust's shareholders liable for the debts
Pacific shareholders, is settled under and other obligations of their trust in
Maryland law. cases where the declaration of trust does
not contain a limitation on such liability
and where the trust was subject to pervasive
control by its shareholders. By contrast,
Western Properties' Amended and Restated
Declaration of Trust provides that no
shareholder shall be personally liable for
the debts or other obligations of Western
Properties; it also provides that, subject
to some exceptions, Western Properties'
affairs shall be entrusted to the exclusive
management and control of the trustees.
Accordingly, Western Properties believes
that a California court would not subject
its shareholders to personal liability for
Western Properties' debts and obligations.
Nonetheless, it is possible that the share-
holders of Western Properties might be held
personally liable under the laws of other
states for Western Properties' obligations
and for certain types of liabilities. These
include tort claims, contract claims where
the above-described disavowal of liability
is not effective, claims for taxes and other
types of statutory liabilities.
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PAN PACIFIC/MARYLAND LAW WESTERN PROPERTIES/CALIFORNIA LAW
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RESTRICTIONS ON ASSETS AND INVESTMENTS
Neither the Pan Pacific charter nor the Pan The Western Properties Amended and Restated
Pacific bylaws specify any restrictions on Declaration of Trust provides that Western
the assets or investments of Pan Pacific. Properties may not do the following:
However, the Pan Pacific charter does
provide that the Pan Pacific board shall use - Invest in commodities.
reasonable best efforts to take such actions
as are necessary or appropriate to preserve - Invest more than 10% of its assets in debt
Pan Pacific's status as a real estate secured by unimproved land.
investment trust.
- Invest in subordinated debt, subject to
some exceptions
- Invest in unrecorded contracts for the
sale of real estate.
- Engage in short sales or borrow on an
unsecured basis if the total amount of all
liabilities of Western Properties would
then exceed the total fair market value of
all assets of Western Properties.
- Engage in trading activities.
- Buy securities of any company holding
investments that Western Properties may not
make.
- Underwrite or distribute the securities
issued by others.
- Issue warrants or options, except in the
case of employee benefit plans, as part of a
financing arrangement or in an issuance to
all shareholders.
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DESCRIPTION OF PAN PACIFIC STOCK
The following description of the terms of Pan Pacific stock is only a
summary. For a complete description, you are referred to the Maryland General
Corporation Law and Pan Pacific's charter and bylaws. Pan Pacific has filed its
charter and bylaws with the SEC as exhibits to previous Pan Pacific registration
statements. See "Where You Can Find More Information" on page 129.
GENERAL
Pan Pacific's charter provides that it may issue up to 100,000,000 shares
of common stock, $.01 par value per share, and up to 30,000,000 shares of
preferred stock, $.01 par value per share. As of September 29, 2000, 21,252,512
shares of common stock and no shares of preferred stock were issued and
outstanding. Under the Maryland General Corporation Law, Pan Pacific's
stockholders generally are not liable for its debts or obligations.
COMMON STOCK
All issued and outstanding shares of Pan Pacific common stock are duly
authorized, fully paid and nonassessable. Holders of Pan Pacific common stock
are entitled to receive dividends when authorized by Pan Pacific's board of
directors out of assets legally available for the payment of dividends. They are
also entitled to share ratably in Pan Pacific's assets legally available for
distribution to its stockholders in the event of the liquidation, dissolution or
winding up of Pan Pacific, after payment of or adequate provision for all of Pan
Pacific's known debts and liabilities. These rights are subject to the
preferential rights of any other class or series of Pan Pacific stock and to the
provisions of Pan Pacific's charter regarding restrictions on transfer of Pan
Pacific's stock.
Subject to Pan Pacific charter restrictions on transfer of its stock, each
outstanding share of Pan Pacific common stock entitles the holder to one vote on
all matters submitted to a vote of stockholders, including the election of
directors. Except as provided by the terms of any other class or series of stock
of Pan Pacific, the holders of Pan Pacific common stock will possess the
exclusive voting power. There is no cumulative voting in the election of
directors, which means that the holders of a majority of the voting power of Pan
Pacific stock can elect all of the directors then standing for election, and the
holders of the remaining shares may not be able to elect any directors.
Except for Revenue Properties (U.S.), Inc.'s right to purchase a
proportionate interest of certain issuances of Pan Pacific common stock, holders
of Pan Pacific common stock have no preference, conversion, exchange, sinking
fund, redemption or appraisal rights and have no preemptive rights to subscribe
for any of Pan Pacific's securities. Subject to Pan Pacific charter restrictions
on transfer of stock, all shares of Pan Pacific common stock have equal
dividend, liquidation and other rights.
Under the Maryland General Corporation Law, a Maryland corporation
generally cannot dissolve, amend its charter, merge, sell all or substantially
all of its assets, engage in a share exchange or engage in similar transactions
outside the ordinary course of business, unless approved by the affirmative vote
of stockholders holding at least two-thirds of the shares entitled to vote on
the matter. However, a Maryland corporation may provide in its charter for
approval of these matters by a lesser percentage, but not less than a majority
of all of the votes entitled to be cast on the matter. Pan Pacific's charter
provides that these matters may be approved by the affirmative vote of
stockholders holding a majority of all the votes entitled to be cast on the
matter.
POWER TO RECLASSIFY UNISSUED SHARES OF PAN PACIFIC STOCK
Pan Pacific's charter authorizes its board of directors to classify and
reclassify any unissued shares of its common stock and preferred stock into
other classes or series of stock. Prior to the issuance of shares of each class
or series, the Pan Pacific board is required by Maryland law and by Pan
Pacific's charter to set, subject to charter restrictions on transfer of stock,
the terms, preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms or
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conditions of redemption for each class or series. Thus, the Pan Pacific board
could authorize the issuance of shares of preferred stock with terms and
conditions which could have the effect of delaying, deferring or preventing a
transaction or a change in control that might involve a premium price for
holders of Pan Pacific common stock or otherwise be in their best interest. No
shares of Pan Pacific's preferred stock are presently outstanding and Pan
Pacific has no present plans to issue any preferred stock.
POWER TO ISSUE ADDITIONAL SHARES OF COMMON STOCK AND PREFERRED STOCK
Pan Pacific believes that the power to issue additional shares of common
stock or preferred stock and to classify or reclassify unissued shares of common
or preferred stock and thereafter to issue the classified or reclassified shares
provides it with increased flexibility in structuring possible future financings
and acquisitions and in meeting other needs which might arise. These actions can
be taken without stockholder approval, unless stockholder approval is required
by applicable law or the rules of any stock exchange or automated quotation
system on which Pan Pacific securities may be listed or traded. Although Pan
Pacific has no present intention of doing so, it could issue a class or series
of stock that could delay, defer or prevent a transaction or a change in control
of Pan Pacific that might involve a premium price for holders of its common
stock or otherwise be in their best interest.
RESTRICTIONS ON OWNERSHIP AND TRANSFER
For Pan Pacific to qualify as a real estate investment trust under the
Internal Revenue Code, subject to specified exceptions, no more than 50% in
value of its outstanding shares of stock may be owned, actually or
constructively, by five or fewer individuals (as defined in the Internal Revenue
Code to include specified entities) during the last half of a taxable year
(other than the first year for which an election to be treated as a real estate
investment trust has been made). In addition, if Pan Pacific, or an owner of 10%
or more of Pan Pacific, actually or constructively owns 10% or more of a tenant
of Pan Pacific's (or a tenant of any partnership in which Pan Pacific is a
partner), the rent received by Pan Pacific (either directly or through any such
partnership) from such tenant will not be qualifying income for purposes of the
real estate investment trust gross income tests of the Internal Revenue Code. A
real estate investment trust's stock must also be beneficially owned by 100 or
more persons during at least 335 days of a taxable year of twelve months or
during a proportionate part of a shorter taxable year (other than the first year
for which an election to be treated as a real estate investment trust has been
made).
Pan Pacific's charter contains restrictions on the ownership and transfer
of its common stock which is intended to assist it in complying with the
Internal Revenue Code's requirement for qualification as a real estate
investment trusts. The ownership limit set forth in Pan Pacific's charter
provides that, subject to specified exceptions, no person or entity may own more
than 6.25% (by number or value, whichever is more restrictive) of the
outstanding shares of Pan Pacific common stock. Pan Pacific's charter also (i)
prohibits any person from actually or constructively owning shares of its common
stock that would result in it being "closely held" under Section 856(h) of the
Internal Revenue Code or otherwise cause it to fail to qualify as a real estate
investment trust, and (ii) voids any transfer of its common stock that would
result in shares of its common stock being owned by fewer than 100 persons. The
constructive ownership rules of the Internal Revenue Code are complex, and may
cause shares of Pan Pacific common stock owned actually or constructively by a
group of related individuals and/or entities to be constructively owned by one
individual or entity. As a result, the acquisition of less than 6.25% of the
shares of Pan Pacific's common stock (or the acquisition of an interest in an
entity, such as Revenue Properties Company Limited, Acktion Corporation, a
Canadian corporation, and/or certain affiliates or subsidiaries of these
entities, that own, actually or constructively, Pan Pacific common stock) by an
individual or entity, could, nevertheless cause that individual or entity, or
another individual or entity, to own constructively in excess of 6.25% of Pan
Pacific's outstanding common stock and thus violate the 6.25% ownership limit,
or such other limit as provided in its charter or as otherwise permitted by its
board of directors. For example, an increase in the proportionate ownership
interest in Revenue Properties Company Limited held by Mark Tanz, Stuart Tanz or
any other Tanz family members, or some other individual or entity, could cause
one or more members of the Tanz family or such other individual or entity to
violate the 6.25% ownership
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limit, or such other limit as provided in Pan Pacific's charter or as otherwise
permitted by its board of directors. Pan Pacific's board of directors may, but
in no event will be required to, waive the 6.25% ownership limit with respect to
a particular stockholder if it determines that such ownership will not
jeopardize Pan Pacific's status as a real estate investment trust. As a
condition of such waiver, Pan Pacific's board of directors may require a ruling
from the Internal Revenue Service or an opinion of counsel satisfactory to it
and shall obtain undertakings or representations from the applicant with respect
to preserving its real estate investment trust status. Pan Pacific's board of
directors has obtained such undertakings and representations from Revenue
Properties (U.S.), Inc. and, as a result, has waived the 6.25% ownership limit
with respect to Revenue Properties (U.S.), Inc. and its affiliates and has
permitted Revenue Properties (U.S.), Inc. to own up to 55.0% of the outstanding
Pan Pacific common stock. Pan Pacific's board of directors has also obtained
such undertakings and representations from the Tanz family and, as a result, has
waived the 6.25% ownership limit with respect to the Tanz family and has
permitted the Tanz family to own, in the aggregate, actually or constructively
(including through the ownership of stock of Revenue Properties (U.S.), Inc. or
Revenue Properties Company Limited), up to 24.0% (by number of shares or value,
whichever is more restrictive) of the outstanding Pan Pacific common stock.
Likewise, Pan Pacific's board of directors has waived the 6.25% ownership limit
with respect to Acktion Corporation and certain entities affiliated with such
corporation, and has permitted such entity to actually or constructively own up
to 12.0% (by number of shares or value, whichever is more restrictive) of the
outstanding Pan Pacific common stock.
Any person who acquires or attempts or intends to acquire actual or
constructive ownership of shares of Pan Pacific stock, including by acquiring
shares of Revenue Properties (U.S.), Inc., Revenue Properties Company Limited,
Acktion Corporation and/or entities affiliated with any of the foregoing
companies, that will or may violate any of the foregoing restrictions on
transferability and ownership, is required to give written notice immediately to
us and provide us with such other information as we may request in order to
determine the effect of such transfer on Pan Pacific's status as a real estate
investment trust. The foregoing restrictions on transferability and ownership
will not apply if Pan Pacific's board of directors determines, and such
determination is approved by the affirmative vote of the holders of not less
than two-thirds of all votes entitled to be cast on the matter, that it is no
longer in Pan Pacific's best interest to attempt to qualify, or to continue to
qualify, as a real estate investment trust. Except as otherwise described above,
any change in the 6.25% ownership limit would require an amendment to Pan
Pacific's charter. Amendments to Pan Pacific's charter require the affirmative
vote of a majority of all votes entitled to be cast on that matter.
Pursuant to Pan Pacific's charter, if any purported transfer of its common
stock or any other event would otherwise result in any person violating the
6.25% ownership limit or such other limit as provided in Pan Pacific's charter
or as otherwise permitted by Pan Pacific's board of directors (including, but
not limited to, the Revenue Properties (U.S.), Inc. ownership limit, the Tanz
family ownership limit and the Acktion ownership limit), then any such transfer
will be void and of no force or effect with respect to the prohibited transferee
as to that number of shares in excess of the ownership limit or such other
limit, and the prohibited transferee shall acquire no right or interest (or, in
the case of any event other than a prohibited transfer, the person or entity
holding record title to any such excess shares, referred to as a prohibited
owner, shall cease to own any right or interest) in such excess shares.
Furthermore, an acquisition or increase in the actual or constructive ownership
of stock in Revenue Properties Company Limited, Revenue Properties (U.S.), Inc.
or Acktion Corporation by one or more members of the Tanz family, or some other
individual or entity, or the actual or constructive acquisition by Revenue
Properties (U.S.), Inc. or Acktion Corporation of additional shares of Pan
Pacific's common stock (referred to as a "violative indirect transfer"), could
result in our disqualification as a real estate investment trust. In such
circumstances, pursuant to Pan Pacific's charter, Pan Pacific will treat Revenue
Properties (U.S.), Inc. or Acktion Corporation as applicable, as a prohibited
owner with respect to the number of shares of Pan Pacific common stock owned by
it which, if divested, would permit Pan Pacific to continue to maintain its real
estate investment trust status. Any such excess shares described above will be
transferred automatically, pursuant to Pan Pacific's charter, to a trust, the
beneficiary of which will be a qualified charitable organization selected by Pan
Pacific. Such automatic transfer shall be deemed to be effective as
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of the close of business on the business day prior to the date of such violative
transfer (including any violative indirect transfer). Within 20 days of
receiving notice from Pan Pacific of the transfer of shares to the trust, the
trustee of the trust (who shall be designated by us and be unaffiliated with us
and any prohibited transferee or prohibited owner) will be required to sell such
excess shares to a person or entity who could own such shares without violating
the 6.25% ownership limit, or such other limit as provided in Pan Pacific's
charter or as otherwise permitted by its board of directors, and distribute to
the prohibited transferee or prohibited owner an amount equal to the lesser of
the price paid by the prohibited transferee or prohibited owner for such excess
shares or the sales proceeds received by the trust for such excess shares. In
the case of any excess shares resulting from any event other than a transfer
(such as a violative indirect transfer), or from a transfer for no consideration
(such as a gift), the trustee will be required to sell such excess shares to a
qualified person or entity and distribute to the prohibited owner an amount
equal to the lesser of the fair market value (as defined in Pan Pacific's
charter) of such excess shares as of the date of such event or the sales
proceeds received by the trust for such excess shares. In either case, any
proceeds in excess of the amount distributable to the prohibited transferee or
prohibited owner, as applicable, will be distributed to the qualified charitable
organization selected by Pan Pacific. Prior to a sale of any such excess shares
by the trust, the trustee will be entitled to receive, in trust for the
qualified charitable organization selected by Pan Pacific, all dividends and
other distributions paid by Pan Pacific with respect to such excess shares, and
also will be entitled to exercise all voting rights with respect to such excess
shares. Subject to Maryland law, effective as of the date that such shares have
been transferred to the trust, the trustee shall have the authority (at the
trustee's sole discretion) (i) to rescind as void any vote cast by a prohibited
transferee or prohibited owner, as applicable, prior to Pan Pacific's discovery
that such shares have been transferred to the trust and (ii) to recast such vote
in accordance with the desires of the trustee acting for the benefit of the
qualified charitable organization selected by Pan Pacific. However, if Pan
Pacific has already taken irreversible corporate action, then the trustee shall
not have the authority to rescind and recast such vote. Any dividend or other
distribution paid to the prohibited transferee or prohibited owner (prior to Pan
Pacific's discovery that such shares had been automatically transferred to a
trust as described above) will be required to be repaid to the trustee upon
demand for distribution to the qualified charitable organization selected by Pan
Pacific. In the event that the transfer to the trust as described above is not
automatically effective (for any reason) to prevent violation of the 6.25%
ownership limit or such other limit as provided in Pan Pacific's charter or as
otherwise permitted by Pan Pacific's board of directors, then Pan Pacific's
charter provides that the transfer of the excess shares will be void or, in the
case of a violative indirect transfer, the excess shares will be redeemable by
Pan Pacific at its sole option at a price equal to the fair market value of such
shares at the time of the violative indirect transfer.
In addition, shares of Pan Pacific stock held in the trust shall be deemed
to have been offered for sale to it, or its designee, at a price per share equal
to the lesser of (i) the price per share in the transaction that resulted in
such transfer to the trust (or, in the case of a devise, gift or transfer, the
fair market value at the time of such devise, gift or transfer) and (ii) the
fair market value on the date Pan Pacific, or its designee, accepts such offer.
Pan Pacific shall have the right to accept such offer until the trustee has sold
the shares of stock held in the trust. Upon such a sale to Pan Pacific, the
interest of the qualified charitable organization selected by Pan Pacific in the
shares sold shall terminate and the trustee shall distribute the net proceeds of
the sale to the prohibited transferee or prohibited owner.
If any purported transfer of shares of Pan Pacific common stock would cause
Pan Pacific to be beneficially owned by fewer than 100 persons, such transfer
will be null and void in its entirety and the intended transferee will acquire
no rights to the stock.
All certificates representing shares of Pan Pacific common stock will bear
a legend referring to the restrictions described above. The foregoing ownership
limitations could delay, defer or prevent a transaction or a change in control
of Pan Pacific that might involve a premium price for Pan Pacific common stock
or otherwise be in the best interest of its stockholders.
Every owner of a specified percentage (or more) of the outstanding shares
of Pan Pacific common stock must file a completed questionnaire with Pan Pacific
containing information regarding their
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ownership of such shares, as set forth in the Treasury Regulations. Under
current Treasury Regulations, the percentage will be set between 0.5% and 5.0%,
depending upon the number of record holders of Pan Pacific shares. In addition,
pursuant to Pan Pacific's charter, each stockholder shall upon demand be
required to disclose to Pan Pacific in writing such information as it may
request in order to determine the effect, if any, of such stockholder's actual
and constructive ownership of Pan Pacific common stock on Pan Pacific's status
as a real estate investment trust and to ensure compliance with the 6.25%
ownership limit, or such other limit as provided in Pan Pacific's charter or as
otherwise permitted by its board of directors.
AMENDMENT TO THE 2000 STOCK INCENTIVE PLAN OF PAN PACIFIC
Pan Pacific's 2000 Stock Incentive Plan was adopted by the Pan Pacific
board on March 17, 2000 and approved by Pan Pacific stockholders on May 5, 2000.
The number of shares of Pan Pacific common stock reserved for issuance under the
2000 Stock Incentive Plan is 489,971. As of the record date, an aggregate of
344,971 shares were available for future grant under the stock incentive plan.
In September 2000, the Pan Pacific board amended the stock incentive plan,
subject to the approval of Pan Pacific stockholders, to increase the shares
reserved for issuance thereunder by 1,296,724 shares to an aggregate of
1,786,695 shares. Pan Pacific stockholders are being asked to approve this share
increase at the Pan Pacific special meeting. The Pan Pacific board believes that
increasing the number of shares available under the stock incentive plan is
necessary in order to allow the combined company to attract, retain and motivate
employees.
The principal features of the 2000 Stock Incentive Plan of Pan Pacific, as
proposed to be modified, are described below:
GENERAL
The stock incentive plan authorizes the grant to employees of Pan Pacific
and its majority-owned subsidiary corporations of options that qualify as
incentive stock options under Section 422 of the Internal Revenue Code. The
stock incentive plan also authorizes the grant to Pan Pacific's employees,
consultants, and non-employee directors and employees of Pan Pacific and its
majority-owned subsidiary corporations of non-qualified stock options, stock
purchase rights, stock appreciation rights and other awards.
PURPOSE
The purposes of the stock incentive plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to Pan Pacific's employees, consultants, and directors and
to promote the success of Pan Pacific's business.
STOCK SUBJECT TO THE STOCK INCENTIVE PLAN
The shares of stock subject to the stock incentive plan are shares of Pan
Pacific common stock. Under the terms of the stock incentive plan, the aggregate
number of shares of Pan Pacific common stock subject to options, stock purchase
rights, stock appreciation rights and other awards will be no more than
1,786,695. In addition, the maximum number of shares which may be subject to
options, stock purchase rights, stock appreciation rights and other awards
granted under the stock incentive plan to any individual in any calendar year
may not exceed 400,000. The Pan Pacific board or a committee of the board
appointed to administer the stock incentive plan shall have the authority in its
discretion to appropriately adjust:
- the aggregate number of shares of Pan Pacific common stock subject to the
stock incentive plan;
- the number and kind of shares of Pan Pacific common stock subject to
outstanding options, stock purchase rights, stock appreciation rights and
other awards; and
- the price per share of outstanding options, stock purchase rights, stock
appreciation rights and other awards;
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if there is any stock dividend, stock split, recapitalization, or other
subdivision, combination or reclassification of shares of Pan Pacific common
stock.
Shares subject to expired or canceled options will be available for future
grant or sale under the stock incentive plan. In addition, shares which are
delivered to Pan Pacific by an optionee or withheld by Pan Pacific (a) upon the
exercise of an award in payment of the exercise price, (b) for tax withholding
purposes, or (c) upon the repurchase by Pan Pacific or the surrender by a holder
of restricted shares, may again be optioned, granted or awarded under the stock
incentive plan. No shares may be optioned, granted or awarded under the stock
incentive plan, however, if such action would cause an incentive stock option to
fail to qualify as an "incentive stock option" under Section 422 of the Internal
Revenue Code.
AWARDS UNDER THE STOCK INCENTIVE PLAN
The stock incentive plan provides that the administrator may grant or issue
stock options, stock appreciation rights, restricted stock, deferred stock,
dividend equivalents, performance awards, stock payments and other stock related
benefits, or any combination thereof. Each award will be set forth in a separate
agreement with the person receiving the award and will indicate the type, terms
and conditions of the award.
Nonqualified Stock Options will provide for the right to purchase Pan
Pacific common stock at a specified price which, except with respect to
nonqualified stock options intended to qualify as performance-based compensation
under Section 162(m) of the Internal Revenue Code, may be less than fair market
value on the date of grant (but not less than par value), and usually will
become exercisable (in the discretion of the administrator) in one or more
installments after the grant date. Nonqualified stock options may be granted for
any term specified by the administrator.
Director Options are nonqualified stock options granted to non-employee
directors of Pan Pacific pursuant to a formula. During the term of the stock
incentive plan and subject to the stock ownership limit, each person who is a
non-employee director shall automatically be granted (a) an option to purchase
six thousand (6,000) shares of Pan Pacific common stock (subject to adjustment
as provided in the stock incentive plan) on the date of his or her initial
election to the Pan Pacific board and (b) an option to purchase six thousand
(6,000) shares of Pan Pacific common stock (subject to adjustment as provided in
the stock incentive plan) on the date of the March meeting of the compensation
committee of the Pan Pacific board, during which the compensation levels for
directors, senior executives and other employees are determined, in each year
after such initial election to the Pan Pacific board. Members of the Pan Pacific
board who are employees of Pan Pacific who subsequently terminate their
employment with Pan Pacific and remain on the Pan Pacific board will not receive
an initial option grant pursuant to clause (a) of the preceding sentence, but to
the extent that they are otherwise eligible, will receive, after termination of
employment with Pan Pacific, options as described in clause (b) of the preceding
sentence. The exercise price of the director options shall be 100% of the fair
market value of a share of Pan Pacific common stock on the date of grant.
No such grants of options will be made to a non-employee director under the
stock incentive plan in the same calendar year that this director received an
automatic grant of options under the 1997 Stock Option and Incentive Plan of Pan
Pacific.
Incentive Stock Options will be designed to comply with the provisions of
the Internal Revenue Code and will be subject to certain restrictions contained
in the Internal Revenue Code. Among such restrictions, incentive stock options
must have an exercise price not less than the fair market value of a share of
Pan Pacific common stock on the date of grant, may only be granted to employees,
must expire within a specified period of time following the optionee's
termination of employment, and must be exercised within ten years after the date
of grant; but may be subsequently modified to disqualify them from treatment as
incentive stock options. In the case of an incentive stock option granted to an
individual who owns (or is deemed to own) more than 10% of the total combined
voting power of all classes of stock of Pan Pacific, the stock incentive plan
provides that the exercise price must be at least 110% of the fair
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market value of a share of Pan Pacific common stock on the date of grant and the
incentive stock option must expire no later than the fifth anniversary of the
date of its grant.
Restricted Stock may be sold to participants at various prices and made
subject to such restrictions as may be determined by the administrator.
Restricted stock, typically, may be repurchased by Pan Pacific at the original
purchase price if the conditions or restrictions are not met. In general,
restricted stock may not be sold, or otherwise hypothecated or transferred
except to certain permitted transferees as set forth in the stock incentive
plan, until restrictions are removed or expire. Purchasers of restricted stock,
unlike recipients of options, will have voting rights and will receive dividends
prior to the time when the restrictions lapse.
Deferred Stock may be awarded to participants, typically without payment of
consideration, but subject to vesting conditions based on performance criteria
established by the administrator. Like restricted stock, deferred stock may not
be sold, or otherwise hypothecated or transferred except to certain permitted
transferees as set forth in the stock incentive plan, until vesting conditions
are removed or expire. Unlike restricted stock, deferred stock will not be
issued until the deferred stock award has vested, and recipients of deferred
stock generally will have no voting or dividend rights prior to the time when
vesting conditions are satisfied.
Stock Appreciation Rights may be granted in connection with stock options
or other awards, or separately. Stock appreciation rights granted by the
administrator in connection with stock options or other awards typically will
provide for payments to the holder based upon increases in the fair market value
of Pan Pacific common stock over the exercise price of the related option or
other awards. A stock appreciation right entitles the holder to exercise the
stock appreciation right (to the extent exercisable) and to receive from Pan
Pacific an amount determined by multiplying the difference obtained by
subtracting the exercise price per share of the stock appreciation right from
the fair market value of a share of Pan Pacific common stock on the date of
exercise by the number of shares of Pan Pacific common stock with respect to
which the stock appreciation right has been exercised, subject to any
limitations imposed by the administrator. The administrator may elect to pay
stock appreciation rights in cash or in Pan Pacific common stock or in a
combination of both.
Dividend Equivalents represent the value of the dividends per share paid by
Pan Pacific, calculated with reference to the number of shares covered by the
stock options, stock appreciation rights or other awards held by the
participant.
Performance Awards may be granted by the administrator to employees or
consultants based upon specific performance criteria determined to be
appropriate by the administrator. In making such determinations, the
administrator will consider, among the factors it deems relevant in light of the
specific type of award, the contributions, responsibilities and other
compensation of the particular employee or consultant.
Stock Payments may be authorized by the administrator in the form of shares
of Pan Pacific common stock or an option or other right to purchase Pan Pacific
common stock in the manner determined from time to time by the administrator.
The administrator may designate key employees as "Section 162(m)
Participants," whose compensation for a given fiscal year may be subject to the
limit on deductible compensation imposed by Section 162(m) of the Internal
Revenue Code. The Administrator may grant to Section 162(m) Participants
restricted stock, deferred stock, stock appreciation rights, dividend
equivalents, performance awards and stock payments that vest or become
exercisable upon the attainment of performance criteria for Pan Pacific, its
subsidiaries, divisions or operating units, which are related to one or more of
the following performance goals:
- net income;
- pre-tax income;
- operating income;
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- cash flow;
- earnings per share;
- earnings before interest, taxes, depreciation and/or amortization;
- return on equity;
- return on invested capital or assets;
- cost reductions or savings;
- funds from operations; and
- appreciation in the fair market value of Pan Pacific common stock.
GRANT AND TERMS OF OPTIONS
The administrator shall have the authority under the stock incentive plan
to determine:
- the number of shares subject to option grants to employees, consultants,
and directors;
- whether the option grants are incentive stock options or nonqualified
stock options; and
- the terms and conditions of the option grants.
The administrator may not grant an incentive stock option under the stock
incentive plan to any person who owns more than 10% of the total combined voting
power of all classes of Pan Pacific's stock unless the stock option conforms to
the applicable provisions of Section 422 of the Internal Revenue Code. Only Pan
Pacific's employees may be granted incentive stock options under the stock
incentive plan. Employees, consultants, and directors may receive nonqualified
stock options and stock purchase rights under the stock incentive plan. Options
for directors are discussed in more detail in "Director Options" above. Each
option will be evidenced by a written option agreement.
The exercise price for the shares of Pan Pacific common stock subject to
each option will be specified in each option agreement. The administrator shall
set the exercise price at the time the option is granted. In certain instances,
the exercise price is also subject to additional rules as follows:
- In the case of options intended to qualify as performance-based
compensation, or as incentive stock options, the exercise price may not
be less than the fair market value for the shares of Pan Pacific common
stock subject to such option on the date the option is granted.
- In the case of incentive stock options granted to a 10% owner, the
exercise price may not be less than 110% of the fair market value of the
shares of Pan Pacific common stock subject to such option on the date the
option is granted.
- In the case of nonqualified stock options, the exercise price may not be
less than 85% of the fair market value for the shares of Pan Pacific
common stock subject to such option on the date the option is granted.
- In the case of nonqualified stock options granted to a 10% owner, the
exercise price may not be less than 100% of the fair market value of the
shares of Pan Pacific common stock subject to such option on the date the
option is granted.
- In the case of options granted to directors, the exercise price will
equal the fair market value of the shares of Pan Pacific common stock
subject to such option on the date the option is granted.
For purposes of the stock incentive plan, the fair market value of a share
of Pan Pacific common stock as of a given date shall be (a) the closing price of
a share of Pan Pacific common stock on the principal exchange on which shares of
Pan Pacific common stock are then trading, if any (or as reported on any
composite index which includes such principal exchange), on the trading day
previous to this date, or if shares were not traded on the trading day previous
to this date, then on the next preceding date on
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<PAGE> 132
which a trade occurred, or (b) if Pan Pacific common stock is not traded on an
exchange but is quoted on Nasdaq or a successor quotation system, the mean
between the closing representative bid and asked prices for the Pan Pacific
common stock on the trading day previous to such date as reported by Nasdaq or a
successor quotation system; or (c) if Pan Pacific common stock is not publicly
traded on an exchange and not quoted on Nasdaq or a successor quotation system,
the fair market value of a share of Pan Pacific common stock as established by
the administrator acting in good faith.
TERM AND VESTING OF OPTIONS
The term of an option shall be set by the administrator. In the case of an
incentive stock option, the term of the option may not be longer than ten years
from the date the incentive stock option is granted, or if granted to a 10%
owner, five years from the date of the grant. Except as limited by the
requirements of Section 422 of the Internal Revenue Code, the administrator may
extend the term of any outstanding option in connection with any termination of
employment or the consulting relationship with an optionee, or amend any other
term or condition of the outstanding option relating to the termination of an
optionee.
An option is exercisable when it "vests." Each option agreement will
contain the period during which the right to exercise the option in whole or in
part vests in the optionee. In no event will an option vest at a rate of less
than 20% per year over five years from the date the option is granted. At any
time after the grant of an option, the administrator may accelerate the period
during which an option vests. No portion of an option which is unexercisable at
an optionee's termination of employment, termination of consulting relationship
or termination of directorship will subsequently become exercisable, except as
may be otherwise provided by the administrator either in the agreement relating
to the stock option or by action following the grant of the option.
EXERCISE OF OPTIONS
An option may be exercised for any vested portion of the shares subject to
the option until the option expires. Only whole shares of Pan Pacific common
stock may be purchased. An option may be exercised by delivering to the
Secretary of Pan Pacific a written or electronic notice of exercise on a form
provided by Pan Pacific, together with full cash payment for the shares in the
form of cash or a check payable to Pan Pacific in the amount of the aggregate
option exercise price. However, the administrator may in its discretion:
- allow payment through the delivery of shares of Pan Pacific common stock
already owned by the optionee;
- subject to certain timing requirements, allow payment through the
surrender of shares of Pan Pacific common stock which would otherwise be
issuable on exercise of the option;
- allow payment through the delivery of property of any kind which
constitutes good and valuable consideration;
- allow payment by use of a full recourse loan from Pan Pacific;
- allow payment through the delivery of a notice that the optionee has
placed a market sell order with a broker with respect to shares of Pan
Pacific common stock then issuable on exercise of the option, and that
the broker has been directed to pay a sufficient portion of the net
proceeds of the sale to Pan Pacific in satisfaction of the option
exercise price; or
- allow payment through any combination of the foregoing.
ELIGIBILITY
Pan Pacific's employees and consultants are eligible to receive awards
under the stock incentive plan. The administrator determines which of Pan
Pacific's employees will be granted options, stock purchase rights, stock
appreciation rights and other awards. No person is entitled to participate in
the stock incentive plan as a matter of right. Only those employees and
consultants who are selected to receive
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<PAGE> 133
grants by the administrator may participate in the stock incentive plan.
Independent non-employee directors are also eligible to receive grants under the
stock incentive plan, as described above.
ADMINISTRATION OF THE STOCK INCENTIVE PLAN
All decisions, determinations and interpretations of the administrator
shall be final and binding on all holders. The administrator has the power to:
- construe and interpret the terms of the stock incentive plan and awards
granted pursuant to the stock incentive plan;
- adopt rules for the administration, interpretation and application of the
stock incentive plan that are consistent with the stock incentive plan;
and
- interpret, amend or revoke any of the newly adopted rules of the stock
incentive plan.
AWARDS NOT TRANSFERABLE
Awards may not be sold, pledged, transferred, or disposed of in any manner
other than to certain permitted transferees as provided for in the stock
incentive plan and by will or by the laws of descent and distribution and may be
exercised, during the lifetime of the holder, only by the holder or such
permitted transferees.
CERTAIN RESTRICTIONS ON RESALE
Employees, officers and directors who are "affiliates" of Pan Pacific as
defined by the rules and regulations under the Securities Act of 1933 may offer
or sell the shares of Pan Pacific common stock they acquire upon exercise of
their options under the stock incentive plan only if they make such offers and
sales:
- pursuant to an effective registration statement under the Securities Act
of 1933;
- pursuant to an appropriate exemption from the registration requirements
of the Securities Act of 1933; or
- within the limitations and subject to the conditions set forth in Rule
144 under the Securities Act of 1933.
AMENDMENT AND TERMINATION OF THE STOCK INCENTIVE PLAN
The Pan Pacific board may not, without prior stockholder approval:
- amend the stock incentive plan so as to increase the number of shares of
stock that may be issued under the stock incentive plan; or
- extend the term of the stock incentive plan.
The stock incentive plan will be in effect for 10 years after the date the
stock incentive plan is approved by the stockholders, unless the Pan Pacific
board terminates the stock incentive plan at an earlier date. The Pan Pacific
board may terminate the stock incentive plan at any time with respect to any
shares not then subject to an option under the stock incentive plan. Except as
indicated above, the Pan Pacific board may also modify the stock incentive plan
from time to time.
FEDERAL INCOME TAX CONSEQUENCES ASSOCIATED WITH THE STOCK INCENTIVE PLAN
The following is a general summary under current law of the material
federal income tax consequences to participants in the stock incentive plan.
This summary deals with the general tax principles that apply and is provided
only for general information. Some kinds of taxes, such as alternative minimum
taxes and state and local income taxes, are not discussed. Tax laws are complex
and subject to change and may vary depending on individual circumstances and
from locality to locality. The summary
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<PAGE> 134
does not discuss all aspects of income taxation that may be relevant in light of
a holder's personal circumstances. This summarized tax information is not tax
advice.
Non-Qualified Stock Options. For federal income tax purposes, if an
optionee is granted nonqualified stock options under the stock incentive plan,
the optionee will not have taxable income on the grant of the option, nor will
Pan Pacific be entitled to any deduction. Generally, on exercise of nonqualified
stock options the optionee will recognize ordinary income, and Pan Pacific will
be entitled to a deduction, in an amount equal to the difference between the
option exercise price and the fair market value of the Pan Pacific common stock
on the date of exercise. The optionee's basis for the stock for purposes of
determining gain or loss on subsequent disposition of such shares generally will
be the fair market value of the Pan Pacific common stock on the date the
optionee exercises the option. Any subsequent gain or loss will be generally
taxable as capital gains or losses.
Incentive Stock Options. There is no taxable income to an optionee when an
optionee is granted an incentive stock option or when that option is exercised.
However, the amount by which the fair market value of the shares at the time of
exercise exceeds the option price will be an "item of adjustment" for the
optionee for purposes of the alternative minimum tax. Gain realized by the
optionee on the sale of stock purchased upon exercise of an incentive stock
option is taxable at capital gains rates, and no tax deduction is available to
Pan Pacific, unless the optionee disposes of the shares within (a) two years
after the date of grant of the option or (b) within one year of the date the
shares were transferred to the optionee. If the shares of Pan Pacific common
stock are sold or otherwise disposed of before the end of the one-year and
two-year periods specified above, the difference between the option exercise
price and the fair market value of the shares on the date of the option's
exercise will be taxed at ordinary income rates, and Pan Pacific will be
entitled to a deduction to the extent the optionee must recognize ordinary
income.
An incentive stock option exercised more than three months after an
optionee terminates employment, other than by reason of death or disability,
will be taxed as a nonqualified stock option. Pan Pacific will be entitled to a
tax deduction equal to the ordinary income, if any, realized by the optionee.
Stock Appreciation Rights. No taxable income is generally recognized upon
the receipt of a stock appreciation right, but upon exercise of the stock
appreciation right the fair market value of the shares (or cash in lieu of
shares) received generally will be taxable as ordinary income to the recipient
in the year of such exercise. Pan Pacific generally will be entitled to a
compensation deduction for the same amount which the recipient recognizes as
ordinary income.
Restricted Stock and Deferred Stock. An employee to whom restricted or
deferred stock is issued generally will not recognize taxable income upon such
issuance and Pan Pacific generally will not then be entitled to a deduction.
However, when restrictions on shares of restricted stock lapse, such that the
shares are no longer subject to a substantial risk of forfeiture or are
transferable, the employee generally will recognize ordinary income and Pan
Pacific generally will be entitled to a deduction for an amount equal to the
excess of the fair market value of the shares at the date such restrictions
lapse over the purchase price therefor. Similarly, when deferred stock vests and
is issued to the employee, the employee generally will recognize ordinary income
and Pan Pacific generally will be entitled to a deduction for the amount equal
to the fair market value of the shares at the date of issuance.
Dividend Equivalents. A recipient of a dividend equivalent award generally
will not recognize taxable income at the time of grant, and Pan Pacific will not
be entitled to a deduction at that time. When a dividend equivalent is paid, the
participant generally will recognize ordinary income, and Pan Pacific will be
entitled to a corresponding deduction.
Performance Awards. A participant who has been granted a performance award
generally will not recognize taxable income at the time of grant, and Pan
Pacific will not be entitled to a deduction at that time. When an award is paid,
whether in cash or Pan Pacific common stock, the participant generally will
recognize ordinary income, and Pan Pacific will be entitled to a corresponding
deduction.
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<PAGE> 135
Stock Payments. A participant who receives a stock payment in lieu of a
cash payment that would otherwise have been made will generally recognize
ordinary income based on the fair market value of the stock received, and Pan
Pacific generally will be entitled to a deduction for the same amount.
Section 162(m) of the Internal Revenue Code. In general, under Section
162(m), income tax deductions of publicly-held corporations may be limited to
the extent total compensation (including base salary, annual bonus, stock option
exercises and non-qualified benefits paid) for certain executive officers
exceeds $1 million (less the amount of any "excess parachute payments" as
defined in Section 280G of the Internal Revenue Code) in any one year. However,
under Section 162(m), the deduction limit does not apply to certain
"performance-based compensation" established by an independent compensation
committee which is adequately disclosed to, and approved by, stockholders. In
particular, stock options and stock appreciation rights will satisfy the
"performance-based compensation" exception if the awards are made by a
qualifying compensation committee, the stock incentive plan sets the maximum
number of shares that can be granted to any person within a specified period and
the compensation is based solely on an increase in the fair market value of Pan
Pacific common stock after the grant date (i.e. the option exercise price is
equal to or greater than the fair market value of the stock subject to the award
on the grant date).
Pan Pacific has attempted to structure the stock incentive plan in such a
manner that Pan Pacific's compensation committee can determine the terms and
conditions of stock options, stock appreciation rights such that remuneration
attributable to such awards will not be subject to the $1,000,000 limitation.
The Pan Pacific has not, however, requested a ruling from the Internal Revenue
Service or an opinion of counsel regarding this issue. This discussion will
neither bind the Internal Revenue Service nor preclude the Internal Revenue
Service from adopting a contrary position.
REQUIRED VOTE
For this proposal to amend Pan Pacific's 2000 Stock Incentive Plan to be
approved, the holders of a majority of the votes cast on the proposal at the Pan
Pacific special meeting must vote in favor of the proposal and a majority of the
outstanding shares of Pan Pacific common stock must cast a vote on the proposal.
THE PAN PACIFIC BOARD RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE 2000
STOCK INCENTIVE PLAN OF PAN PACIFIC RETAIL PROPERTIES, INC.
SHAREHOLDER PROPOSALS
Pan Pacific's bylaws currently provide that in order for a stockholder to
nominate a candidate for election as a director at an annual meeting of
stockholders or to propose business for consideration at such meeting, written
notice generally must be delivered to the Secretary of Pan Pacific at its
principal executive offices not later than the close of business on the 60th
day, and not earlier than the close of business on the 90th day, prior to the
first anniversary of the preceding year's annual meeting. Accordingly,
stockholder proposals for inclusion in proxy material for Pan Pacific's 2001
annual meeting of stockholders must be submitted to the Corporate Secretary of
Pan Pacific in writing and received at the executive offices of Pan Pacific
between February 5, 2001 and March 6, 2001. Such proposals must also have met
the other requirements of the rules of the SEC relating to stockholder proposals
and must have satisfied the notice procedures for stockholder proposals set
forth in the Pan Pacific bylaws. See "Comparison of Rights of Stockholders of
Pan Pacific and Shareholders of Western Properties -- Advance Notice Provision."
Due to the contemplated completion of the merger, Western Properties does
not currently expect to hold a 2001 annual meeting of shareholders. If the
merger is not completed and such a meeting is held, shareholder proposals for
inclusion in proxy materials for the Western Properties annual meeting of
shareholders must be submitted to the Secretary of Western Properties in writing
and received at the executive offices of Western Properties by November 30,
2000. Such proposals must also meet the other
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<PAGE> 136
requirements of the rules of the SEC relating to shareholders' proposals. See
"Comparison of Rights of Stockholders of Pan Pacific and Shareholders of Western
Properties -- Advance Notice Provision."
LEGAL MATTERS
The validity of the shares of Pan Pacific common stock to be issued in
connection with the merger will be passed upon for Pan Pacific by Ballard Spahr
Andrews & Ingersoll, LLP, Baltimore, Maryland.
The description of Federal Income Tax Considerations contained in the
section of this document entitled "Material United States Federal Income Tax
Considerations" is based on the opinion of Latham & Watkins. That description
also relies upon the anticipated opinions of Latham & Watkins, as counsel for
Pan Pacific, and O'Melveny & Myers LLP, as counsel for Western Properties, which
are conditions to the closing of the merger, regarding the qualification of the
merger as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code and regarding Pan Pacific's and Western Properties' conformity with
the requirements for qualification and taxation as a real estate investment
trust under the Internal Revenue Code.
EXPERTS
The consolidated financial statements and schedule of Pan Pacific Retail
Properties, Inc. as of December 31, 1999 and 1998, and for each of the years in
the three-year period ended December 31, 1999 have been incorporated by
reference herein and in the registration statement in reliance upon the report
of KPMG LLP, independent certified public accountants, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
The consolidated financial statements and schedule of Western Properties
Trust as of December 31, 1999 and 1998, and for each of the years in the
three-year period ended December 31, 1999 have been incorporated by reference
herein and in the registration statement in reliance upon the report of KPMG
LLP, independent certified public accountants, incorporated by reference herein,
and upon the authority of said firm as experts in accounting and auditing.
Representatives of KPMG LLP are expected to be present at the Pan Pacific
special meeting and the Western Properties special meeting with an opportunity
to make statements if they desire to do so, and such representatives are
expected to be available to respond to appropriate questions.
WHERE YOU CAN FIND MORE INFORMATION
Pan Pacific and Western Properties file annual, quarterly and special
reports, proxy statements and other information with the SEC. You may read and
copy any reports, statements or other information we file at the SEC's Public
Reference Room, 450 Fifth Street, N.W., Suite 1024, Washington, D.C. 20549 and
at the SEC's regional offices located at 7 World Trade Center, Suite 1300, New
York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to
the public from commercial document retrieval services and at the web site
maintained by the SEC at "http://www.sec.gov." You may inspect information that
Pan Pacific files with the New York Stock Exchange at the offices of the New
York Stock Exchange at 20 Broad Street, New York, New York 10005. You may
inspect information that Western Properties files with the American Stock
Exchange at the offices of the American Stock Exchange at 86 Trinity Place, New
York, New York 10006.
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Pan Pacific filed a registration statement on Form S-4 to register with the
SEC the Pan Pacific common stock to be issued to Western Properties shareholders
in the merger. This joint proxy statement/ prospectus is a part of that
registration statement and constitutes a prospectus of Pan Pacific in addition
to being a proxy statement of Pan Pacific and Western Properties for the special
meetings. As allowed by SEC rules, this joint proxy statement/prospectus does
not contain all the information you can find in the registration statement or
the exhibits to the registration statement.
The SEC allows us to "incorporate by reference" information into this joint
proxy statement/ prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. This joint proxy statement/prospectus incorporates by reference the
documents set forth below that we have previously filed with the SEC. These
documents contain important information about our companies and their finances.
<TABLE>
<CAPTION>
PAN PACIFIC'S SEC FILINGS
(FILE NO. 1-13243) DESCRIPTION OR PERIOD/AS OF DATE
------------------------- --------------------------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1999
Current Report on Form 8-K, dated August 21, Discloses the entering into of the merger
2000 agreement and related matters
Quarterly Reports on Form 10-Q Quarters ended March 31, 2000 and June 30,
2000
Definitive Proxy Statement on Schedule 14A Definitive proxy statement relating to the
2000 annual meeting of Pan Pacific
stockholders on May 5, 2000
Registration Statement on Form 8-A (No. Description of Pan Pacific common stock
001-13243), including any subsequently filed
amendments and reports filed for the purpose
of updating such description
</TABLE>
<TABLE>
<CAPTION>
WESTERN PROPERTIES' SEC FILINGS
(FILE NO. 1-08723) DESCRIPTION OR PERIOD/AS OF DATE
------------------------------- --------------------------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1999
Current Report on Form 8-K, dated August 21, Discloses the entering into of the merger
2000 agreement and related matters
Quarterly Reports on Forms 10-Q Quarters ended March 31, 2000 and June 30,
2000
Definitive Proxy Statement on Schedule 14A Definitive proxy statement relating to the
2000 annual meeting of Western Properties
shareholders on May 11, 2000
</TABLE>
We are also incorporating by reference additional documents that we may
file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 between the date of this joint proxy
statement/prospectus and the date of the Pan Pacific special meeting and the
Western Properties special meeting.
The information incorporated by reference is deemed to be part of this
joint proxy statement/ prospectus. Any statement contained in a document
incorporated or deemed to be incorporated by reference in this joint proxy
statement/prospectus will be deemed modified, superseded or replaced for
purposes of this joint proxy statement/prospectus to the extent that a statement
contained in this joint proxy statement/prospectus or in any subsequently filed
document that also is or is deemed to be incorporated by reference in this joint
proxy statement/prospectus modifies, supersedes or replaces such statement. Any
statement so modified, superseded or replaced will not be deemed, except as so
modified, superseded or replaced, to constitute a part of this joint proxy
statement/prospectus.
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<PAGE> 138
Pan Pacific has supplied all information contained or incorporated by
reference in this joint proxy statement/prospectus relating to Pan Pacific, and
Western Properties has supplied all such information relating to Western
Properties.
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the SEC.
Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this joint proxy statement/prospectus. Shareholders may obtain
documents incorporated by reference in this joint proxy statement/prospectus by
requesting them in writing or by telephone from the appropriate party at the
following addresses:
<TABLE>
<S> <C>
Pan Pacific Retail Properties, Western Properties Trust
Inc. 2200 Powell Street, Suite 600
1631-B South Melrose Drive Emeryville, California 94608
Vista, California 92083 Telephone: (888) 831-5770
Telephone: (760) 727-1002
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS FROM US, PLEASE DO SO BY NOVEMBER 2,
2000 TO RECEIVE THEM BEFORE THE PAN PACIFIC SPECIAL MEETING OR THE WESTERN
PROPERTIES SPECIAL MEETING.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS TO VOTE ON THE PAN PACIFIC
PROPOSALS TO APPROVE THE MERGER AND THE AMENDMENT TO THE 2000 STOCK INCENTIVE
PLAN OF PAN PACIFIC AND THE WESTERN PROPERTIES PROPOSAL TO APPROVE THE MERGER
AND INCORPORATION. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION
THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS. THIS JOINT PROXY STATEMENT/PROSPECTUS IS DATED OCTOBER 3,
2000. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN OCTOBER 3, 2000, AND
NEITHER THE MAILING OF THE JOINT PROXY STATEMENT/PROSPECTUS TO SHAREHOLDERS NOR
THE ISSUANCE OF PAN PACIFIC COMMON STOCK IN THE MERGER SHALL CREATE ANY
IMPLICATION TO THE CONTRARY.
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INDEX TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Pro Forma Condensed Consolidated Financial
Statements................................................ F-2
Unaudited Pro Forma Condensed Consolidated Balance Sheet as
of June 30, 2000.......................................... F-3
Unaudited Pro Forma Condensed Consolidated Statement of
Income for the six months ended June 30, 2000............. F-4
Unaudited Pro Forma Condensed Consolidated Statement of
Income for the year ended December 31, 1999............... F-5
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Statements...................................... F-6
</TABLE>
F-1
<PAGE> 140
PAN PACIFIC RETAIL PROPERTIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet as
of June 30, 2000 is presented as if the merger of WPT, Inc. ("WPT"), the
successor of Western Properties Trust ("Western Properties") into Pan Pacific
Retail Properties, Inc. ("Pan Pacific") had occurred on June 30, 2000. The
unaudited pro forma condensed consolidated statements of income for the six
months ended June 30, 2000 and the year ended December 31, 1999 are presented as
if the merger of WPT into Pan Pacific had occurred on January 1, 1999. The
incorporation of Western Properties as WPT had no financial accounting impact.
The unaudited pro forma condensed consolidated financial statements should
be read in conjunction with the quarterly reports on Form 10-Q for the six
months ended June 30, 2000, the quarterly reports on Form 10-Q for the three
months ended March 31, 2000 and the annual reports on Form 10-K for the year
ended December 31, 1999, which include the consolidated financial statements of
Western Properties and Pan Pacific, including the notes thereto. The unaudited
pro forma condensed consolidated financial statements do not purport to
represent Pan Pacific's financial position as of June 30, 2000 or the results of
operations for the six months ended June 30, 2000 or for the year ended December
31, 1999 that would actually have occurred had the merger of WPT into Pan
Pacific been completed on the dates indicated in the preceding paragraph, or to
project Pan Pacific's financial position or results of operations as of any
future date or for any future period.
F-2
<PAGE> 141
PAN PACIFIC RETAIL PROPERTIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
PAN PACIFIC WESTERN
RETAIL PROPERTIES PRO FORMA
PROPERTIES, INC. TRUST MERGER PAN PACIFIC
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Operating properties, net............. $ 757,815 $233,942 $ 66,646(B) $1,115,300
56,897(C)
Real estate held for sale............. -- 87,102 (66,646)(B) 20,456
Real estate under development......... -- 8,255 -- 8,255
Investment in unconsolidated
entities........................... 1,505 47,318 6,961(C) 55,784
Cash, cash equivalents and restricted
cash............................... 308 2,424 (2,424)(F) 308
Accounts receivable................... 16,433 14,224 (1,913)(D) 24,548
(4,196)(D)
Notes receivable...................... 2,697 25,549 -- 28,246
Prepaid expenses, deferred lease
commissions and other assets....... 12,958 2,626 (1,475)(D) 12,958
(1,151)(E)
--------- -------- --------- ----------
$ 791,716 $421,440 $ 52,699 $1,265,855
========= ======== ========= ==========
LIABILITIES AND EQUITY:
Notes payable......................... $ 226,800 $ 9,701 $ -- $ 236,501
Senior notes, net..................... -- 124,836 -- 124,836
Line of credit payable................ 141,550 78,900 5,839(F) 226,289
Accounts payable, accrued expenses and
other liabilities.................. 10,359 8,760 6,200(A) 25,319
Distributions payable................. 9,408 -- -- 9,408
--------- -------- --------- ----------
388,117 222,197 12,039 622,353
Minority interests.................... 22,689 18,699 690(G) 42,078
--------- -------- --------- ----------
Equity:
Common stock....................... 213 -- 107(H) 320
Paid in capital in excess of par
value............................ 481,485 242,711 220,407(I) 703,790
1,898(J)
(242,711)(K)
Accumulated dividends in excess of
net income....................... -- (62,167) (8,263)(F) --
70,430(K)
Accumulated deficit................ (100,788) -- (1,898)(J) (102,686)
--------- -------- --------- ----------
380,910 180,544 39,970 601,424
--------- -------- --------- ----------
$ 791,716 $421,440 $ 52,699 $1,265,855
========= ======== ========= ==========
</TABLE>
F-3
<PAGE> 142
PAN PACIFIC RETAIL PROPERTIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PAN PACIFIC WESTERN
RETAIL PROPERTIES PRO FORMA
PROPERTIES, INC. TRUST MERGER PAN PACIFIC
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE:
Base rent..................................... $ 43,078 $ 22,240 $ -- $ 65,318
Percentage rent............................... 300 435 -- 735
Recoveries from tenants....................... 9,624 4,521 -- 14,145
Interest income............................... -- 1,124 -- 1,124
Net gain on sale of real estate............... -- 4,256 -- 4,256
Income from unconsolidated entities........... 149 659 -- 808
Other......................................... 1,277 429 -- 1,706
---------- ---------- ------- ----------
54,428 33,664 -- 88,092
---------- ---------- ------- ----------
EXPENSES:
Property operating and property taxes......... 10,384 4,710 -- 15,094
Depreciation and amortization................. 9,426 5,069 (1,928)(L) 12,030
(537)(M)
Interest...................................... 14,316 7,507 (214)(N) 21,609
General and administrative.................... 2,489 1,828 (1,066)(O) 3,251
Provision for loss on real estate
investment................................. -- 1,745 -- 1,745
Other......................................... 86 2,844 -- 2,930
---------- ---------- ------- ----------
36,701 23,703 (3,745) 56,659
---------- ---------- ------- ----------
INCOME BEFORE MINORITY INTERESTS................ 17,727 9,961 3,745 31,433
Minority interests............................ (1,003) (802) -- (1,805)
---------- ---------- ------- ----------
NET INCOME...................................... $ 16,724 $ 9,159 $ 3,745 $ 29,628
========== ========== ======= ==========
Basic earnings per share........................ $ 0.79 $ 0.53 $ 0.93(P)
Diluted earnings per share...................... $ 0.79 $ 0.53 $ 0.92(Q)
Basic weighted average shares outstanding....... 21,252,512 17,242,196 31,976,807(P)
Diluted weighted average shares outstanding..... 22,415,893 17,377,023 34,083,122(Q)
</TABLE>
F-4
<PAGE> 143
PAN PACIFIC RETAIL PROPERTIES, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PAN PACIFIC WESTERN
RETAIL PROPERTIES PRO FORMA
PROPERTIES, INC. TRUST MERGER PAN PACIFIC
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE:
Base rent..................................... $ 79,377 $ 44,567 $ -- $ 123,944
Percentage rent............................... 760 886 -- 1,646
Recoveries from tenants....................... 17,893 9,698 -- 27,591
Interest income............................... -- 1,756 -- 1,756
Net gain on sale of real estate............... 400 6,854 -- 7,254
Income from unconsolidated entities........... 341 466 -- 807
Other......................................... 2,291 1,325 -- 3,616
----------- ---------- ------- ----------
101,062 65,552 -- 166,614
----------- ---------- ------- ----------
EXPENSES:
Property operating and property taxes......... 19,950 10,171 -- 30,121
Depreciation and amortization................. 17,476 11,523 (5,240)(L) 22,474
(1,285)(M)
Interest...................................... 23,939 14,325 (462)(N) 37,802
General and administrative.................... 5,315 3,248 (1,692)(O) 6,871
Other......................................... 248 4,867 -- 5,115
----------- ---------- ------- ----------
66,928 44,134 (8,679) 102,383
----------- ---------- ------- ----------
INCOME BEFORE MINORITY INTERESTS................ 34,134 21,418 8,679 64,231
Minority interests............................ (1,558) (1,604) -- (3,162)
----------- ---------- ------- ----------
NET INCOME...................................... $ 32,576 $ 19,814 $ 8,679 $ 61,069
=========== ========== ======= ==========
Basic earnings per share........................ $ 1.54 $ 1.15 $ 1.91(P)
Diluted earnings per share...................... $ 1.54 $ 1.15 $ 1.90(Q)
Basic weighted average shares outstanding....... 21,196,238 17,225,468 31,920,533(P)
Diluted weighted average shares outstanding..... 22,122,659 18,699,731 33,789,888(Q)
</TABLE>
F-5
<PAGE> 144
PAN PACIFIC RETAIL PROPERTIES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT EXCHANGE RATIO, SHARE PRICE AND PAR VALUE)
1. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The pro forma adjustments to the Unaudited Pro Forma Condensed Consolidated
Balance Sheet as of June 30, 2000 are as follows:
(A) Represents adjustments to record the merger in accordance with the
purchase method of accounting based upon the assumed cost of $246,103,
assuming a market value of $20.5625 per share for Pan Pacific common
shares plus the assumption of Western Properties' liabilities, as
follows:
<TABLE>
<S> <C>
Western Properties' common shares and subsidiary units
issued and outstanding at June 30, 2000................... 18,818
Exchange ratio.............................................. 0.62
--------
Pan Pacific common shares and subsidiary units issued in
merger.................................................... 11,667
Pan Pacific share price..................................... $20.5625
--------
Fair value of Pan Pacific's common shares and subsidiary
units issued in merger.................................... $239,903
Pan Pacific merger costs (see calculation below)............ 6,200
--------
Total costs................................................. 246,103
Assumption of Western Properties' liabilities:
Draw on Pan Pacific's unsecured credit facility to repay
Western Properties' line of credit (see also Note E)... 84,739
Note payable and senior notes, net........................ 134,537
Other liabilities......................................... 8,760
--------
Fair value to be allocated to assets................... $474,139
========
</TABLE>
The following is a calculation of Pan Pacific's estimated fees and
other expenses related to the merger:
<TABLE>
<S> <C>
Advisory fees............................................... $ 4,000
Legal and accounting fees................................... 1,350
Debt related costs resulting from the merger................ 500
Other, including printing, filing and transfer costs........ 350
--------
Total Pan Pacific merger costs............................ $ 6,200
========
Pan Pacific merger costs to be allocated to net assets
(see above)............................................ $ 6,200
Increase in accounts payable, accrued expenses and other
liabilities............................................ $ 6,200
</TABLE>
(B) Reclassification of Western Properties' real estate held for sale that
Pan Pacific intends to hold for investment:
<TABLE>
<S> <C>
Operating properties, net................................... 66,646
Real estate held for sale................................... (66,646)
</TABLE>
F-6
<PAGE> 145
PAN PACIFIC RETAIL PROPERTIES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT EXCHANGE RATIO, SHARE PRICE AND PAR VALUE)
(C) Represents the estimated increase in Western Properties' operating
properties, net based upon Pan Pacific's purchase price as follows:
<TABLE>
<S> <C>
Fair value to be allocated to assets (see Note A)........... $ 474,139
Less historical bases of Western Properties' assets
acquired:
Operating properties, net........................... (233,942)
Real estate held for sale........................... (87,102)
Real estate under development....................... (8,255)
Investment in unconsolidated entity................. (47,318)
Notes receivable.................................... (25,549)
Other assets (see also Notes D, E and F)............ (8,115)
Less adjustment to step-up to fair value Western
Properties' investment in an unconsolidated entity..... (6,961)
---------
Step-up to record fair value of Western Properties'
operating properties................................... $ 56,897
=========
</TABLE>
(D) Decrease due to the elimination of certain Western Properties' assets
as a
result of the merger:
<TABLE>
<S> <C>
Deferred rent receivable.................................... $ (4,196)
Deferred lease commissions.................................. $ (1,475)
Other miscellaneous assets.................................. $ (1,913)
</TABLE>
<TABLE>
<S> <C>
(E) Decrease due to the elimination of Western Properties'
deferred financing costs as a result of the merger...... $ (1,151)
(F) Reduce Western Properties' cash and increase Western
Properties' line of credit to reflect the payment of
Western Properties' estimated fees and other expenses
related to the merger (net of amounts accrued as of June
30, 2000):
</TABLE>
<TABLE>
<S> <C>
Cash........................................................ $ (2,424)
Line of credit payable...................................... $ 5,839
Accumulated dividends in excess of net income............... $ (8,263)
</TABLE>
<TABLE>
<S> <C>
(G) Adjust minority interests to fair value to reflect the
subsidiary units issued as a result of the merger....... $ 690
(H) Increase in common shares resulting from the issuance of
an additional 10,724 Pan Pacific common shares at $0.01
par value per share in exchange for 17,297 Western
Properties' shares of beneficial interest with no par
value per share as follows:
</TABLE>
<TABLE>
<S> <C>
Pan Pacific common shares issued in merger.................. 10,724
Multiplied by Pan Pacific's par value per common share...... $ 0.01
---------
Par value of Pan Pacific common shares issued in merger..... $ 107
---------
</TABLE>
<TABLE>
<S> <C>
(I) Increase paid in capital in excess of par value to
reflect issuance of Pan Pacific common shares as a
result of the merger.................................... $ 220,407
</TABLE>
F-7
<PAGE> 146
PAN PACIFIC RETAIL PROPERTIES, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT EXCHANGE RATIO, SHARE PRICE AND PAR VALUE)
(J) Adjust paid in capital in excess of par value and accumulated deficit
for vesting of Pan Pacific restricted stock as a result of the merger:
<TABLE>
<S> <C>
Paid in capital in excess of par value...................... $ 1,898
Accumulated deficit......................................... $ (1,898)
</TABLE>
<TABLE>
<S> <C>
(K) Eliminate Western Properties' paid in capital in excess
of par value and accumulated dividends in excess of net
income as a result of the merger:
</TABLE>
<TABLE>
<S> <C>
Paid in capital in excess of par value...................... $(242,711)
Accumulated dividends in excess of net income (see also Note
F)........................................................ $ 70,430
</TABLE>
2. ADJUSTMENTS TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
The pro forma adjustments to the Unaudited Pro Forma Condensed Consolidated
Statements of Income for the six months ended June 30, 2000 and the year ended
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
<S> <C> <C> <C>
(L) Decrease in depreciation expense related to real
estate. The net decrease is a result of the fair
value step-up of Western Properties' real estate
assets (see Note C), the reclassification of Western
Properties' real estate held for sale to operating
properties (see Note B) and the change in Western
Properties' estimated useful lives of depreciable
assets to conform to the useful lives used by Pan
Pacific for similar assets. Pro forma depreciation
was computed on a straight-line basis over the
estimated useful lives of the related assets. The
estimated useful lives of buildings, and furniture,
fixtures and equipment are 40 years and 5 years,
respectively........................................ $(1,928) $(5,240)
(M) Decrease in amortization expense due to the
elimination of certain Western Properties' assets as
a result of the merger.............................. $ (537) $(1,285)
(N) Decrease in interest expense due to the elimination
of the amortization of Western Properties' deferred
financing costs as a result of the merger (no
adjustment was necessary to the line of credit
interest as Western Properties' borrowing rate was
the same as Pan Pacific's borrowing rate)........... $ (214) $ (462)
(O) Decrease due to elimination of senior executive
officer compensation as a result of merger related
terminations........................................ $(1,066) $(1,692)
</TABLE>
(P) Pro forma basic earnings per share and pro forma basic weighted
average shares outstanding are presented as if the 10,724 shares of
Pan Pacific common stock were issued on January 1, 1999.
(Q) Pro forma diluted earnings per share and pro forma diluted weighted
average shares outstanding are presented as if the 11,667 shares of
Pan Pacific common stock and subsidiary units were issued on January
1, 1999. The numerator used in the diluted earnings per share
calculation is net income adjusted for the minority interest
subsidiary unit holders' share of net income.
F-8
<PAGE> 147
ANNEX A
AMENDED AND RESTATED AGREEMENT AND
PLAN OF MERGER
BETWEEN
PAN PACIFIC RETAIL PROPERTIES, INC.,
A MARYLAND CORPORATION
AND
WESTERN PROPERTIES TRUST,
A CALIFORNIA REAL ESTATE INVESTMENT TRUST
DATED AS OF AUGUST 21, 2000
<PAGE> 148
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I. DEFINITIONS...................................................... A-2
ARTICLE II. THE MERGER...................................................... A-10
Section 2.1 The Incorporation........................................... A-10
Section 2.2 The Merger.................................................. A-10
Section 2.3 Closing and Closing Date.................................... A-10
Section 2.4 Effective Time.............................................. A-10
Section 2.5 Effects of the Merger....................................... A-10
Section 2.6 Charter; Bylaws............................................. A-11
Section 2.7 Directors; Officers......................................... A-11
Section 2.8 Conversion of Securities.................................... A-11
Section 2.9 Treatment of Company Options and Restricted Stock........... A-12
Section 2.10 Fractional Interests........................................ A-12
Section 2.11 Surrender of WPT Common Stock and Company Common Shares;
Stock Transfer Books........................................ A-13
Section 2.12 Lost, Stolen or Destroyed Certificates...................... A-14
Section 2.13 Withholding Rights.......................................... A-14
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. A-14
Section 3.1 Organization and Qualification.............................. A-14
Section 3.2 Authorization; Validity and Effect of Agreement............. A-15
Section 3.3 Capitalization.............................................. A-15
Section 3.4 Subsidiaries................................................ A-16
Section 3.5 Other Interests............................................. A-16
Section 3.6 No Conflict; Required Filings and Consents.................. A-17
Section 3.7 Compliance.................................................. A-17
Section 3.8 SEC Documents............................................... A-17
Section 3.9 Absence of Certain Changes.................................. A-18
Section 3.10 Litigation.................................................. A-18
Section 3.11 Taxes....................................................... A-18
Section 3.12 Employee Benefit Plans...................................... A-20
Section 3.13 Properties.................................................. A-21
Section 3.14 Contracts................................................... A-22
Section 3.15 Labor Relations............................................. A-22
Section 3.16 [Intentionally Omitted]..................................... A-23
Section 3.17 Environmental Matters....................................... A-23
Section 3.18 Opinion of Financial Advisor................................ A-23
Section 3.19 Brokers..................................................... A-23
Section 3.20 Vote Required............................................... A-24
Section 3.21 Tax Matters................................................. A-24
Section 3.22 Insurance................................................... A-24
Section 3.23 [Intentionally Omitted]..................................... A-24
Section 3.24 No Material Adverse Effect.................................. A-24
Section 3.25 Affiliate Transactions...................................... A-24
Section 3.26 No Existing Discussions..................................... A-24
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PAN PACIFIC................... A-24
Section 4.1 Organization and Qualification.............................. A-24
</TABLE>
A-i
<PAGE> 149
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 4.2 Authorization; Validity and Effect of Agreement............. A-25
Section 4.3 Capitalization.............................................. A-25
Section 4.4 Subsidiaries................................................ A-26
Section 4.5 Other Interests............................................. A-26
Section 4.6 No Conflict; Required Filings and Consents.................. A-26
Section 4.7 Compliance.................................................. A-27
Section 4.8 SEC Documents............................................... A-27
Section 4.9 Absence of Certain Changes.................................. A-28
Section 4.10 Litigation.................................................. A-28
Section 4.11 Taxes....................................................... A-28
Section 4.12 Employee Benefit Plans...................................... A-29
Section 4.13 Properties.................................................. A-30
Section 4.14 Contracts................................................... A-31
Section 4.15 Labor Relations............................................. A-32
Section 4.16 [Intentionally Omitted]..................................... A-32
Section 4.17 Environmental Matters....................................... A-32
Section 4.18 Opinion of Financial Advisor................................ A-32
Section 4.19 Brokers..................................................... A-32
Section 4.20 Vote Required............................................... A-33
Section 4.21 Tax Matters................................................. A-33
Section 4.22 Insurance................................................... A-33
Section 4.23 No Material Adverse Effect.................................. A-33
ARTICLE V. CONDUCT OF BUSINESS PENDING THE MERGER........................... A-33
Section 5.1 Conduct of Business of the Company Pending the Merger....... A-33
Section 5.2 Conduct of Business of Pan Pacific Pending the Merger....... A-36
Section 5.3 Continued Qualification as a Real Estate Investment Trust;
Final Company Dividend...................................... A-37
Section 5.4 Dividend Payment Coordination; Special Dividend............. A-38
Section 5.5 [Intentionally Omitted]..................................... A-38
Section 5.6 Restructuring of Company Board.............................. A-38
ARTICLE VI. ADDITIONAL AGREEMENTS........................................... A-38
Section 6.1 Preparation of Form S-4 and the Proxy Statement; Stockholder
and Shareholder Meetings.................................... A-38
Section 6.2 Cooperation; Notice; Cure................................... A-39
Section 6.3 No Solicitation............................................. A-40
Section 6.4 Access to Information....................................... A-41
Section 6.5 Termination of Company's 401(k) Plan........................ A-41
Section 6.6 Governmental Approvals...................................... A-41
Section 6.7 Publicity................................................... A-42
Section 6.8 Affiliate Agreements........................................ A-42
Section 6.9 Tax Treatment of Reorganization............................. A-43
Section 6.10 Further Assurances and Actions.............................. A-43
Section 6.11 Stock Exchange Listing...................................... A-43
Section 6.12 Letter of the Company's Accountants......................... A-43
Section 6.13 Letter of Pan Pacific's Accountants......................... A-43
Section 6.14 Company REIT Status......................................... A-44
Section 6.15 Pan Pacific REIT Status..................................... A-44
</TABLE>
A-ii
<PAGE> 150
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 6.16 Obtaining Consents.......................................... A-44
Section 6.17 Board Representation........................................ A-44
Section 6.18 Employee Benefits........................................... A-44
Section 6.19 Non-Solicitation of Employees............................... A-45
Section 6.20 Acquisition of WRESI Stock.................................. A-45
Section 6.21 Adjustment to Pan Pacific Dividend Payments................. A-45
Section 6.22 Indemnification and Insurance............................... A-46
ARTICLE VII. CONDITIONS OF MERGER........................................... A-47
Section 7.1 Conditions to Obligation of each Party to Effect the
Merger...................................................... A-47
Section 7.2 Conditions to Obligations of the Company to Effect the
Incorporation and the Merger................................ A-48
Section 7.3 Conditions to Obligations of Pan Pacific to Effect the
Merger...................................................... A-49
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER............................. A-50
Section 8.1 Termination................................................. A-50
Section 8.2 Expenses; Break-Up Fee...................................... A-51
Section 8.3 Effect of Termination....................................... A-53
Section 8.4 Amendment................................................... A-53
Section 8.5 Waiver...................................................... A-53
ARTICLE IX. GENERAL PROVISIONS.............................................. A-53
Section 9.1 Non-Survival of Representations, Warranties and
Agreements.................................................. A-53
Section 9.2 Notices..................................................... A-53
Section 9.3 Severability................................................ A-54
Section 9.4 Entire Agreement; Assignment................................ A-54
Section 9.5 Parties in Interest; Construction........................... A-54
Section 9.6 Governing Law............................................... A-54
Section 9.7 No Trial by Jury............................................ A-54
Section 9.8 Action by Subsidiaries...................................... A-55
Section 9.9 Headings.................................................... A-55
Section 9.10 Specific Performance........................................ A-55
Section 9.11 Counterparts................................................ A-55
Section 9.12 No Liability of Company Shareholders........................ A-55
</TABLE>
<TABLE>
<S> <C>
EXHIBITS
Exhibit A Form of Articles of Incorporation of WPT
Exhibit B Form of Affiliate Agreement
Exhibit C Form of REIT Opinion of Latham & Watkins
Exhibit D Form of REIT Opinion of O'Melveny & Myers LLP
Exhibit E Development Services/Joint Venture Term Sheet
</TABLE>
A-iii
<PAGE> 151
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this "Agreement"),
is dated as of August 21, 2000, and entered into by and between PAN PACIFIC
RETAIL PROPERTIES, INC., a Maryland corporation ("Pan Pacific"), and WESTERN
PROPERTIES TRUST, a California real estate investment trust (the "Company"). Pan
Pacific and the Company are sometimes referred to herein, individually, as a
"Party," and, collectively, as the "Parties."
RECITALS
WHEREAS, Pan Pacific and the Company have heretofore entered into that
certain Agreement and Plan of Merger dated as of the date hereof (the "Existing
Merger Agreement");
WHEREAS, the Company desires to incorporate as a California corporation to
be named WPT, Inc. ("WPT") under the California General Corporation Law (the
"Incorporation");
WHEREAS, the Board of Directors of Pan Pacific and the Board of Trustees of
the Company have each approved the Existing Merger Agreement, declared that the
Existing Merger Agreement is advisable and determined that the merger of WPT
with and into Pan Pacific, with Pan Pacific being the surviving company in such
merger (the "Merger"), is advisable, fair to and in the best interests of their
respective companies and shareholders and accordingly have agreed to effect the
Merger upon the terms and subject to the conditions set forth therein;
WHEREAS, on or before the date of execution of the Existing Merger
Agreement, Revenue Properties (U.S.), Inc., a Delaware corporation that owns
approximately 51% of Pan Pacific Common Stock ("Revenue Properties"), executed
and delivered to the Company and Pan Pacific a Voting Agreement dated as of the
date hereof, pursuant to which Revenue Properties has agreed to vote in favor of
the Pan Pacific Voting Proposal (as defined herein);
WHEREAS, for United States federal income tax purposes, it is intended that
the Merger shall qualify as a reorganization and that this Agreement constitute
a plan of reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code");
WHEREAS, Pan Pacific and the Company desire to make certain
representations, warranties and agreements in connection with the Merger as
specifically set forth herein, and no others;
WHEREAS, Pan Pacific and Bradley Blake, the Chief Executive Officer of the
Company, intend to participate in the development services and joint venture
arrangements described in Exhibit E hereof after consummation of the Merger; and
WHEREAS, the Parties wish to amend and restate the Existing Merger
Agreement in its entirety pursuant to this Agreement for the purpose of (i)
modifying the provisions in Section 5.4 regarding coordination by the Company
and Pan Pacific of payment of certain dividends in the fourth fiscal quarter of
2000; (ii) eliminating the requirement in Section 5.4 that the Closing Date be a
date after November 15, 2000, (iii) eliminating the step-up in the Break-up Fee
from $7,000,000 to $10,000,000; (iv) modifying the provisions in Section 6.18
regarding severance and other payments to officers, directors and employees of
the Company; and (v) making certain other changes to the terms and provisions of
the Existing Merger Agreement, all as set forth herein;
A-1
<PAGE> 152
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and subject to the terms and conditions hereof,
and intending to be legally bound hereby, Pan Pacific and the Company hereby
amend and restate the Existing Merger Agreement pursuant to this Agreement as
follows:
ARTICLE I.
DEFINITIONS
For purposes of this Agreement, the term:
"Action" shall mean any action, order, writ, injunction, judgment or decree
outstanding or claim, suit, litigation, proceeding, arbitration, audit or
investigation by or before any Governmental Entity or any other Person.
"Affiliate" shall have the meaning ascribed to such term in Rule 12b-2 of
the General Rules and Regulations under the Exchange Act.
"Assets" shall mean, with respect to any Person, all land, buildings,
improvements, leasehold improvements, Fixtures and Equipment and other assets,
real or personal, tangible or intangible, owned or leased by such Person or any
of its Subsidiaries.
"Benefit Arrangement" shall mean, with respect to any Person, any
employment, consulting, severance, change in control or other similar contract,
arrangement or policy and each plan, arrangement (written or oral), program,
agreement or commitment providing for insurance coverage (including without
limitation any self-insured arrangements), workers' compensation, disability
benefits, life, health, disability or accident benefits (including without
limitation any "voluntary employees' beneficiary association," as defined in
Section 501(c)(9) of the Code providing for the same or other benefits) or for
deferred compensation, profit-sharing, bonuses, stock (or beneficial interest)
options, stock (or beneficial interest) appreciation rights, stock (or
beneficial interest) purchases or other forms of incentive or equity
compensation (other than a Welfare Plan, Pension Plan or Multiemployer Plan), in
each case with respect to which such Person or any ERISA Affiliate thereof has
or may have any obligation or liability (accrued, contingent or otherwise).
"Business Day" shall mean each day other than Saturdays, Sundays and days
when commercial banks are authorized to be closed for business in San Francisco,
California.
"Certificates" shall mean outstanding certificates which immediately prior
to the Effective Time represented WPT Common Stock.
"CGCL" shall mean the California General Corporation Law, as amended.
"Company Affiliate" shall mean an "affiliate" of the Company within the
meaning of Rule 145 promulgated under the Securities Act.
"Company Board" shall mean the Board of Trustees of the Company.
"Company Common Share" shall mean a common share of beneficial interest in
the Company, no par value.
"Company Contract" shall mean any note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness, lease, license, contract, agreement
or other instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their Assets are
bound, and which either (i) has a remaining term of more than one year, (ii)
involves the payment or receipt of money in excess of $2,500,000 during the
remaining term of such Company Contract or (iii) contains covenants limiting the
freedom of the Company or any of its Subsidiaries to engage in any line of
business or
A-2
<PAGE> 153
compete with any Person or operate at any location; provided, however, that a
Company Lease shall not be considered a Company Contract.
"Company DownREITs" shall mean the Western/Kienow Partnership and the
Western/Pinecreek Partnership.
"Company DownREIT Partnership Agreements" shall mean the partnership
agreements of the Company DownREITs, as in effect as of the date hereof.
"Company DownREIT Transaction Documents" shall mean the Western/Kienow
Partnership Amendment and the Western/Pinecreek Partnership Amendment.
"Company DownREIT Units" shall mean the units of limited partnership
interest in the Company DownREITs.
"Company Lease" shall mean any agreement providing for the use, occupancy
or possession of the Company Real Property.
"Company Material Adverse Effect" shall mean any change in or effect (i)
that is, or would reasonably be expected to be, materially adverse to the
business, Assets, liabilities, results of operations or condition (financial or
otherwise) of the Company and its Subsidiaries taken as a whole, (ii) that will,
or would reasonably be expected to, prevent or materially impair the ability of
the Parties to consummate the Merger before February 28, 2001 or (iii) that
would,or would reasonably be expected to, prevent or materially impair the
ability of Pan Pacific to operate its or any of its Subsidiaries' business or
qualify for taxation as a REIT following the Effective Time; provided, however,
that any such change or effect having the results described in the foregoing
(i), (ii) or (iii) that results from (A) a change in any law, rule, or
regulation, or GAAP or interpretations thereof that applies to both Pan Pacific
and the Company or (B) economic or market conditions in the retail shopping
center industry generally, shall not be considered when determining whether a
Company Material Adverse Effect has occurred; provided, further, that a decline
in the share price of the Company resulting from the public announcement of this
Agreement and the proposed Merger shall not be deemed a Company Material Adverse
Effect.
"Company Options" shall mean all options and purchase rights to acquire
Company Shares granted, awarded, earned or purchased under any Company Stock
Plan.
"Company Shares" shall mean Company Common Shares and Company Preferred
Shares.
"Company Shareholder" shall mean a holder of record of one or more Company
Common Shares immediately prior to the Effective Time.
"Company Stock Plans" shall mean the Company's 1988 Stock Option Plan and
the Company's 1998 Equity Incentive Plan.
"Company Stock Rights" shall mean all options, restricted share awards,
performance awards, dividend equivalents, deferred stock, equity payments,
equity appreciation rights and shares of capital stock or beneficial interests
granted, awarded, earned or purchased pursuant to any Company Stock Plan.
"Company Transaction Documents" shall mean this Agreement and the Articles
of Incorporation.
"Company Transactions" shall mean the Incorporation, the Merger and the
other transactions contemplated by the Company Transaction Documents.
"Declaration of Trust" shall mean the Amended and Restated Declaration of
Trust of the Company.
"Effective Time" shall have the meaning assigned thereto in Section 2.4.
"Encumbrances" shall mean any claim, lien, pledge, option, right of first
refusal, charge, security interest, deed of trust, mortgage, restriction or
encumbrance pertaining to the Assets held by or in favor of Third Parties.
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"Environmental Laws" shall mean any federal, state or local law, statute,
ordinance, order, decree, rule or regulation relating (i) to releases,
discharges, emissions or disposals to air, water, land or groundwater of
Hazardous Materials; (ii) to the use, handling ordisposal of polychlorinated
biphenyls, asbestos or urea formaldehyde or any other Hazardous Material; (iii)
to the treatment, storage, disposal or management of Hazardous Materials; (iv)
to exposure to toxic, hazardous or other controlled, prohibited or regulated
substances; or (v) to the transportation, release or any other use of Hazardous
Materials, including the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. 9601, et seq. ("CERCLA"), the Resource Conservation and
Recovery Act, 42 U.S.C. 6901, et seq. ("RCRA"), the Toxic Substances Control
Act, 15 U.S.C. 2601, et seq. ("TSCA"), those portions of the Occupational,
Safety and Health Act, 29 U.S.C. 651, et seq. relating to Hazardous Materials
exposure and compliance, the Clean Air Act, 42 U.S.C. 7401, et seq., the Federal
Water Pollution Control Act, 33 U.S.C. 1251, et seq., the Safe Drinking Water
Act, 42 U.S.C. 300f, et seq., the Hazardous Materials Transportation Act, 49
U.S.C. 1802 et seq. ("HMTA") and the Emergency Planning and Community Right to
Know Act, 42 U.S.C. 11001, et seq. ("EPCRA"), and other comparable state and
local laws and all rules and regulations promulgated pursuant thereto or
published thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean, with respect to any Person, any entity which
is (or at any relevant time was) considered one employer with such Person under
Section 4001 of ERISA or Section 414 of the Code.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Fixtures and Equipment" shall mean, with respect to any Person, all of the
furniture, fixtures, furnishings, machinery and equipment owned or leased by
such Person and located in, at or upon the Assets of such Person.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, as in effect from time to time, consistently applied.
"Governmental Entities" shall mean all domestic courts, regulatory or
administrative agencies, commissions or other governmental authorities, bodies
or instrumentalities with jurisdiction.
"Hazardous Materials" shall mean each and every element, compound, chemical
mixture, contaminant, pollutant, material, waste or other substance which is
defined, determined or identified as hazardous or toxic under applicable
Environmental Laws or the release of which is regulated under Environmental
Laws. Without limiting the generality of the foregoing, the term includes:
"hazardous substances" as defined in CERCLA; "extremely hazardous substances" as
defined in EPCRA; "hazardous waste" as defined in RCRA; "hazardous materials" as
defined in HMTA; a "chemical substance or mixture" as defined in TSCA; crude
oil, petroleum products or any fraction thereof; radioactive materials,
including source, byproduct or special nuclear materials; asbestos or
asbestos-containing materials; chlorinated fluorocarbons ("CFCs"); and radon.
"IRS" shall mean the United States Internal Revenue Service or any
successor agency.
"Knowledge" shall mean with respect to (i) the Company, the actual
knowledge after reasonable inquiry of those individuals listed in Section 1 of
the Company Disclosure Schedule, and (ii) Pan Pacific, the actual knowledge
after reasonable inquiry of those individuals listed in Section 1 of the Pan
Pacific Disclosure Schedule.
"MGCL" shall mean the Maryland General Corporation Law, as amended.
"Multiemployer Plan" shall mean, with respect to any Person, any
"multiemployer plan thereof," within the meaning of Section 3(37) or 4001(a)(3)
of ERISA, which such Person or any ERISA Affiliate thereof contributed to or is
or was required to contribute to, or under which such Person or any ERISA
Affiliate has or may have any obligation or liability (accrued, contingent or
otherwise).
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"NYSE" shall mean The New York Stock Exchange, Inc.
"Organizational Documents" means, with respect to any entity, the charter,
certificate of incorporation, articles of incorporation, bylaws, partnership
agreement, operating agreement, declaration of trust or other governing
documents of such entity, including any documents designating or certifying the
terms of any securities of such entity.
"Pan Pacific Common Stock" shall mean the Common Stock, par value $.01 per
share, of Pan Pacific.
"Pan Pacific Contract" shall mean any note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness, lease, license, contract, agreement
or other instrument or obligation to which Pan Pacific or any of its
Subsidiaries is a party or by which any of them or any of their Assets may be
bound, and which either (i) has a remaining term of more than one year, (ii)
involves the payment or receipt of money in excess of $5,000,000 during the
remaining term of such Pan Pacific Contract or (iii) contains covenants limiting
the freedom of Pan Pacific or any of its Subsidiaries to engage in any line of
business or compete with any Person or operate at any location; provided,
however, that a Pan Pacific Lease shall not be considered a Pan Pacific
Contract.
"Pan Pacific DownREITs" means Pan Pacific (Portland), LLC, a Delaware
limited liability company, and Pan Pacific (Rancho Las Palmas), a Nevada limited
liability company.
"Pan Pacific DownREIT Operating Agreements" shall mean the operating
agreements of the Pan Pacific DownREITs, as in effect as of the date hereof.
"Pan Pacific DownREIT Units" means the units of membership interest in the
Pan Pacific DownREITs.
"Pan Pacific Lease" shall mean any agreement providing for the use,
occupancy or possession of the Pan Pacific Real Property.
"Pan Pacific Material Adverse Effect" shall mean any change in or effect
(i) that is, or would reasonably be expected to be, materially adverse to the
business, Assets, liabilities, results of operations or condition (financial or
otherwise) of Pan Pacific and its Subsidiaries taken as a whole, (ii) that will,
or would reasonably be expected to, prevent or materially impair the ability of
the Parties to consummate the Merger before February 28, 2001 or (iii) that
would, or would reasonably be expected to, prevent or materially impair the
ability of Pan Pacific to operate its or any of its Subsidiaries' business or
qualify for taxation as a REIT following the Effective Time; provided, however,
that any such change or effect having the results described in the foregoing
(i), (ii) or (iii) that results from (A) a change in any law, rule, or
regulation, or GAAP or interpretations thereof that applies to both Pan Pacific
and the Company or (B) economic or market conditions in the retail shopping
center industry generally, shall not be considered when determining whether a
Pan Pacific Material Adverse Effect has occurred; provided, further, that a
decline in the stock price of Pan Pacific resulting from the public announcement
of this Agreement and the proposed Merger shall not be deemed a Pan Pacific
Material Adverse Effect.
"Pan Pacific Stock" shall mean Pan Pacific Common Stock and Pan Pacific
Preferred Stock.
"Pan Pacific Stock Plans" shall mean the 1997 Stock Option and Incentive
Plan of Pan Pacific and the 2000 Equity Incentive Plan of Pan Pacific.
"Pan Pacific Stock Rights" shall mean all stock options, restricted stock
awards, performance awards, dividend equivalents, deferred stock, stock
payments, stock appreciation rights and shares of stock granted, awarded, earned
or purchased pursuant to any Pan Pacific Stock Plan.
"Pan Pacific Transactions" means the Merger and the other transactions
contemplated by this Agreement.
"Pension Plan" shall mean, with respect to any Person, any "employee
pension benefit plan," as defined in Section 3(2) of ERISA (other than a
Multiemployer Plan) which such Person or any ERISA
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Affiliate thereof contributed to or is or was required to contribute to, or
under which such Person or any ERISA Affiliate thereof has or may have any
obligation or liability (accrued, contingent or otherwise).
"Permitted Encumbrances" shall mean any Encumbrances which result from (i)
all statutory or other liens for Taxes or assessments which are not yet due or
delinquent or the validity of which is being contested in good faith by
appropriate proceedings by a Party hereto for which adequate reserves are being
maintained in accordance with GAAP by a Party hereto; (ii) all cashiers',
landlords', workers', mechanics', carriers' and repairers' liens, and other
similar liens imposed by law, incurred in the ordinary course of business; (iii)
all laws, rules, regulations, ordinances and restrictions promulgated by any
Governmental Entity; (iv) all Company Contracts, leases, subleases, licenses,
concessions or service contracts to which any Person or any of its Subsidiaries
is a party; (v) Encumbrances identified on title policies or preliminary title
reports, surveys in the possession of the Company or its Subsidiaries (in the
case of Company Assets) or in the possession of Pan Pacific or its Subsidiaries
(in the case of Pan Pacific Assets), or other documents or writings or included
in the public records incurred or assumed in the ordinary course of business;
and (vi) all other liens and mortgages, covenants, imperfections in title,
charges, easements, restrictions which, in the case of any such Encumbrances
pursuant to clause (i) through (vi), individually or in the aggregate do not
materially detract from or materially interfere with the present use of the
property subject thereto or affected thereby and would not otherwise cause a
Company Material Adverse Effect with respect to Encumbrances affecting Company
Real Property or a Pan Pacific Material Adverse Effect with respect to
Encumbrances affecting Pan Pacific Real Property.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, real estate investment trust, other
organization (whether incorporated or unincorporated), governmental agency or
instrumentality, or any other legal entity.
"Property Restrictions" shall mean, with respect to any Company Real
Property or Pan Pacific Real Property, as applicable, all easements, rights of
way, covenants, conditions, written agreements, laws, ordinances and regulations
affecting building use or occupancy, or reservations of an interest in title.
"REIT" shall mean a real estate investment trust within the meaning of the
Code.
"Representative" shall mean, with respect to any Person, that Person's
officers, directors, employees, financial advisors, agents or other
representatives.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership, limited liability company, joint venture, real estate investment
trust, or other organization, whether incorporated or unincorporated, or other
legal entity of which (i) such Person directly or indirectly owns or controls at
least a majority of the capital stock or other equity interests having by their
terms ordinary voting power to elect a majority of the board of directors or
others performing similar functions; (ii) such Person is a general partner,
manager or managing member; or (iii) such Person holds a majority of the equity
economic interest.
"Tax" or "Taxes" shall mean all federal, state, local, foreign and other
taxes, levies, imposts, assessments, impositions or other similar government
charges, including, without limitation, income, estimated income, business,
occupation, franchise, real property,payroll, personal property, sales,
transfer, stamp, use, employment, commercial rent or withholding, occupancy,
premium, gross receipts, profits, windfall profits, deemed profits, license,
lease, severance, capital, production, corporation, ad valorem, excise, duty or
other taxes, including interest, penalties and additions (to the extent
applicable) thereto, whether disputed or not.
"Tax Return" shall mean any report, return, document, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction (foreign or domestic) with respect to Taxes, including, without
limitation, any schedule or attachment thereto and any amendment thereof, any
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information returns, any documents with respect to or accompanying payments of
estimated Taxes, or with respect to or accompanying requests for the extension
of time in which to file any such report, return, document, declaration or other
information.
"Third Party" shall mean any person other than the Company, Pan Pacific and
their respective Affiliates.
"Welfare Plan" shall mean, with respect to any Person, any "employee
welfare benefit plan," as defined in Section 3(1) of ERISA, which such Person or
any ERISA Affiliate thereof contributed to or is or was required to contribute
to, or under which such Person or any ERISA Affiliate thereof has or may have
any obligation or liability (accrued, contingent or otherwise).
"Western/Kienow Partnership" shall mean Western/Kienow, L.P., a Delaware
limited partnership.
"Western/Kienow Partnership Amendment" shall mean the First Amendment to
the Agreement of Limited Partnership, dated as of August , 2000, which amends
the Agreement of Limited Partnership of Western/Kienow, L.P. dated October 30,
1998.
"Western/Pinecreek Partnership" shall mean Western/Pinecreek, L.P., a
Delaware limited partnership.
"Western/Pinecreek Partnership Amendment" shall mean the unexecuted First
Amendment to the Agreement of Limited Partnership, which, if and when it is
executed, will amend the Agreement of Limited Partnership of Western/Pinecreek,
L.P. dated November 27, 1999.
"WRESI" shall mean Western Real Estate Services, Inc., a California
corporation.
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TABLE OF OTHER DEFINED TERMS
<TABLE>
<CAPTION>
CROSS REFERENCE
TERMS IN AGREEMENT
----- ---------------
<S> <C>
Acquisition Proposal........................................ Section 6.3(a)
Affiliate Agreement......................................... Exhibit B
Agreement................................................... Preamble
Agreement of Merger......................................... Section 2.4
Alternative Transaction..................................... Section 8.2(d)
Articles of Incorporation................................... Section 2.1
Articles of Merger.......................................... Section 2.4
Base Amount................................................. Section 8.2(d)
Blue Sky Laws............................................... Section 3.6(b)
Break-Up Fee................................................ Section 8.2(e)
Certificate of Merger....................................... Section 2.4
Closing..................................................... Section 2.3
Closing Date................................................ Section 2.3
Code........................................................ Recitals
Company..................................................... Preamble
Company 401(k) Plan......................................... Section 6.5
Company Disclosure Schedule................................. Article III
Company Employee Plans...................................... Section 3.12(a)
Company Financial Advisor................................... Section 3.18
Company Leased Property..................................... Section 3.13(a)
Company Owned Property...................................... Section 3.13(a)
Company Preferred Shares.................................... Section 3.3(a)
Company Real Property....................................... Section 3.13(a)
Company SEC Reports......................................... Section 3.8(a)
Company Shareholders Meeting................................ Section 3.18
Company Voting Proposals.................................... Section 3.2
Confidentiality Agreement................................... Section 6.4
Effective Time.............................................. Section 2.4
Employee Benefits........................................... Section 6.18(a)
Exchange Agent.............................................. Section 2.11(a)
Exchange Fund............................................... Section 2.11(a)
Exchange Ratio.............................................. Section 2.8(a)
Existing Merger Agreement................................... Recitals
Expenses.................................................... Section 8.2(a)
Final Company Dividend...................................... Section 5.3
Governmental Approvals...................................... Section 6.6
Incorporation............................................... Recitals
Joint Proxy Statement/Prospectus............................ Section 3.18
Maryland Department......................................... Section 2.4
Matching Transaction........................................ Section 6.3(c)
Merger...................................................... Recitals
Merger Consideration........................................ Section 2.8(a)
Minimum Distribution Dividend............................... Section 5.3
Notifying Party............................................. Section 6.5(a)
Pan Pacific................................................. Preamble
</TABLE>
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<TABLE>
<CAPTION>
CROSS REFERENCE
TERMS IN AGREEMENT
----- ---------------
<S> <C>
Pan Pacific Board........................................... Section 4.2
Pan Pacific Disclosure Schedule............................. Article IV
Pan Pacific Employee Plans.................................. Section 4.12(a)
Pan Pacific Financial Advisor............................... Section 4.18
Pan Pacific Leased Property................................. Section 4.13(a)
Pan Pacific Options......................................... Section 4.3(a)
Pan Pacific Owned Property.................................. Section 4.13(a)
Pan Pacific Preferred Stock................................. Section 4.3(a)
Pan Pacific Real Property................................... Section 4.13(a)
Pan Pacific SEC Reports..................................... Section 4.8(a)
Pan Pacific Stockholders Meeting............................ Section 3.18
Pan Pacific Voting Proposal................................. Section 4.6(a)
Party or Parties............................................ Preamble
Qualifying Income........................................... Section 8.2(e)
Registration Statement...................................... Section 3.18
REIT Requirements........................................... Section 8.2(e)
Revenue Properties.......................................... Recitals
Superior Proposal........................................... Section 6.3(b)
Surviving Company........................................... Section 2.2
Tax Guidance................................................ Section 8.2(e)
Terminating Company Breach.................................. Section 8.1(h)
Terminating Pan Pacific Breach.............................. Section 8.1(i)
Termination Date............................................ Section 8.1(b)
Voting Debt................................................. Section 3.3(e)
WPT Common Stock............................................ Section 2.1
</TABLE>
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ARTICLE II.
THE MERGER
SECTION 2.1 The Incorporation. Upon the terms and subject to the
conditions of this Agreement and in accordance with Section 200.5 of the CGCL,
immediately prior to the Effective Time, the Company shall consummate the
Incorporation by filing with the Secretary of State of the State of California
articles of incorporation of WPT and a related certificate in the forms attached
hereto as Exhibit A (the "Articles of Incorporation"). Upon the filing of the
Articles of Incorporation, WPT shall succeed automatically to all of the rights
and property of the Company and shall be subject to all of the Company's debts
and liabilities in the same manner as if WPT had incurred them. The Company
Board shall constitute the initial Board of Directors of WPT. As a result of the
Incorporation, each outstanding Company Common Share shall become, without any
additional action of any shareholder of the Company, one fully paid,
nonassessable share of common stock of WPT ("WPT Common Stock").
SECTION 2.2 The Merger. Upon the terms and subject to the conditions of
this Agreement and in accordance with the CGCL and the MGCL, at the Effective
Time, WPT shall be merged with and into Pan Pacific. Following the Merger, the
separate corporate existence of WPT shall cease and Pan Pacific shall continue
as the surviving entity (the "Surviving Company") in accordance with the CGCL
and the MGCL.
SECTION 2.3 Closing and Closing Date. Unless this Agreement shall have
been terminated by either Party hereto and the transactions herein contemplated
shall have been abandoned pursuant to the provisions of Section 8.1, the closing
(the "Closing") of the Incorporation and the Merger shall take place (a) at
10:00 a.m., San Francisco time, as soon as practicable, but in no event later
than the fifth Business Day, after the last of all of the conditions to the
respective obligations of the Parties set forth in Article VII hereof shall have
been satisfied or waived (other than those conditions that by their nature are
to be satisfied at the Closing, but subject to the fulfillment or waiver of
those conditions) or (b) at such other time and date as Pan Pacific and the
Company shall mutually agree; provided, however, that the Closing shall be
postponed to the extent, if any, required by Section 5.4 (such date and time on
and at which the Closing occurs being referred to herein as the "Closing Date").
The Closing shall take place at the offices of O'Melveny & Myers LLP, San
Francisco, California. At the Closing, the documents, certificates, opinions and
instruments referred to in Article VII shall be executed and delivered to the
applicable party.
SECTION 2.4 Effective Time. Subject to the provisions of this Agreement,
as soon as reasonably practical on or after the Closing Date, the Parties shall
(i) file with the State Department of Assessments and Taxation of Maryland (the
"Maryland Department") the articles of merger or other appropriate documents
(the "Articles of Merger") in such form as is required by, and executed in
accordance with, the relevant provisions of the MGCL; (ii) file with the
Secretary of State of the State of California an agreement of merger or other
appropriate documents (the "Agreement of Merger") in such form as required by,
and executed in accordance with, the relevant provisions of the CGCL; and (iii)
make all other filings, recordings or publications required under the MGCL and
the CGCL in connection with the Merger. The Merger shall become effective at
2:00 p.m., California Time, on the later of the date of (i) the filing of the
Articles of Merger with, and acceptance for record of such Articles of Merger
by, the Maryland Department in accordance with the MGCL and (ii) the filing of
the Agreement of Merger with, and acceptance for record of such Agreement of
Merger by, the California Secretary of State in accordance with the CGCL, or at
such other time as the Parties shall agree as specified in such filings in
accordance with applicable law (the "Effective Time").
SECTION 2.5 Effects of the Merger. The Merger shall have the effects set
forth in Section 3-114 of the MGCL, Section 1107 of the CGCL and this Agreement.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time of the Merger, all of the property, rights, privileges and powers
of the Company and Pan Pacific will vest in the Surviving Company, and all of
the debts, liabilities and duties of the Company and Pan Pacific will become the
debts, liabilities and duties of the Surviving Company.
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SECTION 2.6 Charter; Bylaws. At the Effective Time and without any further
action on the part of the Company or Pan Pacific, (i) the charter of Pan Pacific
as in effect at the Effective Time shall be the charter of the Surviving Company
until duly amended as provided for therein or under the MGCL and (ii) the bylaws
of Pan Pacific as in effect at the Effective Time shall be the bylaws of the
Surviving Company until duly amended as provided for therein or under the MGCL.
SECTION 2.7 Directors; Officers. The directors of the Surviving Company
following the Effective Time shall be (a) the five directors of Pan Pacific
immediately prior to the Merger plus (b) two additional individuals chosen by
Pan Pacific in accordance with Section 6.17. The officers of the Surviving
Company immediately following the Effective Time shall be the officers of Pan
Pacific immediately prior to the Effective Time. Such directors and officers
shall serve until the earlier of their resignation or removal from office in
accordance with the Surviving Company's charter or until their respective
successors are duly elected or appointed (in the case of officers) and
qualified, as the case may be.
SECTION 2.8 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Pan Pacific, the Company or the
holder of any of the following securities:
(a) Subject to Section 2.10, each share of WPT Common Stock issued and
outstanding immediately prior to the Effective Time (other than dissenting
shares referred to inSection 2.8(e) and shares to be canceled in accordance
with Section 2.8(b) hereof), shall be converted into and represent the
right to receive 0.62 fully paid and nonassessable shares (rounded to the
nearest ten-thousandth of a share) (as adjusted as set forth in subsection
(d), the "Exchange Ratio") of Pan Pacific Common Stock (the "Merger
Consideration"). The Merger Consideration shall be payable upon the
surrender of the Certificate formerly representing such WPT Common Stock.
As of the Effective Time, all WPT Common Stock shall no longer be
outstanding and shall automatically be canceled and retired and shall cease
to exist, and each holder of a Certificate representing any WPT Common
Stock shall cease to have any rights with respect thereto, except the right
to receive (i) the Merger Consideration, (ii) any cash in lieu of
fractional shares of Pan Pacific Common Stock to be issued or paid in
consideration therefor upon surrender of such Certificate in accordance
with Section 2.10, (iii) any dividends or distributions in accordance with
Section 2.11(e) and (iv) any unpaid dividend declared by the Company in
respect of Company Common Shares in accordance with Section 5.3 or 5.4, in
each case without interest.
(b) Each share of WPT Common Stock that is (i) held in the treasury of
WPT or owned by any wholly-owned Subsidiary of WPT or (ii) owned by Pan
Pacific or any Subsidiary of Pan Pacific, in each case immediately prior to
the Effective Time, shall, by virtue of the Merger and without any action
on the part of the holder thereof, be canceled and retired without any
conversion thereof and no payment or distribution of any consideration
shall be made with respect thereto.
(c) Each share of common stock, preferred stock or other stock of Pan
Pacific issued and outstanding immediately prior to the Effective Time
shall remain outstanding and shall be unchanged after the Merger.
(d) The Exchange Ratio shall be adjusted to reflect fully the effect
of any stock split, reverse split, stock dividend (including any dividend
or distribution of securities convertible into Pan Pacific Common Stock,
WPT Common Stock or Company Common Shares, as applicable), reorganization,
recapitalization or other like change with respect to Pan Pacific Common
Stock, WPT Common Stock or Company Common Shares occurring after the date
hereof and prior to the Effective Time.
(e) Notwithstanding anything in this Agreement to the contrary, shares
of WPT Common Stock which are dissenting shares (as defined in Section
1300(b) of the CGCL), if any, shall not be converted into or represent a
right to receive any shares of Pan Pacific Common Stock, but the holders
thereof shall be entitled only to such rights as are granted by the CGCL.
Each holder of dissenting shares who becomes entitled to payment therefor
pursuant to the CGCL shall receive payment from the Surviving Company in
accordance with the CGCL; provided, however, that (i) if any such holder of
dissenting shares shall have failed to establish his entitlement to
appraisal rights as
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provided in the CGCL, (ii) if any such holder of dissenting shares shall
have effectively withdrawn his demand for appraisal thereof or lost his
right to appraisal and payment therefor under the CGCL or (iii) if neither
any holder of dissenting shares nor the Surviving Company shall have filed
a petition demanding a determination of the value of all dissenting shares
within the time provided in the CGCL, such holder or holders (as the
casemay be) shall forfeit the right to appraisal of such shares of Pan
Pacific Common Stock and such shares of WPT Common Stock shall thereupon be
deemed to have been converted, as of the Effective Time, into and represent
the right to receive shares of Pan Pacific Common Stock, without interest
thereon, as provided in Section 2.8(a).
SECTION 2.9 Treatment of Company Options and Restricted Stock.
(a) At the Effective Time, each outstanding Company Option, whether vested
or unvested, shall constitute an option to acquire, on the same terms and
conditions as were applicable under such Company Option, the same number of
shares of Pan Pacific Common Stock as the holder of such Company Option would
have been entitled to receive pursuant to the Merger had such holder exercised
such option in full immediately prior to the Effective Time (rounded to the
nearest whole number), at a price per share (rounded to the nearest whole cent)
equal to (x) the aggregate exercise price for the Company Common Shares
purchasable pursuant to such Company Option immediately prior to the Effective
Time divided by (y) the number of full shares of Pan Pacific Common Stock deemed
purchasable pursuant to such Company Option in accordance with the foregoing. It
is intended that Company Options converted into options to acquire Pan Pacific
Common Stock in accordance with the foregoing shall qualify following the
Effective Time as incentive stock options as defined in Section 422 of the Code
to the extent such Company Options qualified as incentive stock options
immediately prior to the Effective Time, and the provisions of this Section 2.9
shall be applied consistent with such intent.
(b) Pan Pacific shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Pan Pacific Common Stock for delivery
under Company Stock Plans assumed in accordance with this Section 2.9. As soon
as practicable after the Effective Time, Pan Pacific shall file a registration
statement on Form S-8 (or any successor or other appropriate forms), or another
appropriate form with respect to the shares of Pan Pacific Common Stock subject
to such options and shall use its best efforts to maintain the effectiveness of
such registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as such
options remain outstanding.
(c) The Company Board shall, prior to or as of the Effective Time, take all
necessary actions, if any, pursuant to and in accordance with the terms of the
Company Stock Plans and the instruments evidencing the Company Options, to
provide for the conversion of the Company Options into options to acquire Pan
Pacific Common Stock in accordance with this Section 2.9 without the consent of
the holders of the Company Options.
(d) At the Effective Time, the vesting of each restricted Company Common
Share granted under any Company Stock Plan and set forth on Section 3.3(b) of
the Company Disclosure Schedule shall be fully accelerated and the contractual
restrictions thereon shall terminate.
SECTION 2.10 Fractional Interests. No certificates or scrip representing
fractional shares of Pan Pacific Common Stock shall be issued in connection with
the Merger, and such fractional interests will not entitle the owner thereof to
any rights of a stockholder ofPan Pacific. In lieu of any such fractional
interests, each shareholder of WPT exchanging Certificates pursuant to Section
2.8(a) who would otherwise have been entitled to receive a fraction of a share
of Pan Pacific Common Stock (after taking into account all shares of WPT Common
Stock then held of record by such shareholder) shall receive cash (without
interest) in an amount equal to such fractional amount multiplied by the average
of the last reported sales prices of Pan Pacific Common Stock, as reported on
the NYSE, on each of the ten trading days immediately preceding the date of the
Effective Time.
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SECTION 2.11 Surrender of WPT Common Stock and Company Common Shares;
Stock Transfer Books.
(a) Prior to the Closing Date, Pan Pacific shall designate a bank or trust
company reasonably acceptable to the Company to act as agent for the
shareholders of WPT in connection with the Merger (the "Exchange Agent"). The
Exchange Agent shall receive the Merger Consideration to which shareholders of
WPT shall become entitled pursuant to Section 2.8(a). Prior to the Effective
Time, Pan Pacific will make available to the Exchange Agent sufficient shares of
Pan Pacific Common Stock and an estimated amount of cash in lieu of fractional
shares (such shares of Pan Pacific Common Stock, together with any dividends or
distributions with respect thereto pursuant to Section 2.11(e), if any, and cash
in lieu of fractional shares being hereinafter referred to as the "Exchange
Fund") to make all exchanges pursuant to Section 2.11(b). The Exchange Agent
shall cause the shares of Pan Pacific Common Stock, dividends or distributions
with respect thereto and cash in lieu of fractional shares deposited by Pan
Pacific to be (i) held for the benefit of the shareholders of WPT and (ii)
promptly applied to making the exchanges and payments provided for in Section
2.11(b). Such shares of Pan Pacific Common Stock, dividends or distributions
with respect thereto and cash in lieu of fractional shares shall not be used for
any purpose that is not provided for herein.
(b) Promptly after the Effective Time, the Surviving Company shall, or
shall cause the Exchange Agent to, mail to each shareholder of WPT whose shares
were converted pursuant to Section 2.8(a) into the right to receive certificates
representing Pan Pacific Common Stock (i) a form of letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration and the cash in lieu of
fractional shares pursuant to Section 2.10. Upon surrender to the Exchange Agent
of a Certificate, together with such letter of transmittal, duly completed and
validly executed in accordance with the instructions thereto, and such other
documents as may be reasonably required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor,
(i) a certificate representing that number of whole shares of Pan Pacific Common
Stock which such holder has the right to receive pursuant to the provisions of
Section 2.8(a), with respect to Certificates formerly representing shares of WPT
Common Stock, (ii) cash in lieu of any fractional shares of Pan Pacific Common
Stock to which such holder is entitled pursuant to Section 2.10, after giving
effect to any required Tax withholdings, and (iii) any dividends or
distributions to which such holder is entitled pursuant to Section 2.11(e), and
the Certificate so surrendered shall forthwith be canceled. Until so surrendered
and exchanged, each Certificate shall represent solely the right to receive
theMerger Consideration into which the shares of WPT Common Stock it theretofore
represented shall have been converted pursuant to Section 2.8(a), cash in lieu
of any fractional shares pursuant to Section 2.10 and any dividends or
distributions pursuant to Section 2.11(e). If the exchange of certificates
representing shares of Pan Pacific Common Stock is to be made to a Person other
than the Person in whose name the surrendered Certificate is registered, it
shall be a condition of exchange that the Certificate so surrendered shall be
properly endorsed or shall be otherwise in proper form for transfer and that the
Person requesting such exchange shall have paid any transfer and other taxes
required by reason of the exchange of certificates representing shares of Pan
Pacific Common Stock to a Person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of the
Surviving Company that such Tax either has been paid or is not applicable.
(c) At any time after the one-year anniversary of the Effective Time, Pan
Pacific shall be entitled to require the Exchange Agent to deliver to Pan
Pacific cash and any other instruments (including shares of Pan Pacific Common
Stock) in its possession relating to the transactions contemplated by this
Agreement which had been made available to the Exchange Agent and which have not
been distributed to holders of Certificates. Thereafter, each holder of a
Certificate, representing shares converted pursuant to Section 2.8(a), may
surrender such Certificate to the Surviving Company and (subject to applicable
abandoned property, escheat or other similar laws) receive in exchange therefor
the consideration payable in respect thereto pursuant to Section 2.8(a), Section
2.10 and Section 2.11(e), without interest, but shall have no greater rights
against the Surviving Company than may be accorded to general creditors of the
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Surviving Company under applicable law. Notwithstanding the foregoing, none of
Pan Pacific, the Surviving Company or the Exchange Agent shall be liable to any
shareholder of WPT (or Company Shareholder) for shares of Pan Pacific Common
Stock (and any cash payable in lieu of any fractional shares of Pan Pacific
Common Stock) whose Certificates have been delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(d) At the Effective Time, the stock transfer books of WPT shall be closed
and thereafter there shall be no further registration of transfers of shares of
WPT Common Stock on the records of WPT From and after the Effective Time, the
holders of Certificates evidencing ownership of WPT Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of WPT Common Stock, except as otherwise provided for
herein or by applicable law.
(e) No dividends or other distributions declared or made after the
Effective Time with respect to shares of Pan Pacific Common Stock shall be paid
to the holder of any unsurrendered Certificate with respect to the shares of Pan
Pacific Common Stock the holder is entitled to receive and no Merger
Consideration, or any cash in lieu of fractional shares pursuant to Section
2.10, shall be paid to such holder until the holder of such Certificate
surrenders such Certificate in accordance with the provisions of this Agreement.
Upon such surrender, Pan Pacific shall cause to be paid to the Person in whose
name the certificates representing the Pan Pacific Common Stock shall be issued
in respect of such surrendered Certificate, any dividends or distributions with
respect to such shares of Pan Pacific Common Stock which have a record date
after the Effective Time and shall have become payable between the Effective
Time and thetime of such surrender. In no event shall the Person entitled to
receive such dividends or distributions be entitled to receive interest thereon.
SECTION 2.12 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of Pan
Pacific Common Stock (and cash in lieu of any fractional shares of Pan Pacific
Common Stock), and dividends or distributions, if any, as may be required to be
issued pursuant to Section 2.8(a), Section 2.10 and Section 2.11(e); provided,
however, that Pan Pacific may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Pan Pacific or the Exchange
Agent with respect to the Certificates alleged to have been lost, stolen or
destroyed.
SECTION 2.13 Withholding Rights. Pan Pacific or the Exchange Agent shall
be entitled to deduct and withhold from the Merger Consideration, or cash in
lieu of fractional shares, if any, or dividends or distributions, if any,
otherwise payable pursuant to this Agreement to any shareholder of WPT such
amounts as Pan Pacific or the Exchange Agent is required to deduct and withhold
with respect to the making of such payment under the Code or any provision of
state, local, or foreign Tax law. To the extent that amounts are so withheld by
Pan Pacific or the Exchange Agent, such withheld amounts shall be treated for
all purposes of this Agreement as having been paid to the shareholder of WPT, in
respect of which such deduction and withholding was made by Pan Pacific or the
Exchange Agent.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Pan Pacific that the statements
contained in this Article III are true and correct except as set forth herein or
in the disclosure schedule delivered by the Company to Pan Pacific on or before
the date of this Agreement (the "Company Disclosure Schedule") or as otherwise
limited herein.
SECTION 3.1 Organization and Qualification. The Company and each of its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, with the real estate investment
trust, corporate, partnership or other applicable power and authority to own and
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operate its business as presently conducted. The Company and each of its
Subsidiaries is duly qualified as a foreign corporation or other entity to do
business and is in good standing in each jurisdiction where the ownership or
operation of its properties or the nature of its activities makes such
qualification necessary, except for such failures of the Company and any of its
Subsidiaries to be so qualified as would not, when taken together with all such
other failures, cause a Company Material Adverse Effect. The Company has
previously made available to Pan Pacific true and correct copies of its
Organizational Documents as in effect on the date hereof. The Company is a "real
estate investment trust," as such term is defined in Section 23000 of the CGCL.
SECTION 3.2 Authorization; Validity and Effect of Agreement. The Company
has the requisite real estate investment trust and corporate power and authority
to execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby subject to the adoption and
approval of the Agreement and the Incorporation by the requisite vote of the
holders of Company Common Shares (such votes being the "Company Voting
Proposals"). The execution and delivery of this Agreement by the Company and the
performance by the Company of its obligations hereunder and the consummation of
the transactions contemplated hereby have been duly authorized by the Company
Board and all other necessary real estate investment trust and corporate action
on the part of the Company, other than the adoption and approval of this
Agreement and the Incorporation by the requisite vote of the holders of the
Company Common Shares, and no other trust or corporate proceedings on the part
of the Company are necessary to authorize this Agreement or the Company
Transactions. This Agreement has been duly and validly executed and delivered by
the Company and constitutes a legal, valid and binding obligation of the
Company, enforceable against it in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally and general equitable principles (whether
considered in a proceeding in equity or at law).
SECTION 3.3 Capitalization.
(a) As of the date hereof and as of the date of the Effective Time
(immediately prior to the Incorporation), the authorized shares of beneficial
interest in the Company consists of an unlimited number of Company Common Shares
and 2,000,000 preferred shares of beneficial interest, no par value ("Company
Preferred Shares"). The authorized capital stock of WPT as of the Effective Time
will consist of 25,000,000 shares of WPT Common Stock. As of the close of
business on June 30, 2000, (i) 17,297,250 Company Common Shares were issued and
outstanding, of which zero (0) shares were held in the Company treasury, and
(ii) no Company Preferred Shares were issued and outstanding. Since June 30,
2000, no Company Shares have been issued or reserved for issuance, except for
Company Shares issued in respect of the exercise, conversion or exchange of
Company Stock Rights or Company DownREIT Units outstanding on June 30, 2000.
(b) Section 3.3(b) of the Company Disclosure Schedule sets forth as of the
date hereof, for each Company Stock Plan, the dates on which Company Stock
Rights under such plan were granted, the number of outstanding Company Stock
Rights granted on each such date, the number and class of Company Shares for or
into which each such Company Stock Right is exercisable, convertible or
exchangeable and the exercise price thereof. Except as set forth in this Section
3.3(b), or described in Section 3.3(b) of the Company Disclosure Schedule, or
the rights to convert Company DownREIT Units into Company Common Shares pursuant
to the Company DownREIT Partnership Agreements, there are no securities,
options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company or any of its Subsidiaries is a
party or by which any of them is bound obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional Company Shares or any other equity interests of the Company or
its Subsidiariesor other voting securities of the Company or its Subsidiaries or
obligating the Company or its Subsidiaries to issue, grant, extend or enter into
any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking and neither the Company nor its Subsidiaries have
granted any share appreciation rights or any other contractual rights the value
of which is derived from the financial
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performance of the Company or the value of Company Shares or any other equity
interests of the Company.
(c) There are no outstanding or contingent obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any Company
Shares or any other equity interests in the Company or the capital stock or
ownership interests of any Subsidiary of the Company, other than the Company's
obligation to convert Company DownREIT Units pursuant to the Company DownREIT
Partnership Agreements.
(d) All Company Common Shares subject to issuance as specified in Section
3.3(b) hereof or in Section 3.3(b) of the Company Disclosure Schedule, are duly
authorized and, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, including payment of any
exercise price in respect thereof, will be validly issued, fully paid and
nonassessable.
(e) There are no bonds, debentures, notes or other indebtedness having
voting rights (or convertible into securities having such rights) ("Voting
Debt") of the Company or any of its Subsidiaries issued and outstanding. There
are no voting trusts, proxies or other voting agreements with respect to the
equity interests in the Company to which the Company or any of its Subsidiaries
is a party. The Company does not have a shareholder rights plan in effect.
SECTION 3.4 Subsidiaries. The only Subsidiaries of the Company are those
set forth in Section 3.4 of the Company Disclosure Schedule. All of the
outstanding shares of capital stock (including shares which may be issued upon
exercise of outstanding options) or other ownership interests of each of the
Company's Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Section 3.4 of the Company Disclosure
Schedule, the Company owns, directly or indirectly, all of the issued and
outstanding capital stock and other ownership interests of each of its
Subsidiaries, free and clear of all Encumbrances other than statutory or other
liens for Taxes or assessments which are not yet due or delinquent or the
validity of which is being contested in good faith by appropriate proceedings,
and there are no existing options, warrants, calls, subscriptions, convertible
securities or other securities, agreements, commitments or obligations of any
character relating to the outstanding capital stock or other securities of any
Subsidiary of the Company or which would require any Subsidiary of the Company
to issue or sell any shares of its capital stock, ownership interests or
securities convertible into or exchangeable for shares of its capital stock or
ownership interests.
SECTION 3.5 Other Interests. Except as set forth in Section 3.5 of the
Company Disclosure Schedule, neither the Company nor any of the Company's
Subsidiaries owns or has the right or option to acquire, directly or indirectly,
any interest or investment in (whether equity or debt) any corporation,
partnership, limited liability company, joint venture,business, trust or other
Person, other than the rights held by the Company or its Subsidiaries identified
in Section 3.4 of the Company Disclosure Schedule. Without limiting the
generality of the foregoing sentence, neither the Company nor, to the Company's
Knowledge, any "Affiliate" or "Associate" (as such terms are defined in Section
3-601 of the MGCL) of the Company, is, or was at any time since June 30, 1995,
the "Beneficial Owner" (as defined in Section 3-601 of the MGCL), directly or
indirectly, of 5% or more of the voting power of the outstanding voting stock of
Pan Pacific. At all times during the second half of any taxable year beginning
with the taxable year ended December 31, 1992, the Company has met, or was
treated as having met, the "not closely held" requirement set forth in Section
856(a)(6) of the Code. To the Knowledge of the Company, at any particular time
since January 1, 1992, no Person or Persons who actually or constructively (as
such term is used for purposes of the "not closely held" requirement set forth
in Section 856(a)(6) of the Code or as set forth in Section 856(d)(5) of the
Code) owned at any such time in excess of 9.8% in value of the outstanding
shares of beneficial interest in the Company held, in the aggregate, any
interest in any tenant of the Company. To the Knowledge of the Company, as of
the Effective Time, no Person will own, actually or constructively (as such term
is used for purposes of the "not closely held" requirement set forth in Section
856(a)(6) of the Code or as set forth in Section 856(d)(5) of the Code) in
excess of 9.8% of the outstanding shares of beneficial interest in the Company.
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SECTION 3.6 No Conflict; Required Filings and Consents.
(a) Neither the execution and delivery of this Agreement nor the
performance by the Company of its obligations hereunder, nor the consummation of
the transactions contemplated hereby, will: (i) assuming the Company Voting
Proposals are approved, conflict with the Company's Organizational Documents or
the Organizational Documents of any of its Subsidiaries; (ii) assuming
satisfaction of the requirements set forth in Section 3.6(b) below, violate any
material statute, law, ordinance, rule or regulation, applicable to the Company
or any of its Subsidiaries or any of their Assets; or (iii) except as set forth
in Section 3.6(a)(iii) of the Company Disclosure Schedule, violate, breach,
require consent under, be in conflict with or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or permit the termination of any provision of, or result in the termination of,
the acceleration of the maturity of, or the acceleration of the performance of
any obligation of the Company or any of its Subsidiaries under, or result in the
creation or imposition of any lien upon any Assets or business of the Company or
any of its Subsidiaries under, or give rise to any Third Party's right of first
refusal or other similar right under, any note, bond, indenture, mortgage, deed
of trust, lease, or material permit, authorization, license, contract,
instrument or other agreement or commitment or any order, judgment or decree to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries or any of their respective Assets are bound or
encumbered, or give any Person the right to require the Company or any of its
Subsidiaries to purchase or repurchase any notes, bonds or instruments of any
kind except, in the case of clauses (ii) and (iii), for such violations,
breaches, conflicts, defaults or other occurrences which, individually or in the
aggregate, would not cause a Company Material Adverse Effect.
(b) Except as set forth in Sections 3.6(a) or 3.6(b) of the Company
Disclosure Schedule, no consent, approval or authorization of, permit from, or
declaration, filing or registration with, any Governmental Entity is required to
be made or obtained by the Company or any of its Subsidiaries in connection with
the execution and delivery of the Company Transaction Documents or the Company
DownREIT Transaction Documents by the Company or any of its applicable
Subsidiaries or the consummation by the Company or its applicable Subsidiaries
of the Company Transactions, other than (A) the filing with the SEC of the Joint
Proxy Statement/Prospectus and such reports under Section 13(a) of the Exchange
Act, and such other compliance with the Exchange Act, as may be required in
connection with the Company Transaction Documents; (B) the filing of the
Agreement of Merger pursuant to the CGCL and the Articles of Merger pursuant to
the MGCL; (C) filings with the American Stock Exchange, (D) such filings and
approvals as may be required by any applicable state securities or "blue sky"
laws or environmental laws, (E) business, operating and occupancy licenses and
permits; and (F) such consents, approvals, authorizations, permits,
registrations, declarations and filings the failure of which to make or obtain
would not, in the aggregate, cause a Company Material Adverse Effect.
SECTION 3.7 Compliance. Except as set forth in Section 3.7 of the Company
Disclosure Schedule, the Company and each of its Subsidiaries is in material
compliance with all foreign, federal, state and local laws and regulations
applicable to its operations or with respect to which compliance is a condition
of engaging in the business thereof, except to the extent that failure to comply
would not, individually or in the aggregate, cause a Company Material Adverse
Effect. Neither the Company nor any of its Subsidiaries has received any written
notice since January 1, 1997, or has Knowledge of any written notice received by
it at any time, asserting a failure, or possible failure, to comply with any
such law or regulation, the subject of which written notice has not been
resolved as required thereby or otherwise to the reasonable satisfaction of the
party sending the notice, except for (A) matters being contested in good faith
and set forth in Section 3.7 of the Company Disclosure Schedule and (B) such
failures as would not, individually or in the aggregate, cause a Company
Material Adverse Effect.
SECTION 3.8 SEC Documents.
(a) The Company has filed with the SEC all reports, schedules, statements
and other documents required to be filed by the Company or any of its
Subsidiaries with the SEC since December 31, 1997
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(collectively, the "Company SEC Reports"). As of their respective dates, with
respect to Company SEC Reports filed pursuant to the Exchange Act, and as of
their respective effective dates, as to Company SEC Reports filed pursuant to
the Securities Act, the Company SEC Reports and any registration statements,
reports, forms, proxy or information statements and other documents filed by the
Company with the SEC after the date of this Agreement (i) complied, or, with
respect to those not yet filed, will comply, in all material respects with the
applicable requirements of the Securities Act and the Exchange Act, and (ii) did
not, or, with respect to those not yet filed, will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading.
(b) Each of the consolidated balance sheets included in or incorporated by
reference into the Company SEC Reports (including the related notes and
schedules) presents fairly, in all material respects, the consolidated financial
position of the Company and its consolidated Subsidiaries as of its date, and
each of the consolidated statements of income, shareholders' equity and cash
flows of the Company included in or incorporated by reference into the Company
SEC Reports (including any related notes and schedules) presents fairly, in all
material respects, the results of operations and cash flows, as the case may be,
of the Company and its Subsidiaries for the periods set forth therein (subject,
in the case of unaudited statements, to normal year-end audit adjustments), in
each case in accordance with GAAP consistently applied during the periods
involved, except as may be noted therein.
(c) Except as set forth in the Company SEC Reports, neither the Company nor
any of its Subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on, or reserved against in, a balance sheet of the Company or in
the notes thereto prepared in accordance with GAAP consistently applied, except
for (i) liabilities or obligations that were so reserved on, or reflected in
(including the notes to), the consolidated balance sheet of the Company as of
June 30, 2000, (ii) liabilities or obligations arising in the ordinary course of
business (including trade indebtedness) from June 30, 2000 to the date hereof
and (iii) liabilities incurred after the date hereof that are permitted by
Section 5.1 hereof and (iv) other liabilities or obligations which would not,
individually or in the aggregate, cause a Company Material Adverse Effect.
SECTION 3.9 Absence of Certain Changes. Except as set forth in the Company
SEC Reports and except for the transactions expressly contemplated hereby, from
June 30, 2000 to the date hereof, the Company and its Subsidiaries have
conducted their respective businesses substantially in the ordinary and usual
course consistent with past practices (including the incurrence of trade
indebtedness and secured debt assumed in connection with the acquisition of
properties by the Company or its Subsidiaries, the disposition of assets listed
in Section 3.9 of the Company Disclosure Schedule and the construction of the
development properties listed in Section 3.9 of the Company Disclosure
Schedule), and there has not been any change in the Company's business,
operations, condition (financial or otherwise), results of operations, Assets or
liabilities, except for changes contemplated hereby or changes which,
individually or in the aggregate, have not caused or will not cause a Company
Material Adverse Effect.
SECTION 3.10 Litigation. Except as set forth in the Company SEC Reports or
as set forth in Section 3.10 of the Company Disclosure Schedule, there is no
Action (i) instituted, (ii) pending and served upon the Company or (iii) to the
Knowledge of the Company, pending and not served upon the Company or threatened,
in each case against the Company, any of its Subsidiaries or any of their
respective Assets which, individually or in the aggregate, directly or
indirectly, has a Company Material Adverse Effect, nor is there any outstanding
judgment, decree or injunction, in each case against the Company, any of its
Subsidiaries or any of their respective Assets or any statute, rule or order of
any Governmental Entity applicable to the Company or any of its Subsidiaries
which, individually or in the aggregate, has caused, a Company Material Adverse
Effect.
SECTION 3.11 Taxes.
(a) Except as set forth in Section 3.11(a) of the Company Disclosure
Schedule, the Company and its Subsidiaries have (i) duly filed (or there have
been filed on their behalf) with the appropriate
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Governmental Entities all Tax Returns required to be filed by them (after giving
effect to any filing extension properly granted by a Governmental Entity having
authority to do so), and such Tax Returns are true, correct and complete in all
material respects, (ii) duly paid in full, or made provision in accordance with
GAAP (or there has been paid or provision has been made on their behalf) for,
all Taxes required to have been paid by them, whether or not shown to be due on
such Tax Returns and (iii) withheld and paid all material Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder or other party;
(b) No written claim is pending by an authority in a jurisdiction where any
of the Company and its Subsidiaries does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction;
(c) Neither the Company nor any of its Subsidiaries has received a written
notice of any threatened audits with respect to taxable years beginning on or
after January 1, 1992, with respect to Taxes or Tax Returns of the Company or
any of its Subsidiaries. With respect to taxable years beginning on or after
January 1, 1992, neither the IRS nor any other taxing authority (whether
domestic or foreign) has asserted against the Company or any of its Subsidiaries
any deficiency or claim for Taxes;
(d) Section 3.11(d) of the Company Disclosure Schedule sets forth each year
for which an extension to file Tax Returns has been requested and for which such
Tax Returns have not yet been filed;
(e) There are no liens for Taxes upon any Assets of the Company or any
Subsidiary thereof, except for liens for Taxes not yet due and payable, and no
written power of attorney that has been granted by the Company or any of its
Subsidiaries (other than to the Company or a Subsidiary, property tax
consultants or KPMG LLP) currently is in force with respect to any matter
relating to Taxes;
(f) Except as set forth in Section 3.11(f) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is a party to any
agreement, contract, arrangement or plan that has resulted or could result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code or which would result
in a disallowed deduction under Section 162(m) of the Code.
(g) Except as set forth in Section 3.11(g) of the Company Disclosure
Schedule, there are no, and at the Closing Date there will be no, Tax allocation
or sharing agreements or similar arrangements with respect to or involving the
Company or any of its Subsidiaries, and, after the Closing Date, neither the
Company nor any of its Subsidiaries shall be bound by any such Tax sharing
agreements or similar arrangements or have any liability thereunder for amounts
due in respect of periods prior to the Closing Date.
(h) Except as set forth in Section 3.11(h) of the Company Disclosure
Schedule, none of the Company and its Subsidiaries (i) has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was the Company) or (ii) has any liability for
the Taxes of any Person (other than any of the Company and its Subsidiaries)
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or otherwise;
(i) Since the Company's taxable year beginning January 1, 1992, the Company
has not incurred and does not expect to incur through the Closing Date any
liability for Taxes under Section 857(b), 860(c) or 4981 of the Code, and
neither the Company nor any of its Subsidiaries has incurred any material
liability for Taxes other than in the ordinary course of business. To the
Knowledge of the Company, no event has occurred, and no condition or
circumstance exists, which presents a material risk that any material Tax
described in the preceding sentence will be imposed upon the Company or its
Subsidiaries; and
(j) The Company (i) for all taxable years commencing with January 1, 1992
through December 31, 1999, has been subject to taxation as a REIT and has
satisfied all requirements to qualify as a REIT for such years, (ii) has
operated since December 31, 1999 in such a manner so as to qualify as a REIT and
will continue to operate through the Effective Time in such a manner so as to
qualify as a REIT for the taxable year ending on the date of the Effective Time,
(iii) has not taken or omitted to take any action
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which would reasonably be expected to result in a challenge by the IRS to its
status as a REIT, and no such challenge is pending or, to the Company's
Knowledge, threatened. Each Subsidiary of the Company that is a state law
partnership or limited liability company has been since its formation and
continues to be treated for federal income Tax purposes as a partnership (or a
disregarded entity) and not as a corporation or an association or publicly
traded partnership taxable as a corporation. Except for WRESI and its direct
Subsidiaries, each other Subsidiary of the Company has been since its formation,
and continues to be treated for federal income Tax purposes as a "qualified REIT
subsidiary" as defined in Section 856(i) of the Code. With respect to WRESI,
since its formation, the Company has at no time held, and does not now hold,
directly or indirectly, any voting interest (or any interest convertible into a
voting interest) in WRESI. Neither the Company nor any Subsidiary of the Company
holds any Asset the disposition of which would be subject to rules similar to
Section 1374 of the Code as a result of an election under Notice 88-19 or
Treasury Regulation section 1.337(d)-5T.
(k) The Company filed its federal income tax return for its taxable year
ended December 31, 1991 not later than September 15, 1992.
SECTION 3.12 Employee Benefit Plans.
(a) The Company has listed in Section 3.12 of the Company Disclosure
Schedule all Benefit Arrangements, Multiemployer Plans, Pension Plans and
Welfare Plans ofthe Company and all bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, change in control,
severance and other similar employee benefit plans, and all unexpired severance
agreements, written or otherwise, for the benefit of, or relating to, any
current or former employee of the Company or any ERISA Affiliate of the Company
or any Subsidiary of the Company (together, the "Company Employee Plans").
(b) With respect to each Company Employee Plan, the Company has made
available to Pan Pacific, a true and correct copy of (i) the most recent annual
report (Form 5500) filed with the IRS, (ii) such Company Employee Plan, (iii)
each trust agreement and group annuity contract, if any, relating to such
Company Employee Plan and (iv) the most recent actuarial report or valuation
relating to a Company Employee Plan subject to Title IV of ERISA.
(c) With respect to the Company Employee Plans, individually and in the
aggregate, no event has occurred, and to the Knowledge of the Company, there
exists no condition or set of circumstances in connection with which the Company
could be subject to any liability that will have a Company Material Adverse
Effect under ERISA, the Code or any other applicable law. There is no Company
Employee Plan that is subject to Title IV of ERISA or is a Multiemployer Plan.
(d) With respect to the Company Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
which have not been accrued or otherwise properly disclosed in the footnotes in
accordance with GAAP, in the financial statements of the Company, which
obligations will cause a Company Material Adverse Effect.
(e) Except as disclosed in Company SEC Reports filed prior to the date of
this Agreement, and except as set forth in Section 3.12(e) Company Disclosure
Schedule, or as provided for in this Agreement, neither the Company nor any of
its Subsidiaries is a party to any oral or written (i) agreement with any
officer or other key employee of the Company or any of its Subsidiaries, the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving the Company of the nature
contemplated by this Agreement, (ii) agreement with any officer of the Company
providing any term of employment or compensation guarantee extending for a
period longer than one year from the date hereof and for the payment of
compensation in excess of $100,000 per annum, or (iii) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
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SECTION 3.13 Properties.
(a) Section 3.13(a) of the Company Disclosure Schedule identifies:
(i) all real properties (by name and address) owned by the Company or
its Subsidiaries (the "Company Owned Property") as of the date hereof,
which are all of the real properties owned by them as of the date hereof;
and
(ii) all real properties leased or operated by the Company or its
Subsidiaries as lessee (the "Company Leased Property") as of the date
hereof, which are all of the real properties so leased or operated by them.
The Company Owned Property and the Company Leased Property is referred to
herein collectively as the "Company Real Property."
(b) The Company and its Subsidiaries have obtained title insurance policies
for the Company Real Property listed in Section 3.13(b) of the Company
Disclosure Schedule, and no material claims have been made against any such
policies by an insured party thereunder. With respect to the Company Real
Property not listed in Section 3.13(b) of the Company Disclosure Schedule, the
Company has good and marketable title to the Company Owned Property, and a good
and marketable leasehold interest in the Company Leased Property, sufficient to
allow each of the Company and its Subsidiaries to conduct its business as and
where currently conducted. Each Company Real Property is not subject to any
Encumbrances, except for any Permitted Encumbrances, any Encumbrances listed in
the title insurance policies set forth in Section 3.13(b) of the Company
Disclosure Schedule, or any other Encumbrances that do not, individually or in
the aggregate, cause a Company Material Adverse Effect.
(c) Except as set forth on Section 3.13(c) of the Company Disclosure
Schedule or as disclosed in the Company SEC Reports, the Company Real Property
is not encumbered by any debt.
(d) To the Company's Knowledge, all (i) certificates, permits or licenses
from any Governmental Entity having jurisdiction over any Company Real Property
and (ii) agreements, easements or other rights, necessary to permit the lawful
use and operation of the buildings and improvements on any of the Company Real
Property or to permit the lawful use and operation of all driveways, roads, and
other means of egress and ingress to and from any Company Real Property have
been obtained and are in full force and effect, except where the failure to
obtain or maintain the same would not cause a Company Material Adverse Effect,
and there is no pending threat or modification or cancellation of the same. No
Company Real Property is located outside of the United States and neither the
Company nor any of its Subsidiaries conducts its business of owning, leasing or
operating properties outside of the United States. All work to be performed,
payments to be made and financial undertakings required to be taken by the
Company or its Subsidiaries prior to June 30, 2000 pursuant to any contract
entered into with a Governmental Entity in connection with a site approval,
zoning reclassification or other similar action relating to a Company Real
Property has been paid or undertaken, as the case may be, except where the
failure to pay such amount or undertake such action would not cause a Company
Material Adverse Effect.
(e) The Company has not received since January 1, 1997 any written notice
of any violation of any federal, state or municipal law, ordinance, order,
regulation or requirement affecting any portion of any Company Real Property
issued by any Governmental Entity which would cause a Company Material Adverse
Effect. Since January 1, 1997, neither the Company nor any of its Subsidiaries
has received any written notice from any Governmental Entity with jurisdiction
over the Company or any such Subsidiaries to the effect that (i) any
condemnation or rezoning proceedings are pending or threatened with respect to
any Company Real Property or (ii) any zoning, building or similar law, code,
ordinance or regulation is being violated by the maintenance, operation or use
of any buildings or other improvements on any Company Real Property or by the
maintenance, operation or use of the parking areas, except where any such
written notice of such a proceeding or violation would not, individually or in
the aggregate, cause a Company Material Adverse Effect.
(f) Except as would not cause, individually or in the aggregate, a Company
Material Adverse Effect, to the Company's Knowledge, (i) there are no material
structural defects relating to any Company Real Property, (ii) there is no
Company Real Property whose building systems are not in working order in any
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material respect and (iii) there is no uninsured physical damage to any Company
Real Property in an amount in excess of $150,000 with respect to any individual
property, except for the payment by the Company of a deductible under the
applicable insurance policy or any current renovation or restoration to any
Company Real Property the remaining cost of which exceeds $150,000 with respect
to any individual property.
(g) True and correct copies of the Leases as amended to date have been
delivered to, or made available for review by, Pan Pacific. Section 3.13(g) of
the Company Disclosure Schedule lists the following information with respect to
the Company Leases:
(i) the name of the lessee;
(ii) the expiration date of the Company Lease; and
(iii) the amount (or method of determining the amount) of minimum
monthly base rentals due under each Company Lease.
(h) The Company has delivered to Pan Pacific a copy of its aging of
accounts receivable as of June 30, 2000, which copy is true and correct in all
material respects. Except as set forth in Section 3.13(h) of the Company
Disclosure Schedule, as of the date hereof, neither the Company nor any of its
Subsidiaries has delivered written notice to any tenant to any Company Lease,
alleging that such tenant is in default thereunder, other than with respect to
defaults that have been cured or waived or which would not, individually or in
the aggregate, cause a Company Material Adverse Effect.
(i) There are no agreements, written or oral, between the Company or any of
its Subsidiaries and any other Person relating to the use and occupancy of the
Company Real Property other than the Company Leases. Except as set forth in
Section 3.13(i) of the Company Disclosure Schedule, as of the date hereof, no
defaults (unless subsequently cured) by theCompany or its Subsidiaries have been
alleged in writing by the lessees thereunder that have not been cured in all
material respects and, to the Knowledge of the Company, none of the Company nor
any of its Subsidiaries is in default under any Company Lease other than such
defaults which would, individually or in the aggregate, cause a Company Material
Adverse Effect.
SECTION 3.14 Contracts.
(a) Section 3.14(a) of the Company Disclosure Schedule contains a complete
and accurate list of all Company Contracts in effect as of the date hereof,
other than the Company Contracts which have been filed as an exhibit to the
Company SEC Reports. Each copy of a Company Contract which has been delivered
to, or made available for review by, Pan Pacific is a true and correct copy of
such Company Contract as amended to date.
(b) As of the date of this Agreement, (i) there is no material breach or
violation of or material default by the Company or any of its Subsidiaries under
any of the Company Contracts, except if such breach, violation of or material
default has been waived, and (ii) no event has occurred with respect to the
Company or any of its Subsidiaries which, with notice or lapse of time or both,
would constitute a material breach, violation or default, or give rise to a
right of termination, modification, cancellation, foreclosure, imposition of a
lien, prepayment or acceleration under any of the Company Contracts, which
breach, violation or default referred to in clauses (i) or (ii), individually or
in the aggregate with other such material breaches, violations or defaults
referred to in clauses (i) or (ii), would cause a Company Material Adverse
Effect. True copies of the Company Contracts in effect as of the date hereof
have been delivered or made available to Pan Pacific.
SECTION 3.15 Labor Relations. Except as set forth in Section 3.15 of the
Company Disclosure Schedule or as would not cause a Company Material Adverse
Effect, (i) there are no controversies pending or, to the Knowledge of the
Company, threatened between the Company or any of its Subsidiaries and any of
their respective employees; (ii) neither the Company nor any of its Subsidiaries
is a party, or otherwise subject, to any collective bargaining agreement or
similar contract; (iii) there are no proceedings asserting unfair labor practice
charges pending against the Company or any of its Subsidiaries before the
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National Labor Relations Board, or any similar foreign labor relations
governmental bodies, or any current union representation questions involving
employees of the Company or any of its Subsidiaries; and (iv) there is no
strike, slowdown, work stoppage or lockout, or, to the Knowledge of the Company,
threat thereof, by or with respect to any employees of the Company or any of its
Subsidiaries.
SECTION 3.16 [Intentionally Omitted].
SECTION 3.17 Environmental Matters.
(a) Except as set forth in Section 3.17(a) of the Company Disclosure
Schedule, the Company, each of its Subsidiaries and, to the actual knowledge of
the individuals listed in Section 1 of the Company Disclosure Schedule (after an
inquiry of the Company'sproperty managers but no other third parties), each
tenant or operator of Company Real Property (i) have obtained all material
permits, licenses and other authorizations which are required to be obtained
under all applicable Environmental Laws by the Company or its Subsidiaries and
(ii) are in material compliance with all terms and conditions of such required
permits, licenses and authorizations, and also are in material compliance with
all other applicable limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
applicable Environmental Laws, except where the failure to obtain such permits,
licenses or other authorizations or to comply with such terms and conditions or
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables would not, individually or in the
aggregate, cause a Company Material Adverse Effect.
(b) Except as set forth in Section 3.17(b) of the Company Disclosure
Schedule, the Company, each of its Subsidiaries and, to the actual knowledge of
the individuals listed in Section 1 of the Company Disclosure Schedule, each
tenant or operator of Company Real Property have not received a written notice
of and have no Knowledge of any present or unremediated past violations of
Environmental Laws, or of any event, incident or Action preventing continued
compliance with such Environmental Laws, or giving rise to any common law
environmental liability, or forming the basis of any Action against the Company
or any of its Subsidiaries based on or resulting from the manufacture,
processing, use, treatment, storage, disposal, transport or handling, or the
emission, discharge or release into the environment, of any Hazardous Material.
(c) Section 3.17 constitutes the sole representation of the Company
concerning any Environmental Law or Hazardous Material.
SECTION 3.18 Opinion of Financial Advisor. The Company has received the
opinion of Donaldson, Lufkin & Jenrette Securities Corporation (the "Company
Financial Advisor"), as of the date of this Agreement, to the effect that the
Exchange Ratio is fair to the holders of Company Common Shares from a financial
point of view. The Company has been authorized by the Company Financial Advisor
to permit, subject to prior review and consent by such Company Financial
Advisor, the inclusion of the entirety of such fairness opinion (or a reference
thereto) in the joint proxy statement/prospectus to be sent to the stockholders
of Pan Pacific and the Company in connection with the meeting of the
shareholders of the Company (the "Company Shareholders Meeting") and the meeting
of Pan Pacific's stockholders (the "Pan Pacific Stockholders Meeting") to
consider this Agreement, the Merger and the Incorporation (the "Joint Proxy
Statement/Prospectus") and the registration statement on Form S-4 pursuant to
which shares of Pan Pacific Common Stock to be issued in the Merger will be
registered under the Securities Act (the "Registration Statement"), of which the
Joint Proxy Statement/Prospectus will form a part.
SECTION 3.19 Brokers. No broker, finder or investment banker (other than
the Company Financial Advisor, the fees and expenses of which shall be paid by
the Company) is entitled to any brokerage, finder's or other fee or commission
in connection with the Merger or the transactions contemplated by this Agreement
based upon arrangements made by or on behalfof the Company or any of its
Subsidiaries. The Company has heretofore furnished to Pan Pacific a complete and
correct copy of all agreements between the Company and the Company Financial
Advisor pursuant to which such firm would be entitled to any such payment.
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SECTION 3.20 Vote Required. The affirmative vote of the holders of a
majority of the outstanding Company Common Shares entitled to vote thereon is
the only vote of the holders of any class or series of the Company's equity
interests necessary to approve the Company Voting Proposals. The Company Board,
at a meeting duly called and held, subject to its right to withdraw its support
of the Merger and recommend an Acquisition Proposal pursuant to Section 6.3
hereof, (a) determined that this Agreement and the transactions contemplated
hereby, including the Merger, are fair to, and in the best interests of, the
shareholders of the Company, (b) approved this Agreement and the Company
Transactions, (c) has declared that this Agreement and the Company Transactions
are advisable, and (d) resolved to recommend that the holders of Company Common
Shares approve this Agreement and the Company Transactions. The Western/Kienow
Partnership Amendment has been approved by the requisite vote of, and all other
partnership action by, the partners of the Western/Kienow Partnership. A true
and correct copy of the fully executed Western/Kienow Partnership Amendment has
been delivered to Pan Pacific.
SECTION 3.21 Tax Matters. Neither the Company nor any of its Affiliates
has taken or agreed to take any action, nor does the Company have Knowledge of
any circumstances, that (without regard to any action taken or agreed to be
taken by Pan Pacific or any of its Affiliates) would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
SECTION 3.22 Insurance. The Company has made available to Pan Pacific true
and correct copies of all fire and casualty, general liability, business
interruption, product liability, and sprinkler and water damage insurance
policies maintained by the Company or any of its Subsidiaries as of the date
hereof.
SECTION 3.23 [Intentionally Omitted].
SECTION 3.24 No Material Adverse Effect. Except as disclosed in the
Company SEC Reports, to the Knowledge of the Company, no fact alone or together
with another fact, would cause a Company Material Adverse Effect prior to the
Termination Date.
SECTION 3.25 Affiliate Transactions. Except as set forth in the Company
SEC Reports, from December 31, 1999 through the date of this Agreement there
have been no material transactions, agreements, arrangements or understandings
between the Company or any of its Subsidiaries, on the one hand, and any
Affiliates (other than wholly-owned Subsidiaries) of the Company or other
Persons, on the other hand, that would be required to be disclosed under Item
404 of Regulation S-K under the Securities Act.
SECTION 3.26 No Existing Discussions. As of the date hereof, the Company
is not in breach of its obligations set forth in the tenth paragraph (relating
to negotiations of an Acquisition Proposal with a third party) of the
Confidentiality Agreement.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PAN PACIFIC
Pan Pacific represents and warrants to the Company that the statements
contained in this Article IV are true and correct except as set forth herein or
in the disclosure schedule delivered by Pan Pacific to the Company on or before
the date of this Agreement (the "Pan Pacific Disclosure Schedule") or as
otherwise limited herein.
SECTION 4.1 Organization and Qualification. Pan Pacific and each of its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, with the corporate or partnership
power and authority to own and operate its businesses as presently conducted.
Pan Pacific and each of its Subsidiaries is duly qualified as a foreign
corporation or other entity to do business and is in good standing in each
jurisdiction where the ownership or operation of its properties or the nature of
its activities makes such qualification necessary, except for such failures of
Pan Pacific and any of its Subsidiaries to be so qualified as would not, when
taken with all other such failures, cause a Pan Pacific Material Adverse Effect.
Pan Pacific has previously made available to the Company true and correct copies
of their Organizational Documents as in effect on the date hereof.
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SECTION 4.2 Authorization; Validity and Effect of Agreement. Pan Pacific
has the requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby subject to the adoption and approval of the Pan Pacific
Voting Proposal by the requisite vote of the holders of Pan Pacific Common
Stock. The execution and delivery of this Agreement by Pan Pacific and the
performance by it of its obligations hereunder and the consummation of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of Pan Pacific (the "Pan Pacific Board") and all other necessary
corporate action on the part of Pan Pacific, other than the adoption and
approval of the Pan Pacific Voting Proposal by the requisite vote of the holders
of Pan Pacific Common Stock, and no other corporate proceedings on the part of
Pan Pacific are necessary to authorize this Agreement or the Pan Pacific
Transactions. This Agreement has been duly and validly executed and delivered by
Pan Pacific and constitutes a legal, valid and binding obligation of Pan
Pacific, enforceable against it in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights generally and general equitable principles (whether
considered in a proceeding in equity or at law).
SECTION 4.3 Capitalization.
(a) As of the date hereof and as of the Effective Time, the authorized
stock of Pan Pacific consists of 100,000,000 shares of Pan Pacific Common Stock
and 30,000,000 shares of preferred stock, par value $0.01 per share ("Pan
Pacific Preferred Stock"). As of the close of business on June 30, 2000,
21,252,512 shares of Pan Pacific Common Stock were issued and outstanding and no
shares of Pan Pacific Preferred Stock were issued and outstanding. Since June
30, 2000, no shares of Pan Pacific Stock have been issued or reserved for
issuance, except for shares of Pan Pacific Common Stock issued in respect of the
exercise, conversion or exchange of Pan Pacific Stock Rights or Parent DownREIT
Units outstanding on June 30, 2000.
(b) Section 4.3(b) of the Pan Pacific Disclosure Schedule sets forth as of
the date hereof, for each Pan Pacific Stock Plan, the dates on which Pan Pacific
Stock Rights under such plan were granted, the number of outstanding Pan Pacific
Stock Rights granted on each such date, the number and class of Pan Pacific
Stock for or into which each such Pan Pacific Stock Right is exercisable,
convertible or exchangeable and the exercise price thereof. Except as set forth
in this Section 4.3(b), or described in Section 4.3(b) of the Pan Pacific
Disclosure Schedule, or the rights to convert Pan Pacific DownREIT Units into
shares of Pan Pacific Common Stock pursuant to the Pan Pacific DownREIT
Operating Agreements, there are no securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which Pan
Pacific or any of its Subsidiaries is a party or by which any of them is bound
obligating Pan Pacific or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional Pan Pacific Stock or any other
stock of the Pan Pacific or its Subsidiaries or other voting securities of Pan
Pacific or its Subsidiaries or obligating the Company or its Subsidiaries to
issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking and neither Pan Pacific
and its Subsidiaries have granted any stock appreciation rights or any other
contractual rights the value of which is derived from the financial performance
of Pan Pacific or the value of shares of Pan Pacific Stock.
(c) There are no outstanding or contingent obligations of Pan Pacific or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
Pan Pacific Stock or the stock or ownership interests of any Subsidiary of Pan
Pacific, other than Pan Pacific's obligation to convert Pan Pacific DownREIT
Units pursuant to Pan Pacific DownREIT Operating Agreements.
(d) All shares of Pan Pacific Common Stock subject to issuance as specified
in Section 4.3(b) hereof, or in Section 4.3(b) of the Pan Pacific Disclosure
Schedule, are duly authorized and, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, including
payment of any exercise price in respect thereof, will be validly issued, fully
paid and nonassessable.
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(e) There is no Voting Debt of Pan Pacific or any of its Subsidiaries
issued and outstanding. There are no voting trusts, proxies or other voting
agreements with respect to the shares of stock of Pan Pacific to which Pan
Pacific or any of its Subsidiaries is a party.
SECTION 4.4 Subsidiaries. Other than Subsidiaries of Pan Pacific formed or
acquired after the date hereof in connection with the acquisition of real
property in the ordinary course of business, the only Subsidiaries of Pan
Pacific are those set forth in Section 4.4 of thePan Pacific Disclosure
Schedule. All of the outstanding shares of stock (including shares which may be
issued upon exercise of outstanding options) or other ownership interests of
each of Pan Pacific's Subsidiaries are duly authorized, validly issued, fully
paid and nonassessable. Except as set forth in Section 4.4 of the Pan Pacific
Disclosure Schedule, Pan Pacific owns, directly or indirectly, all of the issued
and outstanding capital stock and other ownership interests of each of its
Subsidiaries, free and clear of all Encumbrances other than statutory or other
liens for Taxes or assessments which are not yet due or delinquent or the
validity of which is being contested in good faith by appropriate proceedings,
and there are no existing options, warrants, calls, subscriptions, convertible
securities or other securities, agreements, commitments or obligations of any
character relating to the outstanding capital stock or other securities of any
Subsidiary of Pan Pacific or which would require any Subsidiary of Pan Pacific
to issue or sell any shares of its capital stock, ownership interests or
securities convertible into or exchangeable for shares of its capital stock or
ownership interests.
SECTION 4.5 Other Interests. Except as set forth in Section 4.5 of the Pan
Pacific Disclosure Schedule, neither Pan Pacific nor any of Pan Pacific's
Subsidiaries owns or has the right or option to acquire, directly or indirectly,
any interest or investment in (whether equity or debt) any corporation,
partnership, limited liability company, joint venture, business, trust or other
Person (other than Pan Pacific's Subsidiaries identified in Section 4.4 of the
Pan Pacific Disclosure Schedule).
SECTION 4.6 No Conflict; Required Filings and Consents.
(a) Neither the execution and delivery of this Agreement nor the
performance by Pan Pacific of its obligations hereunder, nor the consummation of
the transactions contemplated hereby, will: (i) assuming the approval of the
Merger, including the issuance of shares of Pan Pacific Common Stock in
connection with the Merger (the "Pan Pacific Voting Proposal"), by the requisite
holders of Pan Pacific Common Stock, conflict with Pan Pacific's Organizational
Documents or the Organizational Documents of any of its Subsidiaries; (ii)
assuming satisfaction of the requirements set forth in Section 4.6(b) below,
violate any material statute, law, ordinance, rule or regulation, applicable to
Pan Pacific or any of its Subsidiaries or any of their Assets; or (iii) except
as set forth in Section 3.6(a)(iii) of the Pan Pacific Disclosure Schedule,
violate, breach, require consent under, be in conflict with or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or permit the termination of any provision of, or
result in the termination of, the acceleration of the maturity of, or the
acceleration of the performance of any obligation of Pan Pacific or any of its
Subsidiaries under, or result in the creation or imposition of any lien upon any
Assets or business of Pan Pacific or any of its Subsidiaries under or give rise
to any Third Party's right of first refusal, or other similar right, under any
note, bond, indenture, mortgage, deed of trust, lease, or material permit,
authorization, license, contract, instrument or other agreement or commitment or
any order, judgment or decree to which Pan Pacific or any of its Subsidiaries is
a party or by which Pan Pacific or any of its Subsidiaries or any of their
respective Assets are bound or encumbered, or give any Person the right to
require Pan Pacific or any of its Subsidiaries to purchase or repurchase any
notes, bonds or instruments of any kind except, in thecase of clauses (ii) and
(iii), for such violations, breaches, conflicts, defaults or other occurrences
which, individually or in the aggregate, would not cause a Pan Pacific Material
Adverse Effect.
(b) Except as set forth in Section 4.6(a) or 4.6(b) of the Pan Pacific
Disclosure Schedule, no consent, approval or authorization of, permit from, or
declaration, filing or registration with, any Governmental Entity is required to
be made or obtained by Pan Pacific or any of its Subsidiaries in connection with
the execution and delivery of this Agreement by Pan Pacific or any of its
applicable Subsidiaries or the consummation by Pan Pacific of the Pan Pacific
Transactions, other than (A) the filing with the SEC of the Joint Proxy
Statement/Prospectus and such reports under Section 13(a) of the
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Exchange Act, and such other compliance with the Exchange Act, as may be
required in connection with this Agreement; (B) the filing of the Articles of
Merger pursuant to the MGCL and the Agreement of Merger pursuant to the CGCL;
(C) filings with the NYSE, (D) such filings and approvals as may be required by
any applicable state securities or "blue sky" laws or environmental laws, (E)
business, operating and occupancy licenses and permits; and (F) such consents,
approvals, authorizations, permits, registrations, declarations and filings, the
failure of which to make or obtain would not, in the aggregate, cause a Pan
Pacific Material Adverse Effect.
SECTION 4.7 Compliance. Except as set forth in Section 4.7 of the Pan
Pacific Disclosure Schedule, Pan Pacific and each of its Subsidiaries is in
material compliance with all foreign, federal, state and local laws and
regulations applicable to its operations or with respect to which compliance is
a condition of engaging in the business thereof, except to the extent that
failure to comply would not, individually or in the aggregate, cause a Pan
Pacific Material Adverse Effect. Neither Pan Pacific nor any of its Subsidiaries
has received written notice since April 16, 1997, or has Knowledge of any
written notice, asserting a failure, or possible failure, to comply with any
such law or regulation, the subject of which written notice has not been
resolved as required thereby or otherwise to the reasonable satisfaction of the
party sending the notice, except for (A) matters being contested in good faith
and set forth in Section 4.7 of the Pan Pacific Disclosure Schedule and (B) such
failures as would not, individually or in the aggregate, cause a Pan Pacific
Material Adverse Effect.
SECTION 4.8 SEC Documents.
(a) Pan Pacific has filed with the SEC all reports, schedules, statements
and other documents required to be filed by Pan Pacific or any of its
Subsidiaries with the SEC since December 31, 1997 (collectively, the "Pan
Pacific SEC Reports"). As of their respective dates, with respect to Pan Pacific
SEC Reports filed pursuant to the Exchange Act, and as of their respective
effective dates, as to Pan Pacific SEC Reports filed pursuant to the Securities
Act, the Pan Pacific SEC Reports and any registration statements, reports,
forms, proxy or information statements and other documents filed by Pan Pacific
with the SEC after the date of this Agreement (i) complied, or, with respect to
those not yet filed, will comply, in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, and (ii) did not, or,
with respect to those not yet filed, will not, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make thestatements made therein, in the light of the circumstances
under which they were made, not misleading.
(b) Each of the consolidated balance sheets included in or incorporated by
reference into Pan Pacific SEC Reports (including the related notes and
schedules) presents fairly, in all material respects, the consolidated financial
position of Pan Pacific and its consolidated Subsidiaries as of its date, and
each of the consolidated statements of income, equity and cash flows of Pan
Pacific included in or incorporated by reference into Pan Pacific SEC Reports
(including any related notes and schedules) presents fairly, in all material
respects, the results of operations and cash flows, as the case may be, of Pan
Pacific and its Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments), in each
case in accordance with GAAP consistently applied during the periods involved,
except as may be noted therein.
(c) Except as set forth in the Pan Pacific SEC Reports, neither Pan Pacific
nor any of its Subsidiaries has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on, or reserved against in, a balance sheet of Pan Pacific or in
the notes thereto, prepared in accordance with GAAP consistently applied, except
for (i) liabilities or obligations that were so reserved on, or reflected in
(including the notes to), the consolidated balance sheet of Pan Pacific as of
June 30, 2000, (ii) liabilities or obligations arising in the ordinary course of
business (including trade indebtedness) from June 30, 2000 to the date hereof
and (iii) other liabilities incurred after the date hereof that are permitted by
Section 5.2 hereof, and (iv) liabilities or obligations which would not,
individually or in the aggregate, cause a Pan Pacific Material Adverse Effect.
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SECTION 4.9 Absence of Certain Changes. Except as set forth in the Pan
Pacific SEC Reports and except for the transactions expressly contemplated
hereby, from June 30, 2000 to the date hereof, Pan Pacific and its Subsidiaries
have conducted their respective businesses substantially in the ordinary and
usual course consistent with past practices (including the incurrence of trade
indebtedness and secured debt assumed in connection with the acquisition of
properties by Pan Pacific or its Subsidiaries), and there has not been any
change in Pan Pacific's business, operations, condition (financial or
otherwise), results of operations, Assets or liabilities, except for changes
contemplated hereby or changes which, individually or in the aggregate, have not
caused or will not cause a Pan Pacific Material Adverse Effect.
SECTION 4.10 Litigation. Except as set forth in the Pan Pacific SEC
Reports or as set forth in Section 4.10 of the Pan Pacific Disclosure Schedule,
there is no Action (i) instituted, (ii) pending and served upon Pan Pacific or
(iii) to the Knowledge of Pan Pacific, pending and not served on Pan Pacific or
threatened, in each case against Pan Pacific, any of its Subsidiaries or any of
their respective Assets which, individually or in the aggregate, directly or
indirectly, has a Pan Pacific Material Adverse Effect, nor is there any
outstanding judgment, decree or injunction, in each case against Pan Pacific,
any of its Subsidiaries or any of their respective Assets, or any statute, rule
or order of any Governmental Entity applicable to Pan Pacific or any of its
Subsidiaries which, individually or in the aggregate, has caused a Pan Pacific
Material Adverse Effect.
SECTION 4.11 Taxes.
(a) Pan Pacific and its Subsidiaries have (i) duly filed (or there have
been filed on their behalf) with the appropriate Governmental Entities all Tax
Returns required to be filed by them (after giving effect to any filing
extension properly granted by a Governmental Entity having authority to do so),
and such Tax Returns are true, correct and complete in all material respects,
(ii) duly paid in full, or made provision in accordance with GAAP (or there has
been paid or provision has been made on their behalf) for, all Taxes required to
have been paid by them, whether or not shown to be due on such Tax Returns and
(iii) withheld and paid all material Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other party;
(b) No written claim is pending by an authority in a jurisdiction where any
of Pan Pacific and its Subsidiaries does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction;
(c) Neither Pan Pacific nor any of its Subsidiaries has received written
notice of any threatened audits with respect to taxable years ending on or after
December 31, 1997, with respect to Taxes or Tax Returns of Pan Pacific or any of
its Subsidiaries. With respect to taxable years ending on or after December 31,
1997, neither the IRS nor any other taxing authority (whether domestic or
foreign) has asserted against Pan Pacific or any of its Subsidiaries any
deficiency or claim for Taxes;
(d) Section 4.11(d) of the Pan Pacific Disclosure Schedule sets forth each
year for which an extension to file Tax Returns has been requested and for which
such Tax Returns have not yet been filed;
(e) There are no liens for Taxes upon any Assets of Pan Pacific or any
Subsidiary thereof, except for liens for Taxes not yet due and payable, and no
written power of attorney that has been granted by Pan Pacific or any of its
Subsidiaries (other than to Pan Pacific or a Subsidiary, property tax
consultants or KPMG LLP) currently is in force with respect to any matter
relating to Taxes;
(f) There are no, and at the Closing Date there will be no, Tax allocation
or sharing agreements or similar arrangements with respect to or involving Pan
Pacific or any of its Subsidiaries, and, after the Closing Date, neither Pan
Pacific nor any of its Subsidiaries shall be bound by any such Tax sharing
agreements or similar arrangements or have any liability thereunder for amounts
due in respect of periods prior to the Closing Date;
(g) None of Pan Pacific and its Subsidiaries (i) has been a member of an
affiliated group filing a consolidated federal income Tax Return (other than a
group the common parent of which was Pan Pacific) or (ii) has any liability for
the Taxes of any Person (other than any of Pan Pacific and its
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Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract, or otherwise;
(h) Since Pan Pacific's taxable year ending December 31, 1997, Pan Pacific
has not incurred and does not expect to incur through the Closing Date any
liability for Taxes under Section 857(b), 860(c) or 4981 of the Code, and
neither Pan Pacific nor any of its Subsidiaries has incurred any material
liability for Taxes other than in the ordinary course of business. To the
Knowledge of Pan Pacific, no event has occurred, and no condition or
circumstance exists, which presents a material risk that any material Tax
described in the preceding sentence will be imposed upon Pan Pacific or its
Subsidiaries.
(i) Pan Pacific (i) for all taxable years commencing with 1997 through
December 31, 1999, has been subject to taxation as a REIT and has satisfied all
requirements to qualify as a REIT for such years, (ii) has operated since
December 31, 1999 in such a manner so as to qualify as a REIT, and will continue
to operate through the Effective Time in such a manner so as to qualify as a
REIT for the taxable year ending on the date of the Effective Time, (iii) has
not taken or omitted to take any action which would reasonably be expected to
result in a challenge by the IRS to its status as a REIT, and no such challenge
is pending or, to Pan Pacific's Knowledge, threatened. Each Subsidiary of Pan
Pacific that is a state law partnership or limited liability company has been
since its formation and continues to be treated for federal income Tax purposes
as a partnership (or a disregarded entity) and not as a corporation or an
association or publicly traded partnership taxable as a corporation. Each other
Subsidiary of Pan Pacific has been since its formation, and continues to be
treated for federal income Tax purposes as a "qualified REIT subsidiary" as
defined in Section 856(i) of the Code. Neither Pan Pacific nor any Subsidiary of
Pan Pacific holds any Asset (i) the disposition of which would be subject to
rules similar to Section 1374 of the Code as a result of an election under
Notice 88-19 or Treasury Regulation Section 1.337(d)-5T.
SECTION 4.12 Employee Benefit Plans.
(a) Pan Pacific has listed in Section 4.12 of the Pan Pacific Disclosure
Schedule all Benefit Arrangements, Multiemployer Plans, Pension Plans and
Welfare Plans of Pan Pacific and all bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, change in control,
severance and other similar employee benefit plans, and all unexpired severance
agreements, written or otherwise, for the benefit of, or relating to, any
current or former employee of Pan Pacific or any ERISA Affiliate of Pan Pacific,
or any Subsidiary of Pan Pacific (together, the "Pan Pacific Employee Plans").
(b) With respect to each Pan Pacific Employee Plan, Pan Pacific has made
available to the Company, a true and correct copy of (i) the most recent annual
report (Form 5500) filed with the IRS, (ii) such Pan Pacific Employee Plan,
(iii) each trust agreement and group annuity contract, if any, relating to such
Pan Pacific Employee Plan and (iv) the most recent actuarial report or valuation
relating to a Pan Pacific Employee Plan subject to Title IV of ERISA.
(c) With respect to the Pan Pacific Employee Plans, individually and in the
aggregate, no event has occurred, and to the Knowledge of Pan Pacific, there
exists no condition or set of circumstances in connection with which Pan Pacific
could be subject to any liability that will have a Pan Pacific Material Adverse
Effect under ERISA, the Code or any other applicable law. There is no Company
Employee Plan that is subject to Title IV of ERISA or is a Multiemployer Plan.
(d) With respect to the Pan Pacific Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions have
not been made or properly accrued and there are no unfunded benefit obligations
which have not been accrued or otherwise properly disclosed in the footnotes in
accordance with generally accepted accounting principles, in the financial
statements of Pan Pacific, which obligations will cause a Pan Pacific Material
Adverse Effect.
(e) Except as disclosed in Pan Pacific SEC Reports filed prior to the date
of this Agreement, and except as set forth in Section 4.12(e) of the Pan Pacific
Disclosure Schedule, or as provided for in this Agreement, neither Pan Pacific
nor any of its Subsidiaries is a party to any oral or written (i) agreement with
any officer or other key employee of Pan Pacific or any of its Subsidiaries, the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving
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Pan Pacific of the nature contemplated by this Agreement, (ii) agreement with
any officer of Pan Pacific providing any term of employment or compensation
guarantee extending for a period longer than one year from the date hereof and
for the payment of compensation in excess of $100,000 per annum, or (iii)
agreement or plan, including any stock option plan, stock appreciation right
plan, restricted stock plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of the benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated by this Agreement or
the value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement.
SECTION 4.13 Properties.
(a) Section 4.13(a) of the Pan Pacific Disclosure Schedule identifies:
(i) all real properties (by name and address) owned by Pan Pacific or
its Subsidiaries (the "Pan Pacific Owned Property") as of the date hereof,
which are all of the real properties owned by them as of the date hereof;
and
(ii) all real properties leased or operated by Pan Pacific or its
Subsidiaries as lessee (the "Pan Pacific Leased Property") as of the date
hereof, which are all of the real properties so leased or operated by them.
The Pan Pacific Owned Property and the Pan Pacific Leased Property is
referred to herein collectively as the "Pan Pacific Real Property."
(b) Pan Pacific and its Subsidiaries have obtained title insurance policies
for the Pan Pacific Real Property listed in Section 4.13(b) of the Pan Pacific
Disclosure Schedule, and no material claims have been made against any such
policies by an insured party thereunder. With respect to the Pan Pacific Real
Property not listed in Section 4.13(b) of the Pan Pacific Disclosure Schedule,
Pan Pacific has good and marketable title to the Pan Pacific Owned Property, and
a valid leasehold interest in the Pan Pacific Leased Property, sufficient to
alloweach of Pan Pacific and its Subsidiaries to conduct its business as and
where currently conducted. Each Pan Pacific Real Property is not subject to any
Encumbrances, except for any Permitted Encumbrances, any Encumbrances listed in
the title insurance policies set forth in Section 4.13(b) of the Pan Pacific
Disclosure Schedule, or any other Encumbrances that do not, individually or in
the aggregate, cause a Pan Pacific Material Adverse Effect.
(c) Except as set forth on Section 4.13(c) of the Pan Pacific Disclosure
Schedule or as disclosed in the Pan Pacific SEC Reports, the Pan Pacific Real
Property is not encumbered by any debt.
(d) To the Pan Pacific's Knowledge, all (i) certificates, permits or
licenses from any Governmental Entity having jurisdiction over any Pan Pacific
Real Property and (ii) agreements, easements or other rights, necessary to
permit the lawful use and operation of the buildings and improvements on any of
the Pan Pacific Real Property or to permit the lawful use and operation of all
driveways, roads, and other means of egress and ingress to and from any Pan
Pacific Real Property have been obtained and are in full force and effect except
where the failure to obtain or maintain the same would not cause a Pan Pacific
Material Adverse Effect and there is no pending threat or modification or
cancellation of the same. All work to be performed, payments to be made and
financial undertakings required to be taken by Pan Pacific or its Subsidiaries
prior to June 30, 2000 pursuant to any contract entered into with a Governmental
Entity in connection with a site approval, zoning reclassification or other
similar action relating to a Pan Pacific Real Property has been paid or
undertaken, as the case may be, except where the failure to pay such amount or
undertake such action would not cause a Pan Pacific Material Adverse Effect.
(e) Pan Pacific has not received since January 1, 1997 any written notice
of any violation of any federal, state or municipal law, ordinance, order,
regulation or requirement affecting any portion of any Pan Pacific Real Property
issued by any Governmental Entity which would cause a Pan Pacific Material
Adverse Effect. Since January 1, 1997, neither Pan Pacific nor any of its
Subsidiaries has received any written notice from any Governmental Entity with
jurisdiction over Pan Pacific or any such Subsidiaries to the effect that (i)
any condemnation or rezoning proceedings are pending or threatened with respect
to any Pan Pacific Real Property or (ii) any zoning, building or similar law,
code, ordinance or regulation is
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being violated by the maintenance, operation or use of any buildings or other
improvements on any Pan Pacific Real Property or by the maintenance, operation
or use of the parking areas, except where any such written notice of such a
proceeding or violation would not, individually or in the aggregate, cause a Pan
Pacific Material Adverse Effect.
(f) Except as would not cause, individually or in the aggregate, a Pan
Pacific Material Adverse Effect, to Pan Pacific's Knowledge, (i) there are no
material structural defects relating to any Pan Pacific Real Property, (ii)
there is no Pan Pacific Real Property whose building systems are not in working
order in any material respect and (iii) there is no uninsured physical damage to
any Pan Pacific Real Property in an amount in excess of $150,000 with respect to
any individual property, except for the payment by the Pan Pacific of a
deductible under the applicable insurance policy or any current renovation or
restoration to any Pan PacificReal Property the remaining cost of which exceeds
$150,000 with respect to any individual property.
(g) True and correct copies of the Pan Pacific Leases as amended to date
have been delivered to, or made available for review by, the Company. Section
4.13(g) of the Pan Pacific Disclosure Schedule lists the following information
with respect to the Pan Pacific Leases:
(i) the name of the lessee;
(ii) the expiration date of the Pan Pacific Lease; and
(iii) the amount (or method of determining the amount) of minimum
monthly base rentals due under each Pan Pacific Lease.
(h) Pan Pacific has delivered to the Company a copy of its aging of
accounts receivable as of June 30, 2000, which copy is true and correct in all
material respects. Except as set forth in Section 4.13(h) of the Pan Pacific
Disclosure Schedule, as of the date hereof, neither Pan Pacific nor any of its
Subsidiaries has delivered written notice to any tenant to any Pan Pacific Lease
alleging that such tenant is in default thereunder, other than with respect to
defaults that have been cured or waived or which would not, individually or in
the aggregate, cause a Pan Pacific Material Adverse Effect.
(i) There are no agreements, written or oral, between Pan Pacific or any of
its Subsidiaries and any other Person relating to the use and occupancy of the
Pan Pacific Real Property other than the Pan Pacific Leases. Except as set forth
in Section 4.13(i) of the Pan Pacific Disclosure Schedule, as of the date
hereof, no defaults (unless subsequently cured) by Pan Pacific or its
Subsidiaries have been alleged in writing by the lessees thereunder that have
not been cured in all material respects and, to the Knowledge of Pan Pacific,
none of Pan Pacific nor any of its Subsidiaries is in default under any Pan
Pacific Lease other than such defaults which would, individually or in the
aggregate, cause a Pan Pacific Material Adverse Effect.
SECTION 4.14 Contracts.
(a) Section 4.14(a) of the Pan Pacific Disclosure Schedule contains a
complete and accurate list of all Pan Pacific Contracts in effect as of the date
hereof, other than the Pan Pacific Contracts which have been filed as an exhibit
to the Pan Pacific SEC Reports. Each copy of a Pan Pacific Contract which has
been delivered to, or made available for review by, Pan Pacific is a true and
correct copy of such Pan Pacific Contract as amended to date.
(b) As of the date of this Agreement, (i) there is no material breach or
violation of or material default by Pan Pacific or any of its Subsidiaries under
any of the Pan Pacific Contracts, except if such breach, violation of or
material default has been waived, and (ii) no event has occurred with respect to
Pan Pacific or any of its Subsidiaries which, with notice or lapse of time or
both, would constitute a material breach, violation or default, or give rise to
a right of termination, modification, cancellation, foreclosure, imposition of a
lien, prepayment or acceleration under any of the Pan Pacific Contracts, which
breach, violation or default referred to in clauses (i) or (ii), individually or
in the aggregate with other such material breaches, violations or defaults
referred to in clauses (i) or (ii), would cause a Pan Pacific
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Material Adverse Effect. True copies of the Pan Pacific Contracts in effect as
of the date hereof have been delivered or made available to the Company.
SECTION 4.15 Labor Relations. Except as set forth in Section 4.15 of the
Pan Pacific Disclosure Schedule, or as would not cause a Pan Pacific Material
Adverse Effect, (i) there are no controversies pending or, to the Knowledge of
Pan Pacific, threatened between Pan Pacific or any of its Subsidiaries and any
of their respective employees; (ii) neither Pan Pacific nor any of its
Subsidiaries is a party, or otherwise subject, to any collective bargaining
agreement or similar contract; (iii) there are no proceedings asserting unfair
labor practice charges pending against Pan Pacific or any of its Subsidiaries
before the National Labor Relations Board, or any similar foreign labor
relations governmental bodies, or any current union representation questions
involving employees of Pan Pacific or any of its Subsidiaries; and (iv) there is
no strike, slowdown, work stoppage or lockout, or, to the Knowledge of Pan
Pacific, threat thereof, by or with respect to any employees of Pan Pacific or
any of its Subsidiaries.
SECTION 4.16 [Intentionally Omitted].
SECTION 4.17 Environmental Matters.
(a) Except as set forth in Section 4.17(a) of the Pan Pacific Disclosure
Schedule, Pan Pacific, each of its Subsidiaries and, to the actual knowledge of
the individuals listed in Section 1 of the Pan Pacific Disclosure Schedule
(after an inquiry of Pan Pacific's property managers but no other third
parties), each tenant or operator of Pan Pacific Real Property (i) have obtained
all material permits, licenses and other authorizations which are required to be
obtained under all applicable Environmental Laws by Pan Pacific or its
Subsidiaries; (ii) are in material compliance with all terms and conditions of
such required permits, licenses and authorizations, and also are in material
compliance with all other applicable limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in applicable Environmental Laws except where the failure to obtain
such permits, licenses or other authorizations or to comply with such terms and
conditions or limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables would not, individually or
in the aggregate, cause a Pan Pacific Material Adverse Effect.
(b) Except as set forth in Section 4.17(b) of the Pan Pacific Disclosure
Schedule, Pan Pacific, each of its Subsidiaries and, to the actual knowledge of
the individuals listed on Section 1 of the Pan Pacific Disclosure Schedule, each
tenant or operator of Pan Pacific Real Property have not received a written
notice of and have no Knowledge of any present or unremediated past violations
of Environmental Laws, or of any event, incident or Action preventing continued
compliance with such Environmental Laws, or giving rise to any common law
environmental liability, or forming the basis of any Action against Pan Pacific
or any of its Subsidiaries based on or resulting from the manufacture,
processing, use, treatment, storage, disposal, transport, or handling, or the
emission, discharge or release into the environment, of any Hazardous Material.
(c) Section 4.17 constitutes the sole representation of Pan Pacific
concerning any Environmental Law or Hazardous Material.
SECTION 4.18 Opinion of Financial Advisor. Pan Pacific has received the
opinion of Prudential Securities Incorporated (the "Pan Pacific Financial
Advisor"), as of the date of this Agreement, to the effect that the Exchange
Ratio is fair to Pan Pacific from a financial point of view. Pan Pacific has
been authorized by the Pan Pacific Financial Advisor to permit, subject to prior
review and consent by such Pan Pacific Financial Advisor, the inclusion of such
fairness opinion (or a reference thereto) in the Joint Proxy
Statement/Prospectus and the Registration Statement.
SECTION 4.19 Brokers. No broker, finder or investment banker (other than
the Pan Pacific Financial Advisor, the fees and expenses of which shall be paid
by Pan Pacific) is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Pan Pacific or
any of its Subsidiaries. Pan Pacific has heretofore furnished to the Company a
complete and correct copy of all
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agreements between Pan Pacific and the Pan Pacific Financial Advisor pursuant to
which such firm would be entitled to any such payment.
SECTION 4.20 Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Pan Pacific Common Stock entitled to vote
thereon is the only vote of the holders of any class or series of Pan Pacific's
stock necessary to approve the Pan Pacific Voting Proposal. The Pan Pacific
Board, at a meeting duly called and held, (i) determined that this Agreement and
the transactions contemplated hereby, including the Merger, are fair to, and in
the best interests of the stockholders of Pan Pacific, (ii) approved this
Agreement and the transactions contemplated hereby, including the Merger, (iii)
declared that the Merger, this Agreement and the transactions contemplated
thereby are advisable, and (d) resolved to recommend that the holders of the
shares of the Pan Pacific Common Stock approve the Pan Pacific Voting Proposal.
SECTION 4.21 Tax Matters. Neither Pan Pacific nor any of its Affiliates
has taken or agreed to take any action, nor does Pan Pacific have Knowledge of
any circumstances, that (without regard to any action taken or agreed to be
taken by the Company or any of its Affiliates) would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
SECTION 4.22 Insurance. Pan Pacific has made available to the Company true
and correct copies of all fire and casualty, general liability, business
interruption, product liability, and sprinkler and water damage insurance
policies maintained by Pan Pacific or any of its Subsidiaries as of the date
hereof.
SECTION 4.23 No Material Adverse Effect. Except as disclosed in the Pan
Pacific SEC Reports, to the Knowledge of Pan Pacific no fact alone or together
with another fact, would cause a Pan Pacific Material Adverse Effect prior to
the Termination Date.
ARTICLE V.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business of the Company Pending the Merger. During
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time, the Company agrees as
to itself and each of its Subsidiaries, except to the extent that Pan Pacific
shall otherwise consent in writing, or as expressly contemplated or permitted by
this Agreement, or as otherwise indicated in Section 5.1 of the Company
Disclosure Schedule, or as required by a Governmental Entity of competent
jurisdiction, to carry on its business in the ordinary course in substantially
the same manner as previously conducted, to pay its debts and Taxes when due,
subject to good faith disputes over such debts or Taxes, in the ordinary course
in substantially the same manner as previously paid, to pay or perform its other
material obligations when due in the ordinary course in substantially the same
manner as previously paid or performed, to maintain insurance coverages and its
books, accounts and records in the usual manner generally consistent with past
practices, to comply in all material respects with all applicable laws,
ordinances and regulations of Governmental Entities, to maintain and keep its
properties and equipment in good repair, working order and condition (except
ordinary wear and tear), and, to the extent consistent with such business, use
all reasonable efforts, generally consistent with past practices and policies,
to preserve intact its present business organization and its relationships with
officers, employees and others having business dealings with it; provided,
however, that no action by the Company or any of its Subsidiaries with respect
to matters specifically addressed by any other provision of this Section 5.1
shall be deemed to be a breach of this paragraph of Section 5.1 unless such
action would constitute a breach of one or more of such other provisions.
Without limiting the generality of the foregoing and except as expressly
contemplated by this Agreement, during the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
or the Effective Time, without the written consent of Pan Pacific, the Company
shall not and shall not permit any of its Subsidiaries to:
(a) adopt or propose any amendment to its Organizational Documents,
except as contemplated by this Agreement;
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(b) (i) issue, pledge or sell (other than upon exercise of Company
Stock Rights outstanding on the date of this Agreement upon payment of the
exercise price thereof or upon the exercise of rights of the limited
partners in the Company DownREITs to convert or exchange their Company
DownREIT Units outstanding on the date of this Agreement into Company
Common Shares), or propose or authorize the issuance, pledge or sale, or
grant any options or make any other agreements with respect to, any of its
shares of beneficial interest or any other of its securities, (ii) amend,
waive or otherwise modify any of the terms of any option, warrant or stock
option plan of the Company or any of its Subsidiaries, including without
limitation, the Company Stock Rights and the Company Stock Plans, or
authorize cash payments in exchange for any options granted under any of
such plans, or (iii) adopt or implement any shareholder rights plan;
(c) except as set forth in or permitted by Sections 5.3, 5.4 and 6.14,
declare, set aside or pay any dividend or make any other distribution or
payment with respect to any shares of its stock or beneficial interests
(including any dividend distribution payable in, or otherwise make a
distribution of, shares of capital stock of any existing or subsequently
formed Subsidiary of the Company), except (i) the regular quarterly
dividend paid by the Company in an amount not to exceed $0.28 per Company
Common Share, (ii) distributions that are required to be made in respect of
the Company DownREIT Units in connection with any dividends paid on the
Company Common Shares, (iii) dividends or distributions made to the Company
or any subsidiary of the Company, and (iv) other dividends or distributions
made on a pro rata basis not exceeding $50,000 in the aggregate.
(d) split, combine, subdivide, reclassify or redeem, purchase or
otherwise acquire, or propose to redeem or purchase or otherwise acquire,
any shares of its stock or beneficial interests, or any of its other
securities, except conversions, exchanges or redemptions of Company
DownREIT Units for cash, Company Common Shares or otherwise, in accordance
with the Company DownREIT Partnership Agreements;
(e) increase the compensation or fringe benefits payable or to become
payable to its directors, officers or employees (whether from the Company
or any of its Subsidiaries), or pay any benefit not required by any
existing plan, arrangement or practice (including, without limitation, the
granting of stock (or beneficial interest) options, stock (or beneficial
interest) appreciation rights, shares of restricted stock (or beneficial
interest) or performance units) or grant any severance or termination pay
to, or enter into any employment or severance agreement with, any director,
officer or employee of the Company or any of its Subsidiaries or establish,
adopt, enter into, or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, savings, welfare, deferred compensation, employment,
termination, severance or other employee benefit plan, agreement, trust,
fund, policy or arrangement for the benefit or welfare of any directors,
officers or current or former employees, including any Benefit Arrangement,
Pension Plan or Welfare Plan, except, in any case referred to in this
Section 5.1(e) (i) to the extent required by applicable law or regulation,
(ii) pursuant to any collective bargaining agreements or Employee Plan as
in effect on the date of this Agreement consistent with past practices,
(iii) for salary and benefit increases in the ordinary course of business
consistent with past practice to employees other than officers of the
Company earning an annual base salary in excess of $100,000, (iv) pursuant
to Section 2.9, (v) pursuant to existing agreements, policies or practices
previously disclosed in writing to Pan Pacific, which shall be interpreted
and implemented in a manner consistent with past practice, (vi) for
payments permitted by Section 6.18 and (vii) as disclosed in Section 5.1(e)
of the Company Disclosure Schedule;
(f) (i) sell, pledge, dispose of, grant or encumber any of the Assets
of the Company or any of its Subsidiaries consisting of stock or
partnership interests of its Subsidiaries or fee interests in real
property, other than sales of Assets listed on Schedule 5.1(f)(i) of the
Company Disclosure Schedule, (ii) acquire any Assets consisting of fee
interests in real property (other than real property listed in Section
5.1(f)(ii) of the Company Disclosure Schedule), or (iii) acquire any other
Assets or (including, without limitation, by merger, consolidation, lease
or acquisition of stock or Assets) any interest in a corporation,
partnership, other business organization or any division thereof (or a
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substantial portion of the Assets thereof) in an aggregate amount exceeding
$5,000,000; provided that nothing herein shall prevent the Company or its
Subsidiaries from entering into leases of their real property Assets and
provided further that the Company shall notify Pan Pacific of the
acquisition by the Company or any of its Subsidiaries of any interest in a
corporation, partnership, other business organization or any division
thereof (or a substantial portion of the Assets thereof) prior to any such
acquisition;
(g) except as required under any Company Contracts in effect as of the
date hereof or as set forth in Section 5.1(g) of the Company Disclosure
Schedule, (i) incur, assume or pre-pay any debt for borrowed money, other
than pursuant to credit or other agreements in effect as of the date
hereof, (ii) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the
obligations of any other Person, (iii) make any loans, advances or capital
contributions to, or investments in, any other Person (including advances
to employees), except for loans, advances, capital contributions or
investments between any wholly-owned Subsidiary of the Company and the
Company or another wholly-owned Subsidiary of the Company, or (iv) enter
into any "keep well" or other agreement to maintain the financial condition
of another entity (other than the Company or any of its wholly-owned
Subsidiaries);
(h) make or rescind any material express or deemed election relating
to Taxes, settle or compromise any material Action relating to Taxes, amend
in any material respect any material Tax return except in each case in the
ordinary course of business consistent with past practice or as required by
law, or except as may be required by applicable law, make any change to any
of its material methods of reporting income or deductions (including,
without limitation, any change to its methods or basis or write-offs of
accounts receivable) for federal income Tax purposes from those employed in
the preparation of its federal income Tax return for the taxable year
ending December 31, 1999;
(i) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted, unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business and consistent with past practice of
liabilities;
(j) other than in the ordinary course of business and consistent with
past practice, waive any rights of substantial value or make any payment,
direct or indirect, of any material liability of the Company or of any of
its Subsidiaries before the same comes due in accordance with its terms,
other than repayments of revolving lines of credit and the repayment of all
obligations under the First Amended and Restated Credit Agreement among the
Company, the Banks named therein, and Sanwa Bank California, as Agent,
dated October 19, 1998, as amended to the date hereof;
(k) fail to maintain its existing insurance coverage of all types in
effect or, in the event any such coverage shall be terminated or lapse, to
the extent available at reasonable cost, procure substantially similar
substitute insurance policies which in all material respects are in at
least such amounts and against such risks as are currently covered by such
policies;
(l) change in any material manner its methods of accounting as in
effect on June 30, 2000 except as required by GAAP, or take any action,
other than reasonable and usual actions in the ordinary course of business
and consistent with past practice, with respect to accounting policies,
unless required by GAAP or the SEC;
(m) make any material modification or amendment, or terminate, any of
the Company Contracts or waive, release or assign any material rights or
claims other than in the ordinary course of business and consistent with
past practice (provided that the Company is expressly permitted to waive
its right to terminate Company Leases in the event of non-material or
non-recurring breaches by tenants);
(n) take, or agree to commit to take, any action that would cause the
representations and warranties of the Company contained herein,
individually or in the aggregate, not to be true and correct in all
material respects;
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(o) engage in any transaction with, or enter into any agreement,
arrangement, or understanding with, directly or indirectly, any Company
Affiliates which involves the transfer of consideration or has a financial
impact on the Company, other than pursuant to such agreements,
arrangements, or understandings existing on the date of this Agreement or
disclosed on the Company Disclosure Schedule;
(p) take or agree to take or cause to be taken any action that would
prevent the Merger from qualifying as a reorganization as described in
Section 368(a) of the Code;
(q) make or commit to make any capital expenditures (other than
capital expenditures for the repair or maintenance of capital Assets) that
exceed $2,500,000 in the aggregate, excluding capital expenditures made
with funds (A) held in like kind escrows established in accordance with
Section 1031 of the Code or (B) obtained as proceeds from insurance
policies due to the destruction, loss or impairment of capital Assets;
(r) compromise, or settle any litigation or arbitration proceedings
involving payments by the Company or its Subsidiaries in excess of $100,000
per litigation or arbitration, or $500,000 in the aggregate; or
(s) enter into an agreement, contract, commitment or arrangement to do
any of the foregoing, or to authorize, publicly recommend, publicly propose
or publicly announce an intention to do any of the foregoing, except as
permitted above.
SECTION 5.2 Conduct of Business of Pan Pacific Pending the Merger. During
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement or the Effective Time, Pan Pacific agrees as
to itself and each of its Subsidiaries, except to the extent that the Company
shall otherwise consent in writing, or as expressly contemplated or permitted by
this Agreement, or as otherwise indicated in Section 5.2 of the Pan Pacific
Disclosure Schedule, or as required by a Governmental Entity of competent
jurisdiction, to carry on its business in the ordinary course in substantially
the same manner as previously conducted, to pay its debts and Taxes when due,
subject to good faith disputes over such debts or Taxes, in the ordinary course
in substantially the same manner as previously paid, to pay or perform its other
material obligations when due in the ordinary course in substantially the same
manner as previously paid or performed, to maintain insurance coverages and its
books, accounts and records in the usual manner generally consistent with past
practices, to comply in all material respects with all applicable laws,
ordinances and regulations of Governmental Entities, to maintain and keep its
properties and equipment in good repair, working order and condition (except
ordinary wear and tear), and, to the extent consistent with such business, use
all reasonable efforts consistent with past practices and policies to preserve
intact its present business organization and its relationships with officers,
employees and customers, suppliers, distributors, and others having business
dealings with it; provided, however, that no action by Pan Pacific or any of its
Subsidiaries with respect to matters specifically addressed by any other
provision of this Section 5.2 shall be deemed to be a breach of this paragraph
of Section 5.2 unless such breach would constitute a breach of one or more of
such other provisions. Without limiting the generality of the foregoing and
except as expressly contemplated by this Agreement, during the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, without the written consent of the
Company, Pan Pacific shall not and shall not permit any of its Subsidiaries to:
(a) adopt or propose any amendment to its Organizational Documents,
except in furtherance of this Agreement and the Merger;
(b) (i) issue, pledge or sell (other than upon exercise of Pan Pacific
Stock Rights outstanding on the date of this Agreement upon payment of the
exercise price thereof or upon the exercise of rights of the members in the
Pan Pacific DownREITs to convert their Pan Pacific DownREIT Units into
shares of Pan Pacific Common Stock), or propose or authorize the issuance,
pledge or sale, or grant any options or make any other agreements with
respect to, any of its shares of stock or any other of its securities;
provided, however, that the Pan Pacific DownREITs are permitted to issue
Pan
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Pacific DownREIT Units; (ii) amend, waive or otherwise modify any of the
terms of any option, warrant or stock option plan of Pan Pacific or any of
its Subsidiaries, including without limitation, the Pan Pacific Stock
Rights and the Pan Pacific Stock Plans, or authorize cash payments in
exchange for any options granted under any of such plans, or (iii) adopt or
implement any stockholder rights plan;
(c) except as set forth in or permitted by Sections 5.3, 5.4 and 6.15,
declare, set aside or pay any dividend or make any other distribution or
payment with respect to any shares of its stock or beneficial interests
(including any dividend distribution payable in, or otherwise make a
distribution of, shares of capital stock of any existing or subsequently
formed Subsidiary of Pan Pacific), except the regular quarterly dividend
paid by Pan Pacific in an amount not to exceed $0.42 per share of Pan
Pacific Common Stock, distributions that are required to be made in respect
of the Pan Pacific DownREIT Units in connection with any dividends paid on
the shares of Pan Pacific Common Stock, and dividends or distributions made
to Pan Pacific or any subsidiary of Pan Pacific;
(d) split, combine, subdivide, reclassify or redeem, purchase or
otherwise acquire, or propose to redeem or purchase or otherwise acquire,
any shares of its common stock, or any of its other securities, except for
(i) redemptions and transfers of Pan Pacific Common Stock required under
Pan Pacific's charter in order to preserve the status of Pan Pacific as a
REIT under the Code, and (ii) conversions, exchanges or redemptions of Pan
Pacific DownREIT Units for cash, Pan Pacific Common Stock or otherwise, in
accordance with the Organizational Documents of the Pan Pacific DownREITs;
(e) (i) sell, pledge, dispose of, grant or encumber any of the Assets
of Pan Pacific or any of its Subsidiaries consisting of stock or
partnership interests of its Subsidiaries or fee interests in real
property, other than sales or dispositions of Assets in an aggregate amount
not to exceed $40,000,000, or (ii) acquire any Assets consisting of fee
interests in real property, other than Assets in an aggregate amount not to
exceed $50,000,000; or (iii) acquire all or substantially all of the
capital stock or equity securities of any Person, or all or substantially
all of the assets of any division or line of business of any Person,
whether by purchase, merger or consolidation if the aggregate value of the
assets of such Person, division or line of business exceeds $50,000,000;
provided that nothing herein shall prevent Pan Pacific or its Subsidiaries
from entering into leases of their real property Assets;
(f) take or agree to take or cause to be taken any action that would
prevent the Merger from qualifying as a reorganization as described in
Section 368(a) of the Code; or
(g) enter into an agreement, contract, commitment or arrangement to do
any of the foregoing, or to authorize, recommend, propose or announce an
intention to do any of the foregoing.
SECTION 5.3 Continued Qualification as a Real Estate Investment Trust;
Final Company Dividend. From and after the date hereof through the Effective
Time, each of Company and Pan Pacific will maintain its respective qualification
as a "real estate investment trust" under the Code and the rules and regulations
thereunder. Without limiting the generality of the foregoing, if necessary to
enable the Company to make aggregate dividend distributions during its final
taxable period equal to the Minimum Distribution Dividend (after taking into
account the dividend paid in accordance with Section 5.4), the Company shall
declare and pay a dividend (the "Final Company Dividend") to holders of Company
Common Shares in an amount equal to the minimum dividend sufficient to permit
the Company to make aggregate dividend distributions during its final taxable
period equal to the Minimum Distribution Dividend. If the Company determines it
is necessary to declare the Final Company Dividend, it shall notify Pan Pacific
at least ten days prior to the date for the Company Shareholders Meeting so that
Pan Pacific may declare and pay a dividend per share to holders of Pan Pacific
Common Stock in an amount per share equal to the quotient obtained by dividing
(x) the Final Company Dividend per Company Common Share by (y) the Exchange
Ratio. For purposes of this paragraph, the term "Minimum Distribution Dividend"
shall mean a distribution with respect to the Company's taxable year ending at
the Effective Time which is sufficient to allow the Company to (i) satisfy the
distribution requirements set
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forth in Section 857(a) of the Code, and (ii) avoid, to the extent possible, the
imposition of income tax under Section 857(b) of the Code and the imposition of
excise tax under Section 4981 of the Code.
SECTION 5.4 Dividend Payment Coordination; Special Dividend.
(a) Unless the Parties hereto otherwise mutually agree in writing, (i) the
Company shall set a record date for its regular fourth quarter 2000 dividend for
a date on or before the date of the Company Shareholders Meeting specified in
the Joint Proxy Statement/Prospectus, but in any event not later than November
26, 2000, and shall be entitled to authorize, declare and pay (or commit to pay)
such dividend in the amount of $0.28 per share to holders of record of Company
Common Shares at that record date; and (ii) Pan Pacific shall set a record date
for a special dividend for a date on or before the date of the Pan Pacific
Stockholders Meeting specified in the Joint Proxy Statement/Prospectus, and
shall be entitled to authorize, declare and pay (or commit to pay) a special
dividend in the amount of $0.28 per share to holders of record of Pan Pacific
Common Stock at that record date; and (iii) the Closing Date shall be postponed,
if necessary, to ensure that such dividends can be declared and paid.
(b) With respect to dividends in respect of Pan Pacific Common Stock and
Company Common Shares permitted under this Agreement other than those referred
to in Section 5.4(a), each of Pan Pacific and the Company shall coordinate with
the other the declaration and the record and payment dates therefor, it being
the intention of the Parties that holders of Company Common Shares shall not
receive (i) dividends for any single calendar quarter with respect to both
Company Common Shares and shares of Pan Pacific Common Stock received in
exchange therefor in connection with the Merger or (ii) fail to receive
dividends for any single calendar quarter on shares of Company Common Shares or
shares of Pan Pacific Common Stock received in exchange therefor in connection
with the Merger. Notwithstanding the foregoing provisions of this Section
5.4(b), Pan Pacific's declaration of any such dividends shall be at its option.
SECTION 5.5 [Intentionally Omitted].
SECTION 5.6 Restructuring of Company Board. The Company shall take all
actions necessary to cause the following events to occur immediately prior to
the Effective Time: (i) the resignation of two of its trustees, which trustees
shall not be among the individuals listed on Schedule 2.7 hereto, and (ii) the
appointment of two directors of Pan Pacific listed on Schedule 2.7 hereof by at
least a two-thirds vote of the remaining Company trustees.
ARTICLE VI.
ADDITIONAL AGREEMENTS
SECTION 6.1 Preparation of Form S-4 and the Proxy Statement; Stockholder
and Shareholder Meetings.
(a) As promptly as practicable after the execution of this Agreement, the
Company and Pan Pacific shall cooperate with each other regarding, and, prepare
and file with the SEC, the Joint Proxy Statement/ Prospectus and Pan Pacific
shall prepare and file the Registration Statement, provided that Pan Pacific may
delay the filing of the Registration Statement until approval of the Joint Proxy
Statement/Prospectus by the SEC. The Company and Pan Pacific will cause the
Joint Proxy Statement/Prospectus and the Registration Statement to comply as to
form in all material respects with the applicable provisions of the Securities
Act, the Exchange Act and the rules and regulations thereunder. Each of Pan
Pacific and the Company shall use all reasonable efforts to have or cause the
Joint Proxy Statement/Prospectus to be cleared by the SEC and to cause the
Registration Statement to become effective as promptly as practicable. Without
limiting the generality of the foregoing, each of the Company and Pan Pacific
shall cause its respective Representatives to fully cooperate with the other
Party and its respective Representatives in the preparation of the Joint Proxy
Statement/Prospectus and the Registration Statement, and shall, upon request,
furnish the other Party with all information concerning it and its Affiliates as
the other may deem reasonably necessary or advisable in connection with the
preparation of
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the Joint Proxy Statement/Prospectus and the Registration Statement. The Company
hereby agrees that the recommendations of the Company Board described in Section
3.20 (subject to the right of the Company Board to withdraw, amend or modify
such recommendation in accordance with Section 6.3) may be included in the
Registration Statement and the Joint Proxy Statement/Prospectus. Pan Pacific
shall use commercially reasonable best efforts to take all actions required
under any applicable federal or state securities or Blue Sky Laws in connection
with the issuance of shares of Pan Pacific Common Stock pursuant to the Merger
and will pay all filing fees incident thereto. As promptly as practicable after
the Registration Statement becomes effective, the Company and Pan Pacific shall
cause the Joint Proxy Statement/Prospectus to be mailed to their respective
shareholders or stockholders.
(b) The Company and Pan Pacific each agrees that none of the information
supplied by the Company or its Subsidiaries to be included or incorporated by
reference in the Joint Proxy Statement/ Prospectus or any amendment thereof or
supplement thereto, will, on the date of the mailing of the Joint Proxy
Statement/Prospectus or any amendment or supplement thereto, and at the time of
the Company Shareholders Meeting and the Pan Pacific Stockholders Meeting,
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 are made, not
misleading. The Company and Pan Pacific each agrees that none of the information
supplied by it or its Subsidiaries to be included or incorporated by reference
in the Registration Statement will, at the time the Registration Statement
becomes effective under the Securities Act, 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 are made, not misleading.
(c) Without limiting the generality of the foregoing, prior to the
Effective Time (i) the Company and Pan Pacific shall notify each other as
promptly as practicable upon becoming aware of any event or circumstance which
should be described in an amendment of, or supplement to, the Joint Proxy
Statement/Prospectus or the Registration Statement, and (ii) the Company and Pan
Pacific shall each notify the other as promptly as practicable after the receipt
by it of any written or oral comments of the SEC on, or of any written or oral
request by the SEC for amendments or supplements to, the Joint Proxy
Statement/Prospectus or the Registration Statement, and shall promptly supply
the other with copies of all correspondence between it or any of its
Representatives and the SEC with respect to any of the foregoing filings.
(d) The Company and Pan Pacific shall each take all action necessary to
duly call the Company Shareholders Meeting and the Pan Pacific Stockholders
Meeting, respectively, each to be held as promptly as practicable for the
purpose of voting upon the approval of the Company Voting Proposals, in the case
of the Company, and the Pan Pacific Voting Proposal, in the case of Pan Pacific.
Subject to the right of the Company Board to withdraw, amend or modify such
recommendation in accordance with Section 6.3, each of the Company and Pan
Pacific shall, through its respective board of trustees or board of directors,
as applicable, recommend to their respective stockholders adoption of this
Agreement and approval of the Merger and related matters, shall coordinate and
cooperate with respect to the timing of such meetings and shall use their best
efforts to hold the Company Shareholders Meeting and Pan Pacific Stockholders
Meeting on the same day and each of the Company and Pan Pacific shall use all
reasonable efforts to solicit from its stockholders proxies in favor of the
Company Voting Proposals, in the case of the Company, and the Pan Pacific Voting
Proposal, in the case of Pan Pacific. Without limiting the generality of the
foregoing, the Company agrees that its obligations pursuant to this Section
6.1(d) to conduct the Company Shareholders Meeting shall not be affected by the
commencement, public proposal or communication to the Company of any Acquisition
Proposal.
SECTION 6.2 Cooperation; Notice; Cure. Subject to compliance with
applicable law, from the date hereof until the Effective Time, each of Pan
Pacific and the Company shall confer on a regular and frequent basis with one or
more Representatives of the other Party to report on the general status of
ongoing operations. Each of Pan Pacific and the Company shall promptly notify
the other in writing of, and will use all commercially reasonable efforts to
cure before the Closing Date, any event, transaction or circumstance, as soon as
reasonably practical after it becomes known to such Party, that causes or will
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cause any covenant or agreement of Pan Pacific or the Company, as the case may
be, under this Agreement to be breached in any material respect or that renders
or will render untrue in any material respect any representation or warranty of
Pan Pacific or the Company contained in this Agreement. No notice given pursuant
to this paragraph shall have any effect on the representations, warranties,
covenants or agreements contained in this Agreement for purposes of determining
satisfaction of any condition contained herein.
SECTION 6.3 No Solicitation.
(a) Subject to Section 6(b), unless and until this Agreement shall have
been terminated by either party pursuant to Article VIII hereof, the Company
shall not take or cause, directly or indirectly (through representatives, agents
or otherwise), any of the following actions with any party other than Pan
Pacific or its designees: (i) solicit, encourage, initiate or participate in any
negotiations, inquiries or discussions with respect to any offer or proposal to
acquire all or any part of its business, assets or capital shares whether by
merger, consolidation, other business combination, purchase of assets, tender or
exchange offer or otherwise, other than an offer or proposal with respect to a
sale transaction permitted under Section 5.1 hereof (each of the foregoing, an
"Acquisition Proposal"); (ii) disclose, in connection with an Acquisition
Proposal, any information or provide access to its properties, books or records,
except as required by law or pursuant to a governmental request for information;
(iii) enter into or execute any agreement relating to an Acquisition Proposal;
or (iv) make or authorize any public statement, recommendation or solicitation
in support of any Acquisition Proposal other than with respect to the Merger, or
as otherwise required by applicable law. Nothing in this Section 6.3(a) shall
limit the ability of the Company and its Subsidiaries to sell Assets in
accordance with Section 5.1(f) hereof.
(b) Notwithstanding the foregoing, in response to a bona fide, unsolicited,
written Acquisition Proposal from a Third Party (that does not result from a
breach of this Section 6.3), the Company Board may, and may authorize and permit
the Company's officers, trustees, employees, financial advisors,
representatives, or agents to, (i) provide such Third Party with nonpublic
information, (ii) otherwise facilitate any effort or attempt by such Third Party
to make or implement such Acquisition Proposal, (iii) agree to or recommend or
endorse any such Acquisition Proposal with or by any Third Party, (iv) withdraw
or modify, or propose publicly to withdraw or modify, in a manner adverse to Pan
Pacific, its approval and recommendation of the Merger and this Agreement, (v)
participate in discussions and negotiations with such Third Party relating to
such Acquisition Proposal and (vi) cause the Company to enter into an agreement
implementing an Acquisition Proposal, provided that the Company simultaneously
terminates this Agreement pursuant to Section 8.1(g), if and only to the extent
that (x) the Company Board believes in good faith (after consultation with its
financial advisor) that such Acquisition Proposal is more favorable or is likely
to result in an Acquisition Proposal that is more favorable to the Company
Shareholders from a financial point of view than the Merger and is made by a
Person believed by the Company Board to be reasonably capable of completing such
Acquisition Proposal (a "Superior Proposal"), (y) the Company Board, after
having consulted with and considered the advice of outside counsel, has
reasonably determined in good faith that the failure to do so would reasonably
be expected to cause the members of the Company Board to breach their legal
duties to shareholders of the Company under applicable law and (z) the Third
Party has entered into a confidentiality agreement pertaining to nonpublic
information regarding the Company containing terms in the aggregate no more
favorable to the Third Party than those in the Confidentiality Agreement. The
Company agrees that, in the event of a Superior Proposal, for the five Business
Day period commencing on the date on which it delivers notice of such Superior
Proposal to Pan Pacific in accordance with Section 6.3(c), it shall offer to
negotiate with, and cause its respective financial and legal advisors to
negotiate with, Pan Pacific to attempt to make such commercially reasonable
adjustments in the terms and conditions of this Agreement as would enable Pan
Pacific to proceed with the transactions contemplated herein.
(c) The Company shall notify Pan Pacific reasonably promptly after receipt
by the Company (or any of their advisors) of any Acquisition Proposal or any
request for nonpublic information in connection with an Acquisition Proposal or
for access to the Company's properties, books or records by any person or entity
that informs the Company that is it considering making, or has made, an
Acquisition Proposal. Such
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notice shall be made orally and in writing and shall indicate the status thereof
(including the specific terms thereof but not the identity of the Third Party
making such request or Acquisition Proposal). The Company shall promptly (but in
any event within one calendar day) furnish to Pan Pacific a copy of any written
proposals relating to a possible Acquisition Proposal and copies of any written
information provided to or by any third party relating thereto to the extent
such information has not previously been provided to Pan Pacific (but redacting
the name of the Third Party). The Company shall promptly (but in any event
within one calendar day) advise Pan Pacific in writing of any material changes
to the terms and conditions of any Acquisition Proposal.
(d) Nothing contained in this Section 6.3 shall prohibit the Company from
taking and disclosing to its shareholders a position contemplated by Rule 14e-2
promulgated under the Exchange Act or from making any disclosure to its
shareholders if the Company Board determines in good faith after consultation
with its outside counsel (who may be its regularly engaged outside counsel) that
failure to do so would reasonably be expected to result in a breach of its
fiduciary duties to shareholders under any applicable law, provided, however,
that neither the Company nor the Company Board nor any committee thereof may,
except as expressly permitted by this Section 6.3 or required by Rule 14e-2
promulgated under the Exchange Act, withdraw or modify, or propose publicly to
withdraw or modify, its position with respect to this Agreement or the Merger or
approve or recommend, or propose publicly to approve or recommend, an
Acquisition Proposal.
SECTION 6.4 Access to Information. Upon reasonable notice, each of Pan
Pacific and the Company (and each of their respective Subsidiaries) shall afford
to the other Party and its Representatives reasonable access, during normal
business hours during the period prior to the Effective Time, to all its
personnel, properties, books, contracts, commitments and records and, during
such period, each of Pan Pacific and the Company shall, and shall cause each of
its respective Subsidiaries to, furnish promptly to the other (a) copies of
monthly financial reports and development reports, (b) a copy of each report,
schedule, registration statement and other documents filed or received by it
during such period pursuant to the requirements of federal or state securities
laws and (c) all other information concerning its business, Assets, personnel
and tax status as the other Party may reasonably request; provided, however the
foregoing shall not require the Company or Pan Pacific to permit any inspection
or disclose any information that would result in the disclosure of confidential
information of Third Parties or violate a confidentiality obligation of such
party or any material bearing on an Acquisition Proposal made prior to the date
of this Agreement by any Third Party, or the identity of any Third Party making
any Acquisition Proposal after the date hereof, or any advice or analysis by the
Company or any of its representatives of the Company or any such Third Party or
any such Acquisition Proposal or of any report from its financial advisors,
counsel or management regarding Pan Pacific. Each Party making such requests
will hold any such information furnished to it by the other Party or Parties
which is nonpublic in confidence in accordance with the letter agreement dated
as of July 25, 2000, among Pan Pacific, Revenue Properties Company Limited and
the Company (the "Confidentiality Agreement"). All requests for information made
pursuant to this Section shall be directed to an executive officer of the
Company or Pan Pacific, as the case may be, or such Person designated by such
officers. No information or knowledge obtained in any investigation pursuant to
this Section 6.4 shall affect or be deemed to modify any representation or
warranty contained in this Agreement or the conditions to the obligations of the
Parties to consummate the Merger.
SECTION 6.5 Termination of Company's 401(k) Plan. Unless Pan Pacific
otherwise requests in writing, prior to the Closing, (i) the Company Board shall
adopt resolutions terminating, effective prior to the Effective Time, the
Company's Investment 401(k) Plan (each such plan, a "Company 401(k) Plan") and
(ii) amend the Company 401(k) Plan in the manner necessary to cause the
tax-qualified status of such Company 401(k) Plan to be maintained at the time of
termination.
SECTION 6.6 Governmental Approvals.
(a) The Parties shall cooperate with each other and use commercially
reasonable efforts to promptly prepare and file all necessary documentation, to
effect all applications, notices, petitions and filings, to
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obtain as promptly as practicable all permits, registrations, licenses,
consents, variances, exemptions, orders, approvals and authorizations of all
Third Parties and Governmental Entities which are necessary to consummate the
transactions contemplated by this Agreement ("Governmental Approvals"), and to
comply with the terms and conditions of all such Governmental Approvals. Each of
the Parties shall use commercially reasonable efforts to, and shall use
commercially reasonable efforts to cause their respective Representatives and
other Affiliates to, file within 30 days after the date hereof, and in all
events shall file within 60 days after the date hereof, all required initial
applications and documents in connection with obtaining the Governmental
Approvals and shall act reasonably and promptly thereafter in responding to
additional requests in connection therewith. Pan Pacific and the Company shall
have the right to review in advance, and to the extent practicable, each will
consult the other on, in each case subject to applicable laws relating to the
exchange of information, all the information relating to Pan Pacific and the
Company, as the case may be, and any of their respective Subsidiaries,
directors, trustees, officers and stockholders which appear in any filing made
with, or written materials submitted to, any Third Party or any Governmental
Entity in connection with the transactions contemplated by this Agreement.
Without limiting the foregoing, each of Pan Pacific and the Company (the
"Notifying Party") will notify the other promptly of the receipt of comments or
requests from Governmental Entities relating to Governmental Approvals, and will
supply the other Party with copies of all correspondence between the Notifying
Party or any of its Representatives and Governmental Entities with respect to
Governmental Approvals.
(b) Pan Pacific and the Company shall promptly advise each other upon
receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such Party to believe that there is a reasonable
likelihood that any approval needed from a Governmental Entity will not be
obtained or that the receipt of any such approval will be materially delayed.
Pan Pacific and the Company shall take any and all actions reasonably necessary
to vigorously defend, lift, mitigate and rescind the effect of any litigation or
administrative proceeding adversely affecting this Agreement or the transactions
contemplated hereby or thereby, including, without limitation, promptly
appealing any adverse court or administrative order or injunction to the extent
reasonably necessary for the foregoing purposes.
(c) Notwithstanding the foregoing or any other provision of this Agreement,
Pan Pacific shall have no obligation or affirmative duty under this Section 6.6
to cease or refrain from the ownership of any Assets, or the association with
any Person which association is material to the operations of Pan Pacific,
whether on the date hereof or at any time in the future.
SECTION 6.7 Publicity. Pan Pacific and the Company shall agree on the form
and content of the initial press release regarding the transactions contemplated
hereby and thereafter shall consult with each other before issuing any press
release or other public statement with respect to any of the transactions
contemplated hereby and shall not issue any such press release or make any such
public statement prior to such consultation, except as may be required by law or
obligations pursuant to any listing agreement with, or rules of any national
securities exchange.
SECTION 6.8 Affiliate Agreements. No later than 45 days prior to the
Closing the Company shall deliver to Pan Pacific a list identifying, in the view
of the Company, each person who will be, at the time of the Company Shareholders
Meeting, a Company Affiliate. The Company shall provide to Pan Pacific such
information and documents as Pan Pacific shall reasonably request for purposes
of reviewing such list and shall notify Pan Pacific in writing regarding any
change in the identity of the Company Affiliates prior to the Closing Date;
provided, however, that no such Person identified to Pan Pacific shall be added
to the list of Company Affiliates if Pan Pacific shall receive from the Company,
on or before the date of the Company Shareholders Meeting, an opinion of counsel
reasonably satisfactory to Pan Pacific to the effect that such Person is not a
Company Affiliate. The Company shall use its reasonable best efforts to deliver
or cause to be delivered to Pan Pacific as promptly as practicable but in no
event later than 15 days prior to the Closing (and in any case prior to the
Effective Time) an Affiliate Agreement from each of its Affiliates.
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SECTION 6.9 Tax Treatment of Reorganization.
(a) The Parties intend the Merger to qualify as a reorganization under
Section 368(a) of the Code and shall use their best efforts (and shall cause
their respective Subsidiaries to use their best efforts) to cause the Merger to
so qualify. Neither the Company, Pan Pacific, nor any of their respective
Subsidiaries or other Affiliates shall take any action, or fail to take any
action, that is not specifically provided for by this Agreement that would or
would be reasonably likely to adversely affect the treatment of the Merger as a
reorganization under Section 368(a) of the Code. Pan Pacific and the Company
shall, and shall cause their respective Subsidiaries to, take the position for
all purposes that the Merger qualifies as a reorganization under that Section of
the Code. None of the Company, Pan Pacific, or any Subsidiary of either makes
any representation or warranty to the other(s) or to any stockholder regarding
the tax treatment of the Merger or whether the Merger will qualify as a
reorganization under the Code. Each of the Company, Pan Pacific, and the
Subsidiaries of both acknowledge that they are relying on their own advisors in
connection with the tax treatment of the Merger and the other transactions
contemplated by this Agreement.
(b) Pan Pacific and the Company shall cooperate and use their best efforts
in obtaining the opinions of O'Melveny & Myers LLP, counsel to the Company, and
Latham & Watkins, counsel to Pan Pacific, dated as of the Closing Date, to the
effect that the Merger will qualify for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code. Pan Pacific and
Company shall use their best efforts to provide O'Melveny & Myers LLP and Latham
& Watkins with such representations or certificates as may reasonably be
required to enable such counsel to render the opinions referred to in the
preceding sentence.
SECTION 6.10 Further Assurances and Actions. Subject to the terms and
conditions herein, each of the Parties agrees to use its reasonable efforts to
take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable on its part under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, (i) using their
respective reasonable efforts to obtain all licenses, permits, consents,
approvals, authorizations, qualifications and orders of Governmental Entities
and parties to contracts with each Party as are necessary for consummation of
the transactions contemplated by this Agreement, and (ii) to fulfill all
conditions precedent applicable to such Party pursuant to this Agreement,
subject, in the case of the Company, to the rights of the Company and the
Company Board under Sections 6.3(b), 6.3(d) and 8.1(g).
SECTION 6.11 Stock Exchange Listing. Pan Pacific shall use its best
efforts to list on the NYSE prior to the Effective Time, subject to official
notice of issuance, the shares of Pan Pacific Common Stock to be issued in the
Merger.
SECTION 6.12 Letter of the Company's Accountants. The Company shall use
all reasonable efforts to cause to be delivered to Pan Pacific a letter of KPMG
LLP, the Company's independent auditors, dated (i) a date within two Business
Days before the date on which the Registration Statement shall become effective
and (ii) the Closing Date, in each case addressed to Pan Pacific and its
directors, in form reasonably satisfactory to Pan Pacific and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration Statement.
SECTION 6.13 Letter of Pan Pacific's Accountants. Pan Pacific shall use
all reasonable efforts to cause to be delivered to the Company and Pan Pacific a
letter of KPMG LLP, Pan Pacific's independent auditors, dated (i) a date within
two Business Days before the date on which the Registration Statement shall
become effective and (ii) the Closing Date, in each case addressed to the
Company and its directors, in form reasonably satisfactory to the Company and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement.
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SECTION 6.14 Company REIT Status. Notwithstanding anything to the contrary
set forth in this Agreement, nothing in this Agreement shall prohibit the
Company from taking, and the Company hereby agrees to take, any action at any
time or from time to time that in the reasonable judgment of the Company Board,
upon advice of counsel, is legally necessary for the Company to maintain its
qualification as a REIT within the meaning of Sections 856-860 of the Code for
any period or portion thereof ending on or prior to the Effective Time,
including without limitation, making dividend or distribution payments to
shareholders of the Company in accordance with Section 5.3 or otherwise.
SECTION 6.15 Pan Pacific REIT Status. Notwithstanding anything to the
contrary set forth in this Agreement, nothing in this Agreement shall prohibit
Pan Pacific from taking, and Pan Pacific hereby agrees to take any action at any
time or from time to time that in the reasonable judgment of Pan Pacific Board,
upon advice of counsel, is legally necessary for Pan Pacific to maintain its
qualification as a REIT within the meaning of Sections 856-860 of the Code for
any period or portion thereof ending on, prior to or including the Effective
Time, including without limitation, making dividend or distribution payments to
stockholders of Pan Pacific, in accordance with Section 5.3 or otherwise.
SECTION 6.16 Obtaining Consents.
(a) Pan Pacific shall give (or shall cause its Subsidiaries to give) any
notices to Third Parties, and use, and cause its Subsidiaries to use, their
reasonable best efforts to obtain any Third Party consents related to or
required in connection with the Merger that are (i) disclosed or required to be
disclosed in the Pan Pacific Disclosure Schedule or (ii) required to prevent a
Pan Pacific Material Adverse Effect from occurring prior to or after the
Effective Time.
(b) The Company shall give (or shall cause its Subsidiaries to give) any
notices to Third Parties, and use, and cause its Subsidiaries to use, their
reasonable best efforts to obtain any Third Party consents related to or
required in connection with the Merger that are (i) disclosed or required to be
disclosed in the Company Disclosure Schedule, or (ii) required to prevent a
Company Material Adverse Effect from occurring prior to or after the Effective
Time, excluding, in each case consents required under the First Amended and
Restated Credit Agreement among the Company, the Banks named therein, and Sanwa
Bank California, as Agent, dated October 19, 1998, as amended to the date
hereof, for the consummation of the Merger, the Incorporation, or the
transactions contemplated hereby to occur at or after the Effective Time.
SECTION 6.17 Board Representation. At or before the Effective Time, Pan
Pacific shall increase the size of the Pan Pacific Board from five directors to
seven directors. At the Effective Time, the two resulting vacancies on the Pan
Pacific Board shall be filled by two of the individuals listed on Schedule 6.17,
which shall consist of the independent members of the Company Board, which
individuals shall be selected from such list by Pan Pacific and elected to the
Pan Pacific Board by a majority of the directors on the Pan Pacific Board.
SECTION 6.18 Employee Benefits.
(a) At the Effective Time (and not before the Effective Time unless
required by law or contract or as permitted by Section 6.18(c)), the employees
of the Company listed in Section 6.18 of the Company Disclosure Schedule shall
be entitled to the severance payments, bonuses, 401(k) profit sharing and
matching contributions and vacation accrual payments (the "Employee Benefits")
listed opposite their names in Section 6.18 of the Company Disclosure Schedule;
provided, however, that the Company is expressly permitted to pay (or commit to
pay) the applicable amount set forth in Section 6.18 of the Company Disclosure
Schedule to any employee listed on such schedule whose employment is terminated
prior to the Effective Time, at the time of such termination, so long as any
such payments and commitments do not exceed $15,000 to any individual or
$100,000 in the aggregate; provided further that no individual shall be entitled
to any Employee Benefits under this Section 6.18(a) (other than those which the
Company or the Surviving Company is required to pay by law or by contract)
unless such individual first delivers to the Company or the Surviving Company,
as applicable, a writing indicating that the Employee Benefits received by such
individual represent a full settlement of all Employee Benefits due
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such employee and waiving any rights to Employee Benefits accrued as of the
Effective Time. To the extent that any severance payments, bonuses, 401(k)
profit sharing and matching contributions, vacation accrual payments or
substantially similar benefits are paid to any employee listed in Section 6.18
of the Company Disclosure Schedule after the date hereof in connection with
services rendered by such employee prior to the Effective Time, the Employee
Benefits payable to such employee under this Section 6.18(a) shall be reduced on
a dollar-for-dollar basis.
(b) The Company shall have the right to offer to each employee listed in
Section 6.18(b) of the Company Disclosure Schedule, with respect to each Company
Option referred to in Section 6.18(b) of the Company Disclosure Schedule, in
exchange for the cancellation of such Company Option, the amount of cash set
forth on such schedule, provided, however, that any such offer shall be
conditioned upon the applicable employee's written agreement, delivered to the
Company at least five Business Days prior to the Closing Date, to cancel all of
the Company Options held by such employee on the terms set forth in Section
6.18(b) of the Company Disclosure Schedule.
(c) The Company shall be permitted to pay the Employee Benefits listed in
Section 6.18 of the Company Disclosure Schedule on or after December 31, 2000 to
the extent that payment of such types of benefits on that date is consistent
with the Company's past practice. Payment of such amounts shall, in accordance
with Section 6.18(a), reduce the amounts payable under Section 6.18(a) to the
applicable employees on a dollar-for-dollar basis. The amounts of Employee
Benefits payable under Section 6.18(a) shall increase after December 31, 2000 by
the amount of such benefits that would accrue or be payable in 2001 in
accordance with the Company's past practices, pro rated for the period between
December 31, 2000 and the Effective Date.
(d) If any employee listed in Section 6.18 of the Company Disclosure
Schedule becomes an employee of Pan Pacific after the Effective Date and, as a
result thereof, any amounts listed opposite the name of such employee are not
paid to such employee, Pan Pacific agrees to pay such amounts to such employee
upon the cessation of his or her employment by Pan Pacific for any reason if
such person ceases to be employed by Pan Pacific within 180 days of the
Effective Date. This Section 6.18(d) is intended for the irrevocable benefit of,
and to grant third-party rights to, the persons listed in Section 6.18 of the
Company Disclosure Schedule and their successors, assigns and heirs and shall be
binding on all successors and assigns Pan Pacific, including without limitation
the Surviving Company.
SECTION 6.19 Non-Solicitation of Employees. During the period from the
date hereof to the earlier of the Effective Time and the one year anniversary
date of the termination of this Agreement, neither Party hereto will, or will
permit their respective Subsidiaries to, employ or solicit for employment any of
the officers or management level employees of the other Party hereto.
SECTION 6.20 Acquisition of WRESI Stock. Pan Pacific will cause Stuart A.
Tanz and Joseph B. Tyson to acquire, at the Effective Time, all of the capital
stock of WRESI held by Dennis Ryan and by Brad Blake for a payment in cash of
$336,000, plus interest from the date hereof to and including the date of
payment at a rate of 6.00% per annum computed on the basis of a 360 day year for
actual days elapsed, to each such person. Such purchase shall be made without
recourse, representation or warranty.
SECTION 6.21 Adjustment to Pan Pacific Dividend Payments. Pan Pacific
shall change its record date for its regular quarterly dividend payable in the
first quarter of 2001 to a date on or about the last Friday of February and the
payment date for such dividend to a date as close as practicable to March 15,
2001. After the Merger, Pan Pacific intends to change its record dates for its
regular quarterly dividends to dates on or about the last Friday of February,
May, August and November in each year, and payment dates for such dividends to
dates as close as practicable to March 15, June 15, September 15 and December 15
in each year, but the timing of such dividends shall be at the discretion of the
Pan Pacific Board. The regular dividend paid by Pan Pacific in the first
calendar quarter after the Effective Time shall be in a per share amount equal
to or exceeding the quotient of $0.28 divided by the Exchange Ratio. Pan Pacific
intends to maintain or exceed the dividend rate referred to in the immediately
preceding sentence after the first quarter following the Effective Time, but the
amount of subsequent dividends shall be at the discretion of the Pan Pacific
Board.
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SECTION 6.22 Indemnification and Insurance.
(a) From and after the Effective Time, the Surviving Company shall provide
exculpation and indemnification for each Person who is now or has been at any
time prior to the date hereof or who becomes prior to the Effective Time, an
officer, trustee or director of the Company or any of its Subsidiaries,
(together with the WRESI Shareholders (as defined below) the "Indemnified
Parties") which is the same as the exculpation and indemnification provided to
the Indemnified Parties by the Company or WPT and its Subsidiaries immediately
prior to the Effective Time in their respective Organizational Documents, as in
effect on the date hereof; provided, that such exculpation and indemnification
covers actions on or prior to the Effective Time, including, without limitation,
all transactions contemplated by this Agreement. From and after the Effective
Time, the Surviving Company shall also provide exculpation and indemnification
for Bradley Blake and Dennis Ryan in their capacities as shareholders, officers
and/or directors of WRESI (in such capacity, the "WRESI Shareholders") for all
actions on or before the Effective Time, including, without limitation, all
transactions contemplated by this Agreement, to the maximum extent permitted by
law.
(b) In addition to the rights provided in Section 6.22(a) above, in the
event of any threatened or actual claim, action, suit, proceeding or
investigation, whether civil, criminal or administrative, including without
limitation, any action by or on behalf of any or all security holders of the
Company, WPT, or Pan Pacific, or any Subsidiary of the Company or Pan Pacific,
or by or in the right of the Company, WPT, or Pan Pacific, or any Subsidiary of
the Company or Pan Pacific, or any claim, action, suit, proceeding or
investigation (collectively, for this Section 6.22 "Claims") in which any
Indemnified Party is, or is threatened to be, made a party based in whole or in
part on, or arising in whole or in part out of, or pertaining to (i) the fact
that he is or was an officer, employee, trustee or director of the Company or
any of its Subsidiaries or any action or omission or alleged action or omission
by such Person in his capacity as an officer, employee, trustee or director, or
(ii) the Company Transaction Documents or the Company DownREIT Transaction
Documents or the Company Transactions or the transactions contemplated thereby,
whether in any case asserted or arising before or after the Effective Time, Pan
Pacific and the Surviving Company (the "Indemnifying Parties") shall from and
after the Effective Time jointly and severally indemnify and hold harmless the
Indemnified Parties from and against any losses, claims, liabilities, expenses
(including reasonable attorneys' fees and expenses), judgments, fines or amounts
paid in settlement arising out of or relating to any such Claims. Pan Pacific,
the Surviving Corporation and the Indemnified Parties hereby agree to use their
reasonable best efforts to cooperate in the defense of such Claims. In
connection with any such Claim, the Indemnified Parties shall have the right to
select and retain one counsel, at the cost of the Indemnifying Parties, subject
to the consent of the Indemnifying Parties (which consent shall not be
unreasonably withheld or delayed). In addition, after the Effective Time, in the
event of any such threatened or actual Claim, the Indemnifying Parties shall
promptly pay and advance reasonable expenses and costs incurred by each
Indemnified Person as they become due and payable in advance of the final
disposition of the Claim to the fullest extent and in the manner permitted by
law. Notwithstanding the foregoing, the Indemnifying Parties shall not be
obligated to advance any expenses or costs prior to receipt of an undertaking by
or on behalf of the Indemnified Party, such undertaking to be accepted without
regard to the creditworthiness of the Indemnified Party, to repay any expenses
advanced if it shall ultimately be determined that the Indemnified Party is not
entitled to be indemnified against such expense. Notwithstanding anything to the
contrary set forth in this Agreement, the Indemnifying Parties (i) shall not be
liable for any settlement effected without their prior written consent (which
consent shall not be unreasonably withheld or delayed), and (ii) shall not have
any obligation hereunder to any Indemnified Party to the extent that a court of
competent jurisdiction shall determine in a final and non-appealable order that
such indemnification is prohibited by applicable law. In the event of a final
and non-appealable determination by a court that any payment of expenses is
prohibited by applicable law, the Indemnified Party shall promptly refund to the
Indemnifying Parties the amount of all such expenses theretofore advanced
pursuant hereto. Any Indemnified Party wishing to claim indemnification under
this Section 6.22, upon learning of any such Claim, shall promptly notify the
Indemnifying Parties of such Claim and the relevant facts and circumstances with
respect thereto; provided however, that the failure to provide such notice shall
not affect the obligations of the
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Indemnifying Parties except to the extent such failure to notify materially
preju dices the Indemnifying Parties' ability to defend such Claim; and
provided, further, however, that no Indemnified Party shall be obligated to
provide any notification pursuant to this Section 6.22(b) prior to the Effective
Time.
(c) For six years after the Effective Time, Pan Pacific shall maintain in
effect the Company's current directors' and officers' liability insurance
covering acts or omissions occurring prior to the Effective Time with respect to
those persons who are currently covered by the Company's directors' and
officers' liability insurance policy on terms with respect to such coverage and
amount no less favorable in the aggregate to the Company's trustees, directors
and officers, as the case may be, currently covered by such insurance than those
of such policy in effect on the date of this Agreement; provided, that in the
event that the aggregate premiums for insurance for the benefit of persons
currently covered by the Company's officers' and directors' insurance policy
under this Section 6.22(c) are in excess of 150% of the aggregate premiums paid
by the Company in 1999 on an annualized basis for such purpose then Pan Pacific
shall only be obligated to maintain such insurance coverage as is reasonably
available for such amount.
(d) This Section 6.22 is intended for the irrevocable benefit of, and to
grant third-party rights to, the Indemnified Parties and their successors,
assigns and heirs and shall be binding on all successors and assigns Pan
Pacific, including without limitation the Surviving Company. Each of the
Indemnified Parties shall be entitled to enforce the covenants contained in this
Section 6.22 and Pan Pacific acknowledges and agrees that each Indemnified Party
would suffer irreparable harm and that no adequate remedy at law exists for a
breach of such covenants and such Indemnified Party shall be entitled to
injunctive relief and specific performance in the event of any breach of any
provision in this Section 6.22.
(e) In the event that the Surviving Company or any of its respective
successors or assigns (i) consolidates with or merges into any other Person and
shall not be 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, the
successors and assigns of such entity shall assume the obligations set forth in
this Section 6.22, which obligations are expressly intended to be for the
irrevocable benefit of, and shall be enforceable by, each director and officer
covered hereby.
ARTICLE VII.
CONDITIONS OF MERGER
SECTION 7.1 Conditions to Obligation of each Party to Effect the
Merger. The respective obligations of each Party to effect the Merger shall be
subject to the satisfaction at or prior to the Closing Date of the following
conditions:
(a) the Company Voting Proposals shall have been approved by the
shareholders of the Company in the manner required under the CGCL and the
Organizational Documents of the Company;
(b) the Pan Pacific Voting Proposal shall have been approved by the
stockholders of Pan Pacific in the manner required under the MGCL, the
rules of the NYSE and the Organizational Documents of Pan Pacific;
(c) no statute, rule, regulation, executive order, decree, ruling,
injunction or other order (whether temporary, preliminary or permanent)
shall have been enacted, entered, promulgated or enforced by any
Governmental Entity of competent jurisdiction and no other legal restraint
or prohibition shall be in effect which prohibits, restrains, enjoins or
restricts the consummation of the Merger; provided, however, that the
Parties shall use their reasonable best efforts to cause any such decree,
ruling, injunction or other order to be vacated or lifted;
(d) there shall not be instituted or pending any Action by a
Governmental Entity or any other Person as a result of this Agreement or
any of the transactions contemplated herein which causes a Company Material
Adverse Effect or a Pan Pacific Material Adverse Effect (assuming for
purposes of this Section 7.1(d) that the Merger shall have occurred);
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(e) the Registration Statement shall have become effective under the
Securities Act and shall not be the subject of any stop order suspending
the effectiveness of the Registration Statement nor shall proceedings for
that purpose have been threatened, and any material Blue Sky Law permits
and approvals applicable to the registration of the Pan Pacific Common
Stock to be exchanged for Company Shares shall have been obtained;
(f) all filings required to be made prior to the Closing by any Party
or any of its respective Subsidiaries with, and all consents, approvals and
authorizations required to be obtained prior to the Closing by any Party or
any of its respective Subsidiaries from, any Governmental Entity in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby shall have been made
or obtained, except where the failure to obtain such consents would not
cause a Company Material Adverse Effect or a Pan Pacific Material Adverse
Effect and could not reasonably be expected to subject the Parties or their
Affiliates or any directors, trustees, officers, agents or advisors of any
of the foregoing to the risk of criminal liability;
(g) all consents or approvals of all Persons (other than Governmental
Entities and the limited partners of Western/Pinecreek Partnership)
required for or in connection with or as a result of the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby shall have been obtained and shall be in
full force and effect, except for those the failure of which to obtain
would not cause a Company Material Adverse Effect or a Pan Pacific Material
Adverse Effect; and
(h) the shares of Pan Pacific Common Stock issuable to the holders of
Company Shares pursuant to this Agreement shall have been approved for
listing on the NYSE upon official notice of issuance.
SECTION 7.2 Conditions to Obligations of the Company to Effect the
Incorporation and the Merger. The obligation of the Company to effect the
Incorporation and the Merger shall be subject to the fulfillment at or prior to
the Closing Date of the following additional conditions:
(a) Each representation and warranty of Pan Pacific contained in this
Agreement, without giving effect to any materiality qualifications or
references to materiality therein, shall be true and correct at and as of
the Effective Time as if made at and as of the Effective Time, except (i)
as contemplated or permitted by this Agreement, (ii) to the extent that any
such representation or warranty shall have been expressly made as of an
earlier date, in which case such representation and warranty, without
giving effect to any materiality qualifications or references to
materiality therein, shall have been true and correct as of such earlier
date, and (iii) to the extent that any and all failures of such
representations and warranties to be true and correct, shall not result in
a Pan Pacific Material Adverse Effect;
(b) Pan Pacific shall have performed or complied in all material
respects with all obligations required by this Agreement to be performed or
complied with by it at or prior to the Closing Date;
(c) The Company shall have received a certificate executed on behalf
of Pan Pacific by the Chief Executive Officer or Chief Financial Officer of
Pan Pacific to the effect set forth in clauses (a) and (b) of this Section
7.2;
(d) The Company shall have received an opinion of O'Melveny & Myers
LLP, dated as of the date of the Effective Time, in form and substance
reasonably satisfactory to the Company, substantially to the effect that,
on the basis of facts, representations and assumptions set forth in such
opinion that are consistent with the state of facts existing as of such
time, for federal income tax purposes, (i) the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code, (ii) no
gain or loss will be recognized by WPT or any shareholders of WPT as a
result of the Merger, except to the extent that shareholders of WPT receive
cash pursuant to the transactions contemplated by this Agreement; and (iii)
no gain or loss will be recognized by the Company or WPT or any Company
Shareholders or shareholders of WPT as a result of the Incorporation. In
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rendering such opinion, O'Melveny & Myers LLP may receive and rely upon
representations including those contained in this Agreement or in
certificates of officers of the Parties and others;
(e) The Company shall have received the opinion of Latham & Watkins in
the form attached as Exhibit C hereto (based upon customary representations
including those contained in this Agreement or in certificates of officers
of the Parties and others), dated as of the date of the Effective Time, to
the effect that, (i) commencing with its taxable year ended December 31,
1997, Pan Pacific was organized in conformity with the requirements for
qualification and taxation as a REIT under the Code, and (ii) its method of
operation has enabled it and its proposed method of operation will enable
it to continue to meet the requirements for qualification and taxation as a
REIT under the Code; and
(f) The average closing price of Pan Pacific Common Stock on the NYSE
for the period of ten trading days prior to the Closing Date shall not be
less than $15 per share.
SECTION 7.3 Conditions to Obligations of Pan Pacific to Effect the
Merger. The obligations of Pan Pacific to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) Each representation and warranty of the Company contained in this
Agreement, without giving effect to any materiality qualifications or
references to materiality therein, shall be true and correct at and as of
the Effective Time as if made at and as of the Effective Time, except (i)
as contemplated or permitted by this Agreement, (ii) to the extent that any
such representation or warranty shall have been expressly made as of an
earlier date, in which case such representation and warranty, without
giving effect to any materiality qualifications or references to
materiality therein, shall have been true and correct as of such earlier
date, and (iii) to the extent that any and all failures of such
representations and warranties to be true and correct, shall not result in
a Company Material Adverse Effect;
(b) The Company shall have performed or complied in all material
respects with all obligations required by this Agreement to be performed or
complied with by it at or prior to the Closing Date;
(c) Pan Pacific shall have received a certificate executed on behalf
of the Company by the Chief Executive Officer or Chief Financial Officer of
the Company to the effect set forth in clauses (a) and (b) of this Section
7.3;
(d) Pan Pacific shall have received an opinion of Latham & Watkins,
dated as of the date of the Effective Time, in form and substance
reasonably satisfactory to Pan Pacific, substantially to the effect that,
on the basis of facts, representations and assumptions set forth in such
opinion that are consistent with the state of facts existing as of such
time, for federal income tax purposes, (i) the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code, and (ii)
no gain or loss will be recognized by Pan Pacific or any of its
stockholders as a result of the Merger. In rendering such opinion, Latham &
Watkins may receive and rely upon representations including those contained
in this Agreement or in certificates of officers of the Parties or others;
(e) Pan Pacific shall have received the opinion of O'Melveny & Myers
LLP in the form attached as Exhibit D hereto (based upon customary
representations including those contained in this Agreement or in
certificates of officers of the Parties and others), dated as of the date
of the Effective Time, to the effect that, commencing with its taxable year
ended December 31, 1992 (and without regard to whether such opinion is true
or accurate for any taxable year prior to the taxable year ended December
31, 1992), the Company was organized in conformity with the requirements
for qualification and taxation as a REIT under the Code, and its method of
operation has enabled it to meet, through the Effective Time, the
requirements for qualification and taxation as a REIT under the Code;
(f) KPMG LLP shall have delivered to Pan Pacific each of the letters
described in Sections 6.12 and 6.13, at the times provided for in such
Sections; and
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(g) Effective demands for payment under Chapter 13 of the CGCL shall
not have been received by the Company or WPT with respect to 5.0% or more
of the outstanding Company Common Shares or WPT Common Stock.
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated at any time
before the Effective Time (except as otherwise provided), whether before or
after the approval of the shareholders of the Company and the stockholders of
Pan Pacific referred to in Sections 7.1(a) and (b), by written notice from Pan
Pacific to the Company or the Company to Pan Pacific, as the case may be, as
follows:
(a) by mutual written consent of each of Pan Pacific and the Company;
(b) by either the Company or Pan Pacific, if the Effective Time shall
not have occurred on or before February 28, 2001 (the "Termination Date");
provided however, that the right to terminate this Agreement under this
Section 8.1(b) shall not be available to any Party whose failure to fulfill
any obligation under this Agreement has been the cause of, or resulted in,
the failure of the Effective Time to occur on or before the Termination
Date;
(c) by either the Company or Pan Pacific, if a Governmental Entity
shall have issued an order, decree or injunction having the effect of
making the Merger illegal or permanently prohibiting the consummation of
the Merger, and such order, decree or injunction shall have become final
and nonappealable;
(d) by either Pan Pacific or the Company if the requisite vote in
favor of the Company Voting Proposals shall not have been obtained at a
duly held meeting of the shareholders of the Company or at any adjournment
thereof; provided that the right to terminate this Agreement under this
Section 8.1(d) shall not be available to the Company if it fails to fulfill
its obligations under Section 6.1(d);
(e) by either the Company or Pan Pacific if the requisite vote in
favor of the Pan Pacific Voting Proposal shall not have been obtained at a
duly held meeting of stockholders of Pan Pacific or at any adjournment
thereof; provided that the right to terminate this Agreement under this
Section 8.1(e) shall not be available to Pan Pacific if it fails to fulfill
its obligations under Section 6.1(d);
(f) by Pan Pacific, if (i) after the receipt by the Company of an
Acquisition Proposal, the Company Board shall have withdrawn or modified,
or proposed publicly to withdraw or modify, its recommendation of any of
the Company Voting Proposals, (ii) after the receipt by the Company of an
Acquisition Proposal (which Acquisition Proposal is public), Pan Pacific
requests in writing that the Company Board publicly reconfirm its
recommendation of the Company Voting Proposals to the shareholders of the
Company and the Company Board fails to do so within thirty Business Days
after its receipt of Pan Pacific's request; (iii) the Company Board shall
have recommended to the shareholders of the Company an Alternative
Transaction; (iv) a tender offer or exchange offer for 27.5% or more of the
outstanding Company Common Shares is commenced (other than by the Company
or an Affiliate of the Company) and the Company Board recommends that the
shareholders of the Company tender their shares in such tender or exchange
offer; or (v) after the receipt by the Company of an Acquisition Proposal,
the Company fails to call and hold the Company Shareholders Meeting by the
Termination Date.
(g) by the Company, prior to the approval of the Company Voting
Proposals by the shareholders of the Company, if the Company has complied
in all respects with Section 6.3, and the Company Board has determined to
accept a Superior Proposal; provided, however, that no termination shall be
effective pursuant to this Section 8.1(g) under circumstances in which a
Break-Up Fee is payable by the Company pursuant to Section 8.2(c)(iii),
unless concurrently with such termination, 50% of such Break-Up Fee is paid
by the Company in accordance with Section 8.2(c)(iii);
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(h) by Pan Pacific, upon a material breach of any covenant or
agreement on the part of the Company set forth in this Agreement, or if (i)
any representation or warranty of the Company that is qualified as to
materiality shall have become untrue or (ii) any representation or warranty
of the Company that is not so qualified shall have become untrue in any
material respect, in each case such that the conditions set forth in
Section 7.3(a) or Section 7.3(b) would not be satisfied (a "Terminating
Company Breach"); provided, however, that, if such Terminating Company
Breach is capable of being cured by the Company prior to the Termination
Date, for so long as the Company continues in good faith to attempt to cure
such breach, Pan Pacific may not terminate this Agreement under this
Section 8.1(h); or
(i) by the Company, upon a material breach of any covenant or
agreement on the part of Pan Pacific set forth in this Agreement, or if (i)
any representation or warranty of Pan Pacific that is qualified as to
materiality shall have become untrue or (ii) any representation or warranty
of Pan Pacific that is not so qualified shall have become untrue in any
material respect, in each case such that the conditions set forth in
Section 7.2(a) or Section 7.2(b) would not be satisfied ("Terminating Pan
Pacific Breach"); provided, however, that, if such Terminating Pan Pacific
Breach is capable of being cured by Pan Pacific prior to the Termination
Date, for so long as Pan Pacific continues in good faith to attempt to cure
such breach, the Company may not terminate this Agreement under this
Section 8.1(i).
SECTION 8.2 Expenses; Break-Up Fee.
(a) Except as otherwise provided in this Section 8.2, all Expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such Expenses. As used in this Agreement,
"Expenses" includes all reasonable out-of-pocket expenses (including, without
limitation, all reasonable fees and expenses of counsel, accountants, investment
bankers, experts and consultants to a party hereto and its affiliates) incurred
by a party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement and the
transactions contemplated hereby, including the preparation, printing, filing
and mailing of the Proxy Statement and Registration Statement and the
solicitation of stockholder approvals and all other matters related to the
transactions contemplated hereby.
(b) Notwithstanding the foregoing,
(i) if this Agreement is terminated by Pan Pacific pursuant to Section
8.1(h), then the Company shall pay the Expenses incurred by Pan Pacific up
to a maximum of $2,000,000; provided, however that the Company shall not be
obligated to pay such Expenses incurred by Pan Pacific if it is obligated
to pay a Break-Up Fee pursuant to Section 8.2(c).
(ii) if this Agreement is terminated by the Company pursuant to
Section 8.1(i), then Pan Pacific shall pay the Expenses incurred by the
Company up to a maximum of $2,000,000.
The Company's payment of the Expenses incurred by the Pan Pacific pursuant
to this subsection shall be the sole and exclusive remedy of Pan Pacific against
the Company and any of its Subsidiaries and their respective directors,
officers, employees, agents, advisors or other representatives with respect to
the occurrences giving rise to such payment, except for liabilities or damages
caused by the willful breach of any representations, warranties, covenants or
agreements herein by the Company. Pan Pacific's payment of the Expenses incurred
by the Company pursuant to this subsection shall be the sole and exclusive
remedy of the Company against Pan Pacific and any of its Subsidiaries and their
respective directors, officers, employees, agents, advisors or other
representatives with respect to the occurrences giving rise to such payment,
except for liabilities or damages caused by the willful breach of any
representations, warranties, covenants or agreements herein by Pan Pacific.
(c) The Company shall pay Pan Pacific a Break-Up Fee if any of the
following events occur:
(i) the termination of this Agreement by either Pan Pacific or the
Company pursuant to Section 8.1(d), if a proposal for an Alternative
Transaction involving the Company shall have been
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publicly announced prior to the Company Shareholders Meeting and either a
definitive agreement for an Alternative Transaction is entered into, or
such Alternative Transaction (or another Alternative Transaction with the
proponent of such transaction or an Affiliate of such proponent) is
consummated, within twelve months of such termination, it being understood
that the Break-Up Fee under this clause 8.2(c)(i) shall be payable only
upon the earlier of the execution of such definitive agreement or the
consummation of such Alternative Transaction;
(ii) the termination of this Agreement by Pan Pacific pursuant to
Section 8.1(f); or
(iii) the termination of this Agreement by the Company pursuant to
Section 8.1(g).
The Break-Up Fee shall be paid by the Company to Pan Pacific, in immediately
available funds, as follows: (a) 50% of the Break-Up Fee shall be payable upon
the date of the earliest to occur of the events described in clauses (i), (ii)
and (iii) of this Section 8.2(c) and (b) 50% of the Break-Up Fee shall be
payable within 90 days of such date. The Company's payment of a Break-Up Fee
pursuant to this subsection shall be the sole and exclusive remedy of Pan
Pacific against the Company and any of its Subsidiaries and their respective
directors, officers, employees, agents, advisors or other representatives with
respect to the occurrences giving rise to such payment; provided that this
limitation shall not apply in the event of a willful breach of this Agreement by
the Company.
(d) As used in this Agreement, "Alternative Transaction" means either (i) a
transaction pursuant to which any Third Party acquires more than 27.5% of the
outstanding Company Common Shares pursuant to a tender offer or exchange offer
or otherwise, (ii) a merger or other business combination involving the Company
pursuant to which any Third Party (or the stockholders of a Third Party)
acquires more than 27.5% of the outstanding Company Common Shares or 27.5% of
the equity securities of the entity surviving such merger or business
combination, or (iii) any other transaction pursuant to which any Third Party
acquires control of assets (including for this purpose the outstanding equity
securities of Subsidiaries of the Company and the entity surviving any merger or
business combination including any of them) of the Company having a fair market
value (as determined by the Company Board in good faith) equal to more than
27.5% of the fair market value of all the assets of the Company and its
Subsidiaries, taken as a whole, immediately prior to such transaction.
(e) The "Break-Up Fee" shall be an amount equal to the lesser of (i) the
Base Amount (as defined below) and (ii) the maximum amount, if any, that can be
paid to Pan Pacific without causing it to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code for such year determined as if (a) the
payment of such amount did not constitute income described in Sections
856(c)(2)(A) - (H) and 856(c)(3)(A) - (I) of the Code ("Qualifying Income"), and
(b) Pan Pacific has $1,000,000 of income from unknown sources during such year
which was not Qualifying Income (in addition to any known or anticipated income
of Pan Pacific which was not Qualifying Income), in each case as determined by
independent accountants to Pan Pacific. Notwithstanding the foregoing, in the
event Pan Pacific receives a reasoned opinion from outside counsel or a ruling
from the IRS (the "Tax Guidance") providing that Pan Pacific's receipt of the
Base 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 (the
"REIT Requirements"), the Break-Up Fee shall be an amount equal to the Base
Amount and the Company shall, upon receiving notice that Pan Pacific has
received the Tax Guidance, pay to Pan Pacific the unpaid Base Amount within five
Business Days. In the event that Pan Pacific is not able to receive the full
Base Amount due to the above limitations, the Company shall place the unpaid
amount in escrow by wire transfer within three days of termination and shall not
release any portion thereof to Pan Pacific unless and until Pan Pacific receives
either one or a combination of the following once or more often: (i) a letter
from Pan Pacific's independent accountants indicating the maximum amount that
can be paid at that time to Pan Pacific without causing Pan Pacific to fail to
meet the REIT Requirements (calculated as described above) or (ii) the Tax
Guidance, in either of which events the Company shall pay to Pan Pacific the
lesser of the unpaid Base Amount or the maximum amount stated in the letter
referred to in (i) above within five Business Days after the Company has been
notified thereof. The payment of the Break-Up Fee shall be compensation and
liquidated damages for the loss suffered by Pan Pacific as a
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result of the failure of the Merger to be consummated and to avoid the
difficulty of determining damages under the circumstances and neither Party
shall have any other liability to the other after the payment of the Break-Up
Fee. The obligation of Company to pay any unpaid portion of the Break-Up Fee
shall terminate on the December 31 following the date which is three years from
the date of this Agreement. Amounts remaining in escrow after the obligation of
the Company to pay the Break-Up Fee terminates shall be released to the Company.
As used in this Section 8.2(e), the "Base Amount" shall mean $7,000,000.
SECTION 8.3 Effect of Termination. In the event of termination of this
Agreement by either the Company or Pan Pacific as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Pan Pacific or the Company or their respective
officers, members or directors except as (i) set forth in Section 8.2, (ii) with
respect to any actual liabilities or damages incurred or suffered by a party as
a result of the willful breach by the other party of any of its representations,
warranties, covenants or other agreements set forth in this Agreement and (iii)
with respect to provisions that survive the termination hereof pursuant to
Section 9.1.
SECTION 8.4 Amendment. This Agreement may be amended by the Parties by
action taken by or on behalf of their respective Boards at any time before or
after any required approval of matters presented in connection with the Merger
by the shareholders of the Company and the stockholders of Pan Pacific;
provided, however, that after any such approval, there shall be made no
amendment that by law requires further approval by such shareholders or
stockholders without the further approval of such shareholders or stockholders.
This Agreement may not be amended except by an instrument in writing signed by
the Parties.
SECTION 8.5 Waiver. At any time prior to the Closing Date, any Party may
(a) extend the time for the performance of any of the obligations or other acts
of the other Parties hereto, (b) waive any inaccuracies in the representations
and warranties of the other Parties contained herein or in any document
delivered pursuant hereto and (c) waive compliance by any other Party with any
of the agreements or conditions contained herein. Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the Party or
Parties to be bound thereby. The failure of any Party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
ARTICLE IX.
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.1, as the case may be, except that (a) the agreements set
forth in Article II and Section 6.18(d), Sections 6.22, 9.6 and 9.7 shall
survive the Effective Time and (b) the agreements set forth in the
Confidentiality Agreement and in Sections 6.19, 8.2 and 8.3, this Section 9.1,
Section 9.6 and Section 9.7 shall survive termination indefinitely.
SECTION 9.2 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex, by registered or certified mail (postage prepaid,
return receipt requested), or by overnight courier, to the respective Parties at
the following addresses (or at such other address for a Party as shall be
specified by like notice):
If to Pan Pacific:
Pan Pacific Retail Properties, Inc.
1631-B South Melrose Drive
Vista, CA 92083
Attention: Joseph B. Tyson
Fax No.: (760) 727-1430
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with an additional copy to:
Latham & Watkins
650 Town Center Drive
Costa Mesa, California 92626
Attention: William J. Cernius, Esq.
Fax No.: (714) 540-1235
If to the Company:
Western Properties Trust
2200 Powell Street, Suite 600
Emeryville, CA 94608
Attention: Dennis Ryan
Fax No.: (510) 547-7841
with a copy to:
O'Melveny & Myers LLP
275 Battery Street, Suite 2600
San Francisco, California
Attention: Peter T. Healy, Esq.
Fax No.: (415) 984-8701
SECTION 9.3 Severability. If any term or other provision of this agreement
is invalid, illegal or incapable of being enforced because of any rule of law or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any Party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the Parties shall negotiate
in good faith to modify this Agreement so as to effect the original intent of
the Parties as closely as possible in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the fullest extent possible.
SECTION 9.4 Entire Agreement; Assignment. This Agreement (including the
Company Disclosure Schedule and the Pan Pacific Disclosure Schedule), together
with the Confidentiality Agreement, constitute the entire agreement among the
Parties with respect to the subject matter hereof and supersede all prior
agreements and undertakings, both written and oral, among the Parties, or any of
them, with respect to the subject matter hereof. This Agreement shall not be
assigned by any Party by operation of law or otherwise without the express
written consent of each of the other Parties.
SECTION 9.5 Parties in Interest; Construction. This Agreement shall be
binding upon and inure solely to the benefit of each Party hereto except that,
in the case of the Company, this Agreement shall be binding upon WPT as its
successor after the Incorporation, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement, except as set forth in Section 6.18(d) or Section 6.22.
SECTION 9.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA WITHOUT
REGARD, TO THE FULLEST EXTENT PERMITTED BY LAW, TO THE CONFLICTS OF LAWS
PROVISIONS THEREOF WHICH MIGHT RESULT IN THE APPLICATION OF THE LAWS OF ANY
OTHER JURISDICTION. EACH OF THE PARTIES SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS OF THE UNITED STATES LOCATED IN THE
COUNTY OF ORANGE, CALIFORNIA WITH RESPECT TO ANY CLAIM OR CAUSE OF ACTION
ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 9.7 No Trial by Jury. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY
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JURY IN CONNECTION WITH ANY LITIGATION ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE CONFIDENTIALITY AGREEMENT, THE MERGER OR ANY OF THE OTHER
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 9.8 Action by Subsidiaries. Whenever this Agreement requires any
Subsidiary of the Company or any Subsidiary of Pan Pacific to take any action,
such requirement shall be deemed to include an undertaking on the part of the
Company or Pan Pacific to cause such Subsidiary to take such action, as the case
may be.
SECTION 9.9 Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 9.10 Specific Performance. Each of the Parties hereto acknowledges
and agrees that the other Parties would be irreparably damaged in the event any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, each of the Parties
agrees that they each shall be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and conditions hereof in any Action instituted in
any court of the United States or any state having competent jurisdiction, in
addition to any other remedy to which such Party may be entitled, at law or in
equity.
SECTION 9.11 Counterparts. This Agreement may be executed in two or more
counterparts, and by the different Parties in separate counterparts, each of
which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
SECTION 9.12 No Liability of Company Shareholders. The shareholders of the
Company shall not be personally liable for any obligations or liabilities under
this Agreement.
[Signature page follows.]
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IN WITNESS WHEREOF, Pan Pacific and the Company have caused this Agreement
to be executed as of the date first written above by their respective officers
thereunto duly authorized.
PAN PACIFIC RETAIL PROPERTIES, INC.
By: /s/ STUART A. TANZ
------------------------------------
Stuart A. Tanz, President and
Chief Executive Officer
WESTERN PROPERTIES TRUST
By: /s/ BARBARA DONHAM
------------------------------------
Barbara Donham,
Vice President Administration and
Secretary
By: /s/ DENNIS RYAN
------------------------------------
Dennis Ryan, Chief Financial
Officer
[Signature Page to the Amended and Restated Agreement and Plan of Merger]
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EXHIBIT A
FORM OF ARTICLES OF INCORPORATION OF WPT
<PAGE> 208
ARTICLES OF INCORPORATION
OF
[WPT], INC.
NAME
One: The name of the corporation is [WPT], Inc.
PURPOSE
Two: The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
AGENT FOR SERVICE
Three: The name of the corporation's initial agent for service of process
is [Latham & Watkins].
AUTHORIZED SHARES
Four: The total number of shares which the corporation is authorized to
issue is twenty-five million (25,000,000) with no par value.
DIRECTOR AND OFFICER LIABILITY
Five: The liability of the directors of the corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
INDEMNIFICATION OF AGENTS
Six: The corporation shall indemnify its directors and officers to the full
extent permitted by Section 317 of the California Corporations Code. The
corporation is further authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through bylaw
provisions, agreements with agents, vote of shareholders or disinterested
directors or otherwise, in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to the applicable
limits set forth in Section 204 of the California Corporations Code with respect
to actions for breach of duty to the corporation and its shareholders.
------------------------------------------------------
Name:
----------------------------------------------
Date:
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Name:
----------------------------------------------
Date:
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CERTIFICATE
The undersigned hereby certify that we are the duly elected and acting
[President/Vice President] and [secretary/assistant secretary], respectively, of
Western Properties Trust (the "Association") and in such capacity we hereby
certify that the incorporation of the Association has been approved by the
trustees and by the required vote of holders of shares of beneficial interest in
accordance with Section 200.5(a) of the California Corporations Code.
IN WITNESS WHEREOF, we have executed this Certificate as and
of the Association as of , 200 .
--------------------------------------
Name:
Title:
--------------------------------------
Name:
Title:
A-A-2
<PAGE> 210
VERIFICATION
I am [President/Vice President] of Western Properties Trust (the
"Association"). I have been authorized by the Association to sign the foregoing
Certificate on behalf of the Association. To the best of my knowledge,
information and belief, the statements contained in such Certificate are true
and on that ground, I certify or declare under penalty of perjury under the laws
of the State of California and the United States that the same are true and
correct.
Executed this day of , 200 , at ,
California.
--------------------------------------
Name:
Title: [President/Vice President]
A-A-3
<PAGE> 211
VERIFICATION
I am [Secretary/Assistant Secretary] of Western Properties Trust (the
"Association"). I have been authorized by the Association to sign the foregoing
Certificate on behalf of the Association. To the best of my knowledge,
information and belief, the statements contained in such Certificate are true
and on that ground, I certify or declare under penalty of perjury under the laws
of the State of California and the United States that the same are true and
correct.
Executed this day of , 200 , at ,
California.
--------------------------------------
Name:
Title: [Secretary/Assistant Secretary]
A-A-4
<PAGE> 212
EXHIBIT B
FORM OF AFFILIATE AGREEMENT
<PAGE> 213
FORM OF AFFILIATE LETTER
Pan Pacific Retail Properties, Inc.
1631-B South Melrose Drive
Vista, California 92083
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of Western Properties Trust, a California real estate
investment trust ("WPT"), as the term "affiliate" is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"). Pursuant to the terms of the
Agreement and Plan of Merger dated as of August 21, 2000 (the "Agreement"),
between Pan Pacific Retail Properties, Inc. ("PPRP") and WPT, WPT will be merged
with and into PPRP (the "Merger").
As a result of the Merger, I may receive common stock, par value $.01 per
share, of PPRP (the "PPRP Common Stock" or "Merger Consideration") in exchange
for common stock, no par value, of WPT, Inc. ("WPT Common Shares").
1. I represent, warrant and covenant to PPRP that in the event I receive
any Merger Consideration as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
Merger Consideration in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of the Merger Consideration
to the extent I felt necessary, with my counsel or counsel of WPT.
C. I have been advised that the issuance of Merger Consideration to
me pursuant to the Merger has been registered with the Commission under the
Act on a Registration Statement on Form S-4. However, I have also been
advised that, since at the time the Merger was submitted for a vote of the
shareholders of WPT, I may be deemed to have been an affiliate of WPT and
any subsequent distribution by me of the Merger Consideration has not been
registered under the Act, I may not sell, transfer or otherwise dispose of
the Merger Consideration issued to me in the Merger unless (i) such sale,
transfer or other disposition has been registered under the Act, (ii) such
sale, transfer or other disposition is made in conformity with Rule 145
promulgated by the Commission under the Act or (iii) in the opinion of
counsel reasonably acceptable to PPRP or a "no action" letter obtained by
the undersigned from the staff of the Commission, such sale, transfer or
other disposition is otherwise exempt from registration under the Act.
D. I understand that PPRP is under no obligation to register the
sale, transfer or other disposition of the Merger Consideration by me or on
my behalf under the Act, or except as expressly set forth in the Agreement,
to take any other action necessary in order to make compliance with an
exemption from such registration available.
E. I also understand that PPRP may give stop transfer instructions to
its transfer agent with respect to PPRP Common Stock to enforce the
restrictions on the undersigned set forth herein and that it reserves the
right to place on the certificates for PPRP Common Stock issued to the
undersigned, or any substitutions therefor, a legend stating in substance:
"The securities represented by this certificate have been issued in
a transaction to which Rule 145 promulgated under the Securities Act of
1933 applies and may be sold or otherwise transferred in compliance with
the requirements of Rule 145 or pursuant to a registration statement
under said Act or an exemption from such registration."
F. I also understand that unless the transfer, by the undersigned, of
PPRP Common Stock of the undersigned has been registered under the Act or
is a sale made in conformity with the provisions
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of Rule 145, PPRP reserves the right to put the following legend on the
certificates issued to transferees of the undersigned:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 and were acquired from a
person who received such shares in a transaction to which Rule 145,
promulgated under the Securities Act of 1933, applies. The securities
have been acquired by the holder not with a view to, or for resale in
connection with, any distribution thereof within the meaning of the
Securities Act of 1933 and may not be sold, pledged or otherwise
transferred except in accordance with an exemption from the registration
requirements of the Securities Act of 1933."
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of WPT as described in the first paragraph of this
letter or as a waiver of any rights I may have to object to any claim that I am
such an affiliate on or after the date of this letter.
2. By PPRP's acceptance of this letter, PPRP hereby agrees with the
undersigned to the extent applicable as follows:
A. For so long as and to the extent necessary to permit the
undersigned to sell PPRP Common Stock pursuant to Rule 145 and, to the
extent applicable, Rule 144 under the Act, PPRP shall (a) use its
reasonable efforts to (i) file, on a timely basis, all reports and data
required to be filed with the Commission by it pursuant to Section 13 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
(ii) furnish to the undersigned upon request a written statement as to
whether PPRP complied with such reporting requirements during the 12 months
preceding any proposed sale of PPRP Common Stock by the undersigned under
Rule 145, and (b) otherwise use its reasonable efforts to permit such sales
pursuant to Rule 145 and Rule 144. PPRP has filed all reports required to
be filed with the Commission under Section 13 of the Exchange Act during
the preceding 12 months.
B. It is understood and agreed that certificates with the legend set
forth in paragraphs E and F of Section 1 above will be substituted by
delivery of certificates without such legend if (i) transfer by the
undersigned of PPRP Common Stock of the undersigned has been registered
under the Act or is a sale made in conformity with the provisions of Rule
145, (ii) one year shall have elapsed from the date the undersigned
acquired PPRP Common Stock, received in the Merger and the provisions of
Rule 145(d)(2) are then available to the undersigned, (iii) two years shall
have elapsed from the date the undersigned acquired PPRP Common Stock
received in the Merger and the provisions of Rule 145(d)(3) are then
applicable to the undersigned, or (iv) PPRP has received either an opinion
of counsel, which opinion and counsel shall be reasonably satisfactory to
it, or a "no-action" or interpretive letter obtained by the undersigned
from the staff of the Commission, to the effect that the restrictions
imposed by Rule 144 and Rule 145 under the Act no longer apply to the
undersigned.
Very truly yours,
--------------------------------------
Name:
Accepted this day of
, 2000 by
PAN PACIFIC RETAIL PROPERTIES, INC.
By:
----------------------------------------------------
Name:
-------------------------------------------------
Title:
--------------------------------------------------
A-B-2
<PAGE> 215
EXHIBIT C
FORM OF REIT OPINION OF LATHAM & WATKINS
<PAGE> 216
, 2000
Western Properties Trust
2200 Powell Street, Suite 600
Emeryville, California 92608
Re: FEDERAL INCOME TAX STATUS OF PAN PACIFIC RETAIL PROPERTIES, INC.
Ladies and Gentlemen:
We have acted as tax counsel to Pan Pacific Retail Properties, Inc., a
Maryland corporation (the "Company"), in connection with that certain Amended
and Restated Agreement and Plan of Merger (the "Merger Agreement") dated as of
August 21, 2000, by and between the Company and Western Properties Trust, a
California unincorporated business association organized as a California trust.
This opinion is provided to you pursuant to Section 7.2(e) of the Merger
Agreement.
This opinion is based on various factual assumptions concerning the
business, assets, governing documents, and operations of the Company and its
subsidiaries, and is conditioned upon certain representations made by the
Company as to these and other factual matters through a certificate of the
Company (the "Officer's Certificate"). With respect to matters of Maryland law,
we have, with your consent, relied upon the opinion of Ballard Spahr Andrews &
Ingersoll, LLP, counsel for the Company, dated [ ], 2000.
In our capacity as tax counsel to the Company, we have made such legal and
factual examinations and inquiries, including an examination of originals or
copies certified or otherwise identified to our satisfaction of such documents,
corporate records and other instruments as we have deemed necessary or
appropriate for purposes of this opinion. For purposes of our opinion, we have
not conducted an independent investigation or audit of the facts set forth in
the foregoing documents or contained in the Officer's Certificate. In our
examination, we have assumed the authenticity of all documents submitted to us
as originals, the genuineness of all signatures thereon, the legal capacity of
natural persons executing such documents and the conformity to authentic
original documents of all documents submitted to us as copies.
We are opining herein only as to the effect of the federal income tax laws
of the United States and we express no opinion with respect to the applicability
or effect of other federal laws, the laws of any state or other jurisdiction or
as to any matters of municipal law or the laws of any other local agencies
within any state.
Based on such facts, assumptions and representations, it is our opinion
that (i) commencing with its taxable year ended December 31, 1997, the Company
was organized in conformity with the requirements for qualification and taxation
as a real estate investment trust (a "REIT") under the Internal Revenue Code of
1986, as amended (the "Code"), and (ii) its method of operation has enabled it
and its proposed method of operation will enable it to continue to meet the
requirements for qualification and taxation as a REIT under the Code.
No opinion is expressed as to any matter not discussed herein.
This opinion is rendered to you as of the date of this letter, and we
undertake no obligation to update this opinion subsequent to the date hereof.
This opinion is based on various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters, all of which are
subject to change either prospectively or retroactively. Also, any variation or
difference in the facts from those set forth in the Officer's Certificate may
affect the conclusions stated herein. Moreover, the Company's qualification and
taxation as a real estate investment trust depends upon the Company's ability to
meet (through actual annual operating results, asset diversification,
distribution levels and diversity of stock ownership) the various qualification
tests imposed under the Code, the results
A-C-1
<PAGE> 217
of which have not been and will not be reviewed by Latham & Watkins.
Accordingly, no assurance can be given that the actual results of the Company's
operation for any one taxable year will satisfy such requirements.
This opinion is rendered only to you, and is solely for your use in
connection with the transactions set forth in the Merger Agreement. This opinion
may not be relied upon by you or your shareholders for any other purpose, or
furnished to, quoted to, or relied upon by any other person, firm or
corporation, for any purpose, without our prior written consent.
Very truly yours,
A-C-2
<PAGE> 218
EXHIBIT D
FORM OF REIT OPINION OF O'MELVENY & MYERS LLP
<PAGE> 219
August , 2000
Pan Pacific Retail Properties, Inc.
1631-B South Melrose Drive
Vista, CA 92083
RE: REIT STATUS OF WESTERN PROPERTIES TRUST
Ladies and Gentlemen:
This opinion is delivered in our capacity as counsel to Western Properties
Trust, a California unincorporated business association organized as a
California trust (the "Company"), in connection with the Amended and Restated
Agreement and Plan of Merger, dated as of August 21, 2000, by and between Pan
Pacific Retail Properties, Inc., a Maryland corporation ("Pan Pacific") and the
Company (the "Agreement"). We are providing this opinion to you pursuant to
Section 7.3(e) of the Agreement. Capitalized terms used, but not otherwise
defined, herein shall have the meanings ascribed to such terms in the Agreement.
In giving the opinions set forth herein, we have examined the following:
(i) the Company's Amended and Restated Declaration of Trust, as amended,
restated and supplemented; (ii) the Agreement of Limited Partnership of
Western/Kienow Partnership L.P., a Delaware limited partnership, dated as of
(the "Western/Kienow Partnership Agreement"); (iii) the Agreement of
Limited Partnership of Western/ Pinecreek L.P., a Delaware limited partnership,
dated as of (the "Western/Pinecreek Partnership Agreement"); (iv)
the Western/Kienow Partnership Amendment; (v) the Western/Pinecreek Partnership
Amendment; (vi) that certain Officer's Certificate (the "Officer's Certificate")
dated August , 2000 from as of the Company; and (vii)
such other documents as we have deemed necessary or appropriate for purposes of
this opinion.
In connection with the opinions rendered below, we have assumed, with your
consent, that:
1. each of the documents referred to above has been duly authorized,
executed, and delivered; is authentic, if an original, or is accurate, if a
copy; and has not been amended except as is set forth above; and
2. during its taxable years ending December 31, 1992, 1993, 1994,
1995, 1996, 1997, 1998, and 1999, and the taxable year of the Company
ending at the Effective Time, the Company has operated in such a manner
that shall make the representations contained in the Officer's Certificate
true for such years.
In connection with the opinions rendered below, we also have relied upon
the correctness of the representations contained in the Officer's Certificate
and we have no reason to believe such reliance is not reasonable. For purposes
of our opinions, we made no independent investigation of the facts contained in
the documents and assumptions set forth above or the representations set forth
in the Officer's Certificate. Consequently, we have relied on the Company's
representations that the information presented in such documents, or otherwise
furnished to us, accurately and completely describes all material facts relevant
to our opinions. No facts have come to our attention, however, that would cause
us to question the accuracy and completeness of such facts or documents in a
material way.
Based on the documents and assumptions set forth above and the
representations set forth in the Officer's Certificate, we are of the opinion
that commencing with its taxable year ended December 31, 1992 (and without
regard to whether such opinion is true or accurate with respect to any taxable
year prior to the taxable year ended December 31, 1992), the Company was
organized in conformity with the requirements for qualification and taxation as
a real estate investment trust ("REIT") under the Code, and its method of
operation has enabled it to meet, through the Effective Time, the requirements
for qualification and taxation as a REIT under the Code.
A-D-1
<PAGE> 220
The foregoing opinions are based on current provisions of the Code and the
Treasury regulations thereunder (the "Regulations"), published administrative
interpretations thereof, and published court decisions. The IRS has not issued
Regulations or administrative interpretations with respect to various provisions
of the Code relating to REIT qualification.
The foregoing opinions are limited to the U.S. federal income tax matters
addressed herein, and no other opinions are rendered with respect to other
federal tax matters or to any issues arising under the tax laws of any other
country, or any state or locality. We undertake no obligation to update the
opinions expressed herein after the date of this letter. This opinion letter is
solely for the information and use of the addressee and its counsel, and it may
not be distributed, relied upon for any purpose by any other person, quoted in
whole or in part or otherwise reproduced in any document, or filed with any
governmental agency without our express written consent.
Respectfully submitted,
A-D-2
<PAGE> 221
EXHIBIT E
DEVELOPMENT SERVICES/JOINT VENTURE TERM SHEET
<PAGE> 222
CONFIDENTIAL MEMORANDUM
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
To: B. Blake
Fm: S. Tanz
CC: J. Tyson
Date: August 18, 2000
RE: PROJECT COPPERTONE -- DEVELOPMENT PROJECTS DESCRIPTION AND
TERM SHEET
</TABLE>
--------------------------------------------------------------------------------
Below is the revised summary of each development Project and the proposed
development arrangement. This term sheet and joint venture outline shall serve
as the basis for the formal development and management agreements between NewCo
and DevelopCo and shall be attached as an exhibit to the Merger Agreement.
--------------------------------------------------------------------------------
PLAZA ESCUELA, WALNUT CREEK
Description $42.0 million, 156,000 square foot retail project
located on a substantial portion of one city block in
downtown Walnut Creek. The site is situated in the
heart of Walnut Creek's "pedestrian retail grid" with
numerous high-end retail stores and restaurants, and is
one block west of Broadway Plaza, a 700,000 square foot
open-air mall (owned by Macerich) anchored by
Nordstrom's and Macy's. The project is across the
street from Olympic Place (see below).
Plaza Escuela will be anchored by a 40,000 square foot
Andronico's Market (high-end regional grocery chain), a
24,000 square foot Container Store, as well as,
potentially three other anchor tenants totaling 70 to
75,000 square feet (two stories) and 15 to 20,000
square feet of mid-block shop space. Two, four-story
parking garages (one on each block) will be built on
the interior portion of each block (total of 645
stalls).
Status Construction started in March 2000 and is progressing
on schedule with a targeted completion date of July
2001 with store openings in August. In terms of
leasing, Andronico's and Container's leases were
executed in 2Q'00, as well as a lease with AAA (11,000
sq. ft.); hence, preleasing currently stands at 48%.
Coppertone is in lease negotiations with Prudential
Insurance (7,000 sq. ft.). Together, AAA and Prudential
are expected to lease 100% of the second floor,
two-story retail/office building which is at the
secondary location/corner of the site. Coppertone is
also in lease negotiations with Men's Warehouse (5,600
sq. ft.) and they are in discussions with numerous
other retailers (e.g., Tower Records, Starbucks, Baja
Grill, Designer Shoes, etc.).
As of 6/30, Coppertone had funded a total of $11.8
million. Coppertone expects between 6/30 and year-end
(i.e., when merger closes) approximately $16.2 million
of additional costs will be funded bringing the total
funded through year-end to $28.0 million. The remaining
costs of $14.0 million will be funded during the first
six months of 2001. While Coppertone's maximum
commitment is $42 million, Coppertone has had
discussions with the borrower regarding increasing the
maximum loan amount to $44 million based on the
finalized budget.
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<PAGE> 223
Existing Ownership Coppertone is acting as the lender and the developer of
the property for a third-party owner (private family).
Coppertone is funding 100% of the construction costs as
a first mortgage loan ($42 million). The construction
draw request process, lender approvals, etc., is
consistent with conventional construction lending.
The loan requires monthly, interest-only payments based
on 9.0% rate on the first $26.5 million funded and
10.5% on the remaining $15.5 million. Currently the
interest accruing is being capitalized and is
incorporated into the $42 million construction budget.
The loan matures seven years from the date the
certificate of occupancy is issued (presumably around
7/01; hence maturity in 7/08). In addition to the
interest on the loan, Coppertone will receive 25% of
excess cash flow for seven years (the "Plaza
Participation"). The borrower can prepay the loan at
anytime (no penalty) but Coppertone will still receive
the Plaza Participation for the remainder of the seven
years (if the borrower is prepaying the loan in
connection with a sale of the property, the Plaza
Participation is paid at prepayment based on a present
value calculation -- see below).
In addition to the loan arrangement, Coppertone is
providing development, leasing, and property management
services pursuant to a separate agreement with the
owner and receives the following fees: (i) development
fee of $450,000 plus a $250,000 entitlement fee; (ii)
leasing fees (split with 3rd party brokers) of $2.00
per sq. ft. for leases over 50,000 sq. ft., $3.00 per
sq. ft. for leases over 20,000 sq. ft. but less than
50,000 sq. ft., and $5.00 per sq. ft. for leases under
20,000 sq. ft. (no minimum lease term provision); and
(iii) a management fee equal to 3% of total revenues.
Coppertone has already accrued the entitlement fee, a
key money fee for Andronico and has been accruing the
development fee during 2000 and expects by Merger
closing that it will have accrued, as a receivable on
its balance sheet, the majority of the development fee,
with only about $56,000 still to be paid/accrued in
2001. Leasing fees are paid to Coppertone (50% paid on
execution, 50% on occupancy). Property management fees
will be paid monthly.
Proposed Structure Upon Merger closing: (i) NewCo will assume Coppertone's
position as lender; (ii) NewCo will assign Coppertone's
existing development, leasing and management agreement
(the "Existing Agreement") to DevelopCo; and (iii)
NewCo will enter into a new agreement with DevelopCo as
outlined below:
The Plaza Participation will be distributed to NewCo
and DevelopCo in the following priority: (i) first,
100% to NewCo until NewCo has received a 10% rate of
return on capital advanced under the loan; and (ii)
second, 50% to NewCo and 50% to DevelopCo thereafter.
Upon Plaza Escuela reaching stabilization (the project
at or above 90% occupancy, including Andronico's and
Container Store or their successors), DevelopCo will
have the on-going right to put its 50% interest in the
Plaza Participation, for cash, to NewCo and NewCo will
have an on-going right to call, for cash, DevelopCo's
interest in the Plaza Participation. The value of
DevelopCo's interest will be based upon a similar
present value calculation as stipulated in the existing
loan agreement (the greater of: (i) 12 months trailing
cash flow; (ii) latest quarter annualized; or (iii) 95%
of pro forma stabilized NOI, discounted back at the 10
year treasury plus 200 bps).
A-E-2
<PAGE> 224
Upon the consummation of the put/call, DevelopCo will
have the right to continue to lease and manage the
property for three years.
As part of the NewCo assigning the Existing Agreement
to DevelopCo, all fees that are accrued up until Merger
closing (i.e., entitlement, development and leasing
fees) will remain with NewCo. Following Merger closing,
DevelopCo will be entitled to all unaccrued fees earned
pursuant to the Existing Agreement.
--------------------------------------------------------------------------------
OLYMPIC PLACE, WALNUT CREEK
Description $34.7 million, 146,000 square foot retail/entertainment
project located on an entire city block in downtown
Walnut Creek immediately across the street from Plaza
Escuela (to the south) and Broadway Plaza (to the
east). Olympic Place will be anchored by a two-story
60,000 sq. ft., 12 - 14 screen Century Theaters. The
project will feature one additional 10,000 - 20,000 sq.
ft. ground floor anchor tenant with two 8,000 sq. ft.
second-story units above. The remaining square footage
will be shop and restaurant space with continuous
perimeter street frontage wrapping the city block. A
600-stall, 3 - 4 level structured parking garage will
be constructed on the interior of the city block site
extending over the street-frontage retail on the upper
levels. In addition, there is an existing 27,000 square
foot office building on the southwest corner of the
site.
Status Coppertone acquired the primary land parcel in 11/99
($8.4 million) and the corner parcel for $1,100,000 in
May 2000. Coppertone currently has in escrow one parcel
the "motel parcel" ($1.65 million) with a scheduled
closing in August or September 2000. In early June,
Coppertone commenced with the city's design review
commission hearing/approval process and they expect to
receive final approval by the end of September (no major
issues identified to date). Once approval is obtained,
Coppertone will immediately commence construction
(fourth quarter 2000) with a targeted completion date of
first quarter 2002.
In terms of leasing, Coppertone has a signed ground
lease with Century whereby Century will pay $1.2 million
in annual ground rent and will be responsible for paying
for the construction of their theater (i.e., the $37.4
million costs does not include the cost to build
theater). In addition, Coppertone is in various stages
of discussion with a variety of potential tenants as the
second anchor such as Cost Plus (draft LOI), Old Navy,
Best Buy, Elm Street, Babies R Us, and Staples, as well
as other potential shop space tenants and restaurants.
Coppertone expects substantial pre-leasing activity
during the next 60 to 90 days prior to commencing
construction.
As of 6/30, Coppertone had funded a total of $9.4
million (land and soft costs). Assuming construction
commences in the fourth quarter, Coppertone expects
between 6/30 and year-end (i.e., when merger closes)
approximately $3.8 million of additional costs will be
funded bringing the total funded through year-end to
$12.8 million. The remaining costs of $24.6 million will
be funded during 2001.
A-E-3
<PAGE> 225
Existing Ownership Coppertone currently owns 100% of the project (fee
simple) and has funded costs to date through cash flow
from operations and borrowings under their line of
credit. No debt encumbers the property.
Proposed Development
Arrangement Upon closing of the Merger, a new joint venture
("Olympic JV") will be formed between NewCo and
DevelopCo.
Olympic JV A to-be-formed Delaware limited liability company whose
managing members will be NewCo and DevelopCo with each
party's ownership interests equal to their total equity
capital contributions (proforma estimates are 92.5%
NewCo, 7.5% DevelopCo -- see below).
Capitalization For capital allocation and distributions purposes, the
total projected costs of $37.4 million will be assumed
to be capitalized as 50% equity and 50% debt. Upon
formation, the actual costs funded to date (expected to
be $12.8 million) will be allocated as follows: (i)
approximately $1.4 million as equity capital contributed
by DevelopCo (i.e., the cash and other "out of pocket"
component of Coppertone's CEO and possibly other senior
executives and a senior development manager's severance
will be allocated in lieu of a cash payment at Merger
closing) and (ii) $12.6 million as equity capital
contributed by NewCo (collectively the "Olympic
Equity"). Additional funding will be provided by NewCo
and allocated as follows: (1) the first $5.9 million of
additional fundings (added to the $12.8 million will
equal $18.7 million or 50% of total costs) will be
allocated as Olympic Equity contributed by NewCo and (2)
the remaining $18.7 million to be funded will be
allocated as debt capital ("Olympic Debt") provided by
NewCo.
Distributions Olympic JV will distribute, on a quarterly basis, all
cash flow, net of any required reserves, as follows:
First, 100% to NewCo until NewCo has received a rate of
return on Olympic Debt (only if provided by NewCo or
guaranteed by) based on 30-day LIBOR, adjusted monthly,
plus 300 basis points;
Second, 100% to NewCo until the Olympic Debt has been
repaid in full (only if provided by NewCo or guaranteed
by);
Third, to NewCo and DevelopCo, pro rata, until each has
received a 12% rate of return on their respective
Olympic Equity;
Fourth, to NewCo and DevelopCo, pro rata, until their
respective Olympic Equity has been repaid in full; and
Fifth, 50% to NewCo and 50% to DevelopCo prorata
thereafter.
3rd Party Debt Notwithstanding the expectation that NewCo will provide
the Olympic Debt, Olympic JV will pursue conventional,
non-recourse construction and/or permanent debt
financing from third-party, institutional lenders
secured by a first mortgage on the project. To the
extent such financing is obtained on terms more
favorable than the Olympic Debt (i.e., amount, rate,
etc.) it will be utilized in lieu of NewCo providing the
Olympic Debt.
Development Fee DevelopCo will be responsible for completing the
development of the project (e.g., entitlement, project
design and construction management) and
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<PAGE> 226
Olympic JV will pay DevelopCo, as funds are drawn, a
market development fee equal to 4% of hard costs
(excluding land). To the extent any hard costs are
expanded prior to Merger Closing, the applicable
development fee will go to DevelopCo on a catch up
basis. After Merger Closing all such future fees will go
to DevelopCo.
Leasing Fees DevelopCo will be responsible for all leasing of the
project and Olympic JV will pay DevelopCo, 50% upon
execution of each lease and 50% upon occupancy, market
leasing fees (in addition to paying customary, market
fees to third-party leasing brokers) equal to $3.00 per
square foot on all leases with an initial lease term
equal to or greater than three years, except for any
leases signed prior to the merger agreement date will be
paid at the rate of $1.50 per square at joint venture
formation. Leasing fees on leases with an initial term
of less than three years will be based on $1.00 per
square foot for each lease year.
Property Management Fee Upon Olympic Place being put in service, DevelopCo will
provide property management services and Olympic JV will
pay, monthly in arrears, DevelopCo a market property
management fee equal to 3% of total revenue except as
described below.
Put/Call Right Upon Olympic Place reaching stabilization (Century in
occupancy and the rest of the project at or above 90%
occupancy), DevelopCo will have the on-going right to
put their ownership interests, for cash, to NewCo and
NewCo will have an on-going right to call, for cash,
DevelopCo's ownership interests. The value of
DevelopCo's interest will based upon the then fair
market value of the project, as determined through a
third-party appraisal, less 3% for sale transaction
costs, and giving effect to the priority Distributions.
Upon the consummation of the put/call, NewCo will assume
all leasing and property management responsibilities of
the project. Neither party will have the right to sell
their interests to a third-party, without consent of the
other party.
Approval Rights NewCo will have approval rights over all major decisions
for the project (e.g., construction budget, financial
projections, project/design changes, all fundings/draw
requests, leases greater than 3,000 square feet, tenant
improvements*, leasing commissions*, capital
expenditures*, financings, sale of the project).
* not in the approved cost pro forma budget
--------------------------------------------------------------------------------
ON BROADWAY, REDWOOD CITY
Description $35.8 million, two-story, 160,000 sq. ft. urban in-fill
retail/entertainment center located on an entire city
block in downtown Redwood City. The site is directly
adjacent to Regency Realty's 103,000 sq. ft.
grocery-anchored shopping center (Sequoia Station).
The On Broadway project is expected to be anchored by an
80,000 sq. ft., 20-screen movie theater with the box
office and lobby located on the ground floor and all of
the concession areas and auditoriums located on the
second floor above approximately 70,000 sq. ft. of
street frontage, high-end retail and restaurants
wrapping around the city block. Parking for the project
will be across the street in a city funded, 900-stall
five-story parking garage.
A-E-5
<PAGE> 227
In addition to the retail site, there is a potential
85,000 - 150,000 square foot office building that may be
located on a portion of the parking lot site. The office
building developer will pay for additional parking to
meet code for the office building.
Status In 1999, Coppertone and its development partner (see
below) were awarded the right to develop the center and
possibly the potential office building site from the
city and subsequently executed an "exclusive right to
negotiate" with the city. For the past year Coppertone
has been engaged in the entitlement process with the
city, while the city was finalizing the EIR with funding
from Coppertone (completed in July 2000). Coppertone
expects the city to complete the EIR study and public
review process by September/October at which time the
city and Coppertone will negotiate a development
agreement setting forth Coppertone's right to the
developments and the city's obligations to pay for the
garage and to assist in assembling the land parcels that
make up the sites (i.e., through condemnation if
necessary). Coppertone expects to be in a position to
commence construction in early 2001 (although none of
the land parcels have been acquired to date) with a
completion in mid-2002.
In terms of leasing, Coppertone is in early draft lease
negotiations with Century Theaters and is in discussions
with numerous other national and regional retailers
(e.g., Barnes & Noble, Pier 1 Imports, Cost Plus, Elm
Street).
As of 6/30, Coppertone had funded a total of $600,000
(including the development fee to JV partner -- see
below). Coppertone believes there is a good chance that
they will execute the development agreement in the
fourth quarter and simultaneously be underway with the
land acquisition process. If this all happens,
Coppertone could fund another $14 to $15 million by
year-end (land acquisition cost and soft cost).
Existing JV Coppertone is pursuing the project through a 50/50 joint
venture (the "Redwood JV") with a local developer,
Innisfree whose president and owner is David Irmer (he
developed Sequoia Station). Coppertone is the managing
member and controlling entity with absolute approval
rights over all major decisions. Coppertone will provide
100% of the capital and will receive a 10% preferred
return on invested capital and will share 50/50 with
Irmer (or a new entity formed by Innisfree and
DevelopCo), after Coppertone receives its preferred
return. The 50/50 sharing arrangement from the retail
project must provide Irmer with a minimum of $3.8
million (based upon a 12% unleveraged return on cost for
the retail project and a 9.75% exit cap rate) or the
shortfall must be made up through the office
development, which is the likely scenario.
As per the Redwood JV, Coppertone will provide
development services, leasing and property management
while Irmer is responsible for the entitlement process
and land assemblage. Irmer is expected to earn $440,000
in development fees (over a 22-month period) and
Coppertone about $200,000 in development fees and minor
leasing fees. Coppertone has the right to buyout Irmer
interests at a predetermined price (9.75% cap rate) and
Irmer has the right to convert his equity into
Coppertone stock based on a FFO multiple (equates to
around $17 a share).
Proposed Structure Upon Merger closing, NewCo will assume Coppertone's
position as 50% controlling partner and capital provider
in the Redwood JV. The Redwood
A-E-6
<PAGE> 228
JV will be restructured to: (i) include DevelopCo
whereby they would assume Coppertone's development,
leasing and management responsibilities and DevelopCo
will be entitled to the $200,000 of expected development
fees, as well as additional leasing and management fees
for such services; (ii) assign the development rights of
the potential office site to DevelopCo and Irmer; and
(iii) establish a new put/call as described below.
Put/Call Right As part of the Redwood JV restructuring the existing
put/call between Coppertone and Irmer would be amended
such that upon the project reaching stabilization
(theater in occupancy and the rest of the project at or
above 90% occupancy), Irmer will have the on-going right
to put his ownership interests, for cash, to NewCo and
NewCo will have an on-going right to call, for cash,
Irmer's ownership interests. The value of Irmer's
interest will based upon the Redwood JV (i.e., 9.75%
exit cap rate).
Upon the consummation of the put/call, DevelopCo will
have the right to continue to lease and manage the
property for three years; provided however, if NewCo
sells its 50% interest in the Plaza Participation,
DevelopCo's right to continue lease and manage the
property terminates.
Neither party will have the right to sell their
interests to a third-party, without consent of the other
party.
--------------------------------------------------------------------------------
BAY MEADOWS, SAN MATEO
Description A 305,000 sq. ft. retail and office mixed-use project
located in the city of San Mateo as part of a 75-acre
mixed-use development. The project is owned by Paine
Webber and is being jointly developed on a fee
management basis by Spieker Properties (office
component) and Coppertone (retail component). Coppertone
will not have any ownership interests, it is simply
acting as the retail fee developer.
Status The project is currently in the entitlement process.
During the 2Q'00, Spieker executed its development
agreement with Paine Webber for the overall project.
Coppertone expects to enter into a consulting agreement
with Spieker whereby Coppertone will provide
development, leasing and property management services
for the retail component. Coppertone expects to generate
$200,000 in various fees by the year-end 2000 with
additional $305,000 in fees during 2001 and $318,000 in
fees during 2002.
Proposed Arrangement Upon Merger closing, NewCo will assign Coppertone's
consulting agreement to DevelopCo and NewCo will have no
involvement in the project going forward. All
development and leasing fees earned and accrued by
Coppertone prior to Merger Closing will go to NewCo. All
fees thereafter will go to DevelopCo.
--------------------------------------------------------------------------------
Exclusivity Pursuant to a mutually acceptable, three-year
exclusivity agreement, NewCo and DevelopCo will agree to
a reciprocal right-of-first refusal on any future
grocery store anchored retail development projects, such
that each party will have a 30-day review period to
either accept or decline to pursue the proposed project
in a mutually acceptable joint venture structure
(similar to Olympic JV, except there will be a 10%
preferred return to NewCo). If the party declines to
pursue the proposed project, the other party will have
the right to pursue such project separately.
A-E-7
<PAGE> 229
ANNEX B
August 21, 2000
The Board of Directors
Pan Pacific Retail Properties, Inc.
1631-B South Melrose Drive
Vista, California 92083
Members of the Board:
We understand Pan Pacific Retail Properties, Inc., a Maryland Corporation
("Pan Pacific," or the "Company") and Western Properties Trust, a California
real estate investment trust, ("Western") propose to enter into an Agreement and
Plan of Merger (the "Agreement"). Pursuant to the Agreement, Western shall be
merged with and into Pan Pacific (the "Merger"). At the effective time of the
Merger, each outstanding share of beneficial interest, no par value, of Western
(a "Western Common Share") will be converted into the right to receive 0.62
shares of common stock, par value $.01 per share, of Pan Pacific (a "Pan Pacific
Common Share") (the "Exchange Ratio").
You have requested our opinion as to the fairness from a financial point of
view of the Exchange Ratio to the Company. In conducting our analysis and
arriving at the opinion expressed herein, we have reviewed such materials and
considered such financial and other factors as we deemed relevant under the
circumstances, including:
(i) the Agreement dated August 21, 2000;
(ii) certain publicly-available historical financial and operating
data of the Company including, but not limited to, (a) the Annual Report to
Shareholders and Annual Report on Form 10-K of the Company for the three
fiscal years ended December 31, 1999, 1998 and 1997, and (b) the Quarterly
Reports on Form 10-Q for the quarters ended March 31, and June 30, 2000;
(iii) certain publicly-available historical financial and operating
data for Western including, but not limited to, (a) the Annual Report on
Form 10-K for the three fiscal years ended December 31, 1999, 1998 and
1997, (b) the Quarterly Reports on Form 10-Q for the quarters ended March
31 and June 30, 2000, and (c) the Proxy Statement for the Annual Meeting of
Shareholders held on May 11, 2000;
(iv) certain information relating to Western, including financial
forecasts for the fiscal years ending December 31, 2000 through December
31, 2004 prepared by management of Western;
(v) the development services/joint venture term sheet regarding the
proposed development agreement between the Company and certain members of
Western management, attached as an exhibit to the Agreement;
(vi) publicly available financial, operating and stock market data
concerning certain companies engaged in businesses we deemed comparable to
the Company and Western, respectively, or otherwise relevant to our
inquiry;
(vii) the financial terms of certain recent comparable transactions we
deemed relevant to our inquiry;
(viii) the historical stock prices and trading volumes of the Pan
Pacific common stock and Western common stock; and
(ix) such other financial studies, analyses and investigations as we
deemed appropriate.
We have assumed, with your consent, that the merger will be effected in
accordance with the terms set forth in the Agreement dated August 21, 2000.
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<PAGE> 230
We have met with the senior management of the Company and Western to
discuss (i) the prospects for their respective businesses, (ii) their estimates
of such businesses' future financial performance, (iii) the financial impact of
the Merger on the respective companies, and (iv) such other matters as we deemed
relevant.
In connection with our review and analysis and in arriving at our opinion,
we have relied upon the accuracy and completeness of the financial and other
information provided to us by the Company and Western and have not undertaken
any independent verification of such information or any independent valuation or
appraisal of any of the assets or liabilities of the Company or Western. With
respect to certain financial forecasts provided to us by the management of
Western, we have assumed such information (and the assumptions and basis
therefor) represents the best currently available estimates and judgments of
Western's management as to the future financial performance of Western. Our
opinion is predicated on the Merger qualifying as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986.
Further, our opinion is necessarily based on economic, financial, and market
conditions as they exist and can only be evaluated as of the date hereof.
Our opinion does not address nor should it be construed to address the
relative merits of the Merger and alternative business strategies. In addition,
this opinion does not in any manner address the prices at which the shares of
Pan Pacific will actually trade following consummation of the Merger.
As you know, we have been retained by the Company to render this opinion in
connection with the Merger and will receive a fee for such services. In addition
to having underwritten Pan Pacific's common stock offerings, in the ordinary
course of business we may actively trade the shares of Pan Pacific common stock
and Western common stock for our own account and for the accounts of customers
and we may, therefore, at any time hold a long or short position in such
securities.
This letter and the opinion expressed herein are for the use of the Board
of Directors of the Company. This opinion does not constitute a recommendation
to the shareholders of the Company as to how such shareholders should vote or as
to any other action such shareholders should take regarding the Merger or any
other action such holders should take regarding these transactions. This opinion
may not be reproduced, summarized, excerpted from or otherwise publicly referred
to or disclosed in any manner, without our prior written consent, except that
the Company may include this opinion in its entirety in any proxy statement or
information statement relating to the Merger sent to the Company's shareholders.
Based upon and subject to the foregoing, we are of the opinion, as of the
date hereof, that the Exchange Ratio is fair to the Company from a financial
point of view.
Very truly yours,
PRUDENTIAL SECURITIES INCORPORATED
B-2
<PAGE> 231
ANNEX C
August 21, 2000
Board of Trustees
Western Properties Trust
2200 Powell Street, Suite 600
Emeryville, CA 94608
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to Western Properties Trust (the "Company") and the holders of outstanding
shares of beneficial interest, $0.01 par value, of the Company ("Company Common
Stock") of the Exchange Ratio (as defined below) pursuant to the Agreement and
Plan of Merger dated as of August 21, 2000 (the "Agreement"), by and between Pan
Pacific Retail Properties, Inc. ("Pan Pacific" or the "Acquirer") and the
Company pursuant to which the Company will be merged (the "Merger") with and
into Pan Pacific.
Pursuant to the Agreement, each share of beneficial interest of the Company
Common Stock will be converted, subject to certain exceptions, into the right to
receive 0.62 share (the "Exchange Ratio") of common stock at $0.01 par value per
share of Pan Pacific ("Acquirer Common Stock").
In arriving at our opinion, we have reviewed the draft dated August 21,
2000 of the Agreement and the exhibits thereto and the letter of intent, dated
August 18, 2000, regarding the development joint venture. We also have reviewed
financial and other information that was publicly available or furnished to us
by the Company and the Acquirer including information provided during
discussions with their respective management teams. Included in the information
provided during discussions with the Company and the Acquirer were certain
financial projections of the Company for the period beginning January 1, 2000
and ending December 31, 2004 prepared by the management of the Company and
certain financial projections of the Acquirer for the period beginning January
1, 2000 and ending December 31, 2002 prepared by management of the Acquirer. In
addition, we have compared certain financial and securities data of the Company
and the Acquirer with various other companies whose securities are traded in
public markets that we deemed comparable, reviewed the historical stock prices
and trading volumes of Company Common Stock and Acquirer Common Stock, reviewed
prices in certain other business combinations that we deemed comparable and
conducted such other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company, the Acquirer and
the Acquirer's respective representatives, or that was otherwise reviewed by us.
With respect to the financial projections supplied to us, we have relied on
representations that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the management of the
Company and Acquirer as to the future operating and financial performance of the
Company and Acquirer, respectively. We have not assumed any responsibility for
making an independent evaluation any assets or liabilities or for making any
independent verification of any of the information reviewed by us.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect the conclusion reached in this opinion, we do not have
any obligation to update, revise or reaffirm this opinion. We are expressing no
opinion herein as to the prices at which Acquirer Common Stock will actually
trade at any time. Our opinion does not address the relative merits of the
Merger and the other business strategies being considered by the Company's Board
of Directors, nor does it address the Board's decision to proceed with the
Merger. Our opinion does not
C-1
<PAGE> 232
constitute a recommendation to any stockholder as to how such stockholder should
vote on the proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the Exchange Ratio is fair to the Company and holders of
Company Common Stock from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ ROBERT BRODY
------------------------------------
Robert Brody
Managing Director
C-2
<PAGE> 233
ANNEX D
DISSENTERS' RIGHTS UNDER
THE CALIFORNIA CORPORATIONS CODE
Set forth below is an excerpt from the California Corporations Code
regarding dissenter's rights:
CALIFORNIA GENERAL CORPORATION LAW
CORPORATIONS CODE
TITLE 1. CORPORATIONS
DIVISION 1. GENERAL CORPORATION LAW
CHAPTER 13. DISSENTERS' RIGHTS
1300. Reorganization of short-form merger; dissenting shares; corporate purchase
at fair market value; definitions
(a) If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and (b) or
subdivision (e) or (f) of Section 1201, each shareholder of the corporation
entitled to vote on the transaction and each shareholder of a subsidiary
corporation in a short-form merger may, by complying with this chapter, require
the corporation in which the shareholder holds shares to purchase for cash at
their fair market value the shares owned by the shareholder which are dissenting
shares as defined in subdivision (b). The fair market value shall be determined
as of the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or depreciation
in consequence of the proposed action, but adjusted for any stock split, reverse
stock split or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either (A) listed on any national securities exchange
certified by the Commissioner of Corporations under subdivision (o) of
Section 25100 or (B) listed on the National Market System of the NASDAQ
Stock Market, and the notice of meeting of shareholders to act upon the
reorganization summarizes this section and Sections 1301, 1302, 1303 and
1304; provided, however, that this provision does not apply to any shares
with respect to which there exists any restriction on transfer imposed by
the corporation or by any law or regulation; and provided, further, that
this provision does not apply to any class of shares described in
subparagraph (A) or (B) if demands for payment are filed with respect to 5
percent or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted
in favor of the reorganization or, (B) if described in subparagraph (A) or
(B) of paragraph (1) (without regard to the provisos in that paragraph),
were voted against the reorganization, or which were held of record on the
effective date of a short-form merger; provided, however, that subparagraph
(A) rather than subparagraph (B) of this paragraph applies in any case
where the approval required by Section 1201 is sought by written consent
rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of record.
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1301. Notice to holders of dissenting shares in reorganizations; demand for
purchase; time; contents
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise the shareholder's right under such sections.
The statement of price constitutes an offer by the corporation to purchase at
the price stated any dissenting shares as defined in subdivision (b) of Section
1300, unless they lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the corporation
purchase and shall contain a statement of what such shareholder claims to be the
fair market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
1302. Submission of share certificates for endorsement; uncertificated
securities
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
1303. Payment of agreed price with interest; agreement fixing fair market value;
filing; time of payment
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions
to the reorganization are satisfied, whichever is later, and in the case of
certificated securities, subject to surrender of the certificates therefor,
unless provided otherwise by agreement.
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<PAGE> 235
1304.Action to determine whether shares are dissenting shares or fair market
value; limitation; joinder; consolidation; determination of issues;
appointment of appraisers
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of the
shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the proper county
praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If
the status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
1305. Report of appraisers; confirmation; determination by court; judgment;
payment; appeal; costs
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed by
the court, the appraisers, or a majority of them, shall make and file a report
in the office of the clerk of the court. Thereupon, on the motion of any party,
the report shall be submitted to the court and considered on such evidence as
the court considers relevant. If the court finds the report reasonable, the
court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a
report within 10 days from the date of their appointment or within such further
time as may be allowed by the court or the report is not confirmed by the court,
the court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which any
dissenting shareholder who is a party, or who has intervened, is entitled to
require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
1306. Prevention of immediate payment; status as creditors; interest
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
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1307. Dividends on dissenting shares
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
1308. Rights of dissenting shareholders pending valuation; withdrawal of demand
for payment
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A dissenting
shareholder may not withdraw a demand for payment unless the corporation
consents thereto.
1309. Termination of dissenting share and shareholder status
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to require
the corporation to purchase their shares upon the happening of any of the
following:
(a) The corporation abandons the reorganization. Upon abandonment of
the reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter
all necessary expenses incurred in such proceedings and reasonable
attorneys' fees.
(b) The shares are transferred prior to their submission for
endorsement in accordance with Section 1302 or are surrendered for
conversion into shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon
the status of the shares as dissenting shares or upon the purchase price of
the shares, and neither files a complaint or intervenes in a pending action
as provided in Section 1304, within six months after the date on which
notice of the approval by the outstanding shares or notice pursuant to
subdivision (i) of Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
1310. Suspension of right to compensation or valuation proceedings; litigation
of shareholders' approval
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings under
Sections 1304 and 1305 shall be suspended until final determination of such
litigation.
1311. Exempt shares
This chapter, except Section 1312, does not apply to classes of shares
whose terms and provisions specifically set forth the amount to be paid in
respect to such shares in the event of a reorganization or merger.
1312. Right of dissenting shareholder to attack, set aside or rescind merger or
reorganization; restraining order or injunction; conditions
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a
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<PAGE> 237
reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days'
prior notice to the corporation and upon a determination by the court that
clearly no other remedy will adequately protect the complaining shareholder or
the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
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PAN PACIFIC RETAIL PROPERTIES, INC.
PROXY
SPECIAL MEETING OF STOCKHOLDERS -- NOVEMBER 9, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, as a holder of Common Stock of Pan Pacific Retail
Properties, Inc. ("Pan Pacific"), hereby appoints Mr. Stuart A. Tanz and Dr.
Mark J. Riedy or either of them, as proxies, each with full power of
substitution, to represent and to vote as designated on this card all of the
shares of Common Stock of Pan Pacific which the undersigned is entitled to vote
at the Special Meeting of Stockholders to be held on November 9, 2000 at 10:00
A.M., or any adjournment or postponement thereof, and to otherwise represent the
undersigned at the meeting with all powers possessed by the undersigned as if
personally present at such meeting. The undersigned hereby acknowledges receipt
of the Notice of Special Meeting of Stockholders and of the accompanying Proxy
Statement and revokes any proxy heretofore given with respect to such meeting.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned. If no direction is made, this Proxy will be voted FOR
proposals 1 and 2. If any other business is presented at the Special Meeting of
Stockholders, the Proxy will be voted in accordance with the discretion of the
proxies named above.
1. To approve the merger of WPT, Inc., a California corporation (which will be
the successor of Western Properties Trust, a California real estate
investment trust, as a result of the incorporation of Western Properties
Trust immediately before the merger) with and into Pan Pacific, including
the issuance of shares of Pan Pacific common stock in connection with the
merger, substantially in accordance with the Amended and Restated Agreement
and Plan of Merger, dated as of August 21, 2000, between Pan Pacific and
Western Properties Trust.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To approve an amendment to the 2000 Stock Incentive Plan of Pan Pacific
Retail Properties, Inc. which would increase the number of shares of Pan
Pacific common stock reserved for issuance under the Plan from 489,971 to
1,786,695.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies named herein are authorized to vote upon
any other matter that may properly come before the Special Meeting of
Stockholders or any adjournment or postponement thereof.
The Board of Directors recommends a vote "FOR" the merger proposal and the
proposal to amend the 2000 Stock Incentive Plan of Pan Pacific Retail
Properties, Inc.
IMPORTANT: PLEASE DATE AND SIGN THE PROXY ON REVERSE SIDE
------------------------
ACCOUNT NUMBER
<PAGE> 239
Please mark, date and sign as
your name appears hereon. If
acting as executor,
administrator, trustee,
guardian, etc., you should so
indicate when signing. If the
signer is a corporation, please
sign the full corporate name,
by a duly authorized officer
and indicate the title of such
officer. If shares are held
jointly, each stockholder named
should sign. If you receive
more than one proxy card,
please date and sign each card
and return all proxy cards in
the enclosed envelope.
Dated: ________________, 2000
-------------------------------
Signature
-------------------------------
Signature
PLEASE DATE, SIGN AND MAIL THIS
PROXY IN THE ENCLOSED ENVELOPE.
<PAGE> 240
PROXY
WESTERN PROPERTIES TRUST
PROXY SOLICITED BY THE BOARD OF TRUSTEES
FOR A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 9, 2000
The undersigned hereby appoints Reginald B. Oliver, James L. Stell, Dennis
D. Ryan, Bradley N. Blake, L. Michael Foley and Joseph P. Colmery as proxies,
each with the power to appoint his substitute, and hereby authorizes each of
them to represent and to vote, as designated below, all the shares of beneficial
interest of Western Properties Trust ("Western Properties") held of record by
the undersigned on September 29, 2000 at the special meeting of shareholders of
Western Properties to be held at the Holiday Inn, 1800 Powell Street, Gold Room,
Emeryville, California 94608, on November 9, 2000 at 10:00 a.m., Pacific Time,
and at any and all postponements, continuations and adjournments thereof, with
all powers that the undersigned would possess if personally present, upon and in
respect of the following matters and in accordance with the following
instructions, with discretionary authority as to any and all other matters that
may properly come before the special meeting.
Should the undersigned be present and choose to vote at the special meeting
or at any adjournment or postponements thereof, and after notification to
Western Properties at the special meeting of the shareholder's decision to
terminate this proxy, then the power of the attorneys or proxies shall be deemed
terminated and of no further force and effect. This proxy may also be revoked by
filing a written notice of revocation with Western Properties or by duly
executing a proxy bearing a later date.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. UNLESS A CONTRARY DIRECTION IS INDICATED,
THIS PROXY WILL BE VOTED FOR PROPOSAL 1, AS MORE SPECIFICALLY DESCRIBED IN THE
JOINT PROXY STATEMENT/PROSPECTUS TRANSMITTED IN CONNECTION WITH THE SPECIAL
MEETING. ANY HOLDER WHO WISHES TO WITHHOLD THE DISCRETIONARY AUTHORITY REFERRED
TO IN PROPOSAL 2 BELOW SHOULD MARK A LINE THROUGH THE ENTIRE PROPOSAL.
IMPORTANT: PLEASE MARK YOUR VOTE, DATE AND SIGN ON REVERSE SIDE.
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<PAGE> 241
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF WESTERN
PROPERTIES TRUST
Please mark
your vote as [X]
indicated in
this example.
THE WESTERN PROPERTIES TRUST BOARD OF TRUSTEES RECOMMENDS A VOTE FOR PROPOSAL 1
1. Proposal Number 1 - Approval and adoption of the principal terms of the
Amended and Restated Agreement and Plan of Merger between Western Properties
Trust, a California real estate investment trust, and Pan Pacific Retail
Properties, Inc., a Maryland corporation, dated as of August 21, 2000, as
amended, the merger contemplated thereby, and approval of the incorporation
of Western Properties Trust as a California corporation immediately before
the merger, as described in the accompanying joint proxy statement and
prospectus.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. Proposal Number 2 - In their discretion, the proxies are authorized to vote
upon such other business as may properly come before the special meeting or
any adjournments or postponements thereof.
WHEN THIS PROXY IS PROPERLY EXECUTED, THE PROXIES WILL VOTE ALL OF THE COMMON
SHARES HELD OF RECORD BY THE UNDERSIGNED IN THE MANNER INSTRUCTED HEREIN BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR" PROPOSAL
1.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY USING THE ENCLOSED
ENVELOPE. IF YOUR ADDRESS IS INCORRECTLY SHOWN, PLEASE PRINT CHANGES.
The undersigned hereby notifies and confirms all that said attorneys and
proxies, or any of them, or their substitutes shall lawfully do or cause to be
done by virtue hereof, and hereby revokes any and all proxies heretofore given
by the undersigned to vote at said special meeting. The undersigned acknowledges
receipt of the notice of said special meeting and joint proxy
statement/prospectus accompanying said notice.
Signature(s)____________________________________ Dated:________________, 2000
Please sign exactly as names are shown. When shares are held by joint tenants,
both should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in full
corporation name by president or other authorized officer. If a partnership,
please sign in full partnership name by authorized person.
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