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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ___)*
Public Storage Properties X, Inc.
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(Name of Issuer)
Common Stock Series A
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(Title of Class of Securities)
744605 10 6
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(CUSIP Number)
David Goldberg, 701 Western Avenue,
Suite 200, Glendale, CA 91201-2397, 818/244-8080, ext. 529
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(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
June 28, 1996
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
Check the following box if a fee is being paid with the statement. X (A fee is
-
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 26 pages
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CUSIP No. 744605 10 6 Page 2 of 26 Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Public Storage, Inc.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [_]
(b) [_]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC/00
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [_]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
California
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7 SOLE VOTING POWER
NUMBER OF 559,509
SHARES ----------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY N/A
EACH ----------------------------------------------------------------
REPORTING 9 SOLE DISPOSITIVE POWER
PERSON 452,094
WITH ----------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
N/A
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
559,509
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
25.9%
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14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
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CUSIP No. 744605 10 6 Page 3 of 26 Pages
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Item 1. Security and Issuer
This Statement on Schedule 13D relates to the Common Stock Series A,
par value $.01 per share (the "Shares"), of Public Storage Properties X, Inc., a
California corporation (the "Issuer"). The address of the principal executive
office of the Issuer is 701 Western Avenue, Suite 200, Glendale, California
91201-2397.
Item 2. Identity and Background
This Statement on Schedule 13D is filed on behalf of Public Storage,
Inc. (the "Reporting Person"), a California corporation formerly known as
Storage Equities, Inc. ("SEI"). The address of the Reporting Person's principal
executive office is 701 Western Avenue, Suite 200, Glendale, California 91201-
2397.
The Reporting Person is a fully integrated, self-advised and self-
managed real estate investment trust which is engaged primarily in the
development, construction, acquisition, ownership, operation, management and
leasing of mini-warehouses. On November 16, 1995, Public Storage Management,
Inc. ("PSMI"), a corporation controlled by B. Wayne Hughes and members of his
family (collectively, the "Hughes Family"), was merged (the "PSMI Merger") with
and into SEI, which then changed its name to Public Storage, Inc. Prior to the
PSMI Merger, PSMI was a subsidiary of a California corporation known as Public
Storage, Inc. ("Old PSI"). Old PSI was a wholly-owned subsidiary of PSI
Holdings, Inc. ("PSH"), a California corporation owned and controlled by the
Hughes Family. Prior to the PSMI Merger, Old PSI merged with and into PSH, which
was followed by the merger of PSH with and into PSMI. As a result of the PSMI
Merger, 418,094.4 shares of Common Stock Series C of the Issuer previously
reported as beneficially owned by Old PSI was transferred to the Reporting
Person.
Information regarding the identity and background of the Reporting
Person's directors and executive officers is set forth in Appendix A attached to
this Statement on Schedule 13D. To the knowledge of the Reporting Person, all of
its directors and executive officers are citizens of the United States except
Uri P. Harkham, who is a citizen of Australia.
During the last five years, neither the Reporting Person nor, to its
knowledge, any director, executive officer, or controlling person of the
Reporting Person, has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or has been a party to a civil proceeding of
a judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws of finding any violation with respect to such laws.
<PAGE>
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CUSIP No. 744605 10 6 Page 4 of 26 Pages
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Item 3. Source and Amount of Funds or Other Consideration
Of the 452,094 Shares owned by the Reporting Person as of June 28,
1996, 34,000 were acquired upon the automatic conversion of 34,000 shares of
Common Stock Series B of the Issuer purchased by the Reporting Person for an
aggregate cost of approximately $671,500, and 418,094 were acquired upon the
automatic conversion of 418,094.4 shares of Common Stock Series C of the Issuer
which were acquired by the Reporting Person in the PSMI Merger. The funds used
to purchase the Common Stock Series B were obtained from the Reporting Person's
working capital.
The terms of the Common Stock Series B and the Common Stock Series C
provided that all of such shares would convert automatically into Shares when
and if a certain level of distributions had been paid to owners of Shares. The
automatic conversion occurred on June 28, 1996.
Item 4. Purpose of Transaction
The Reporting Person and the Issuer have entered into an Agreement and
Plan of Reorganization dated as of June 20, 1996 (the "Merger Agreement")
providing for the merger of the Issuer with and into the Reporting Person (the
"Merger"), which is subject to certain conditions (as described below). Upon
the Merger, each Share (other than Shares held by the Reporting Person or by
shareholders of the Issuer who have properly exercised dissenters' rights under
California law ("Dissenting Shares")) would be converted into the right to
receive cash, the Reporting Person's common stock or a combination of the two,
as follows: (i) with respect to a certain number of Shares (not to exceed 20%
of the Shares, less any Dissenting Shares), upon a shareholder's election,
$20.92 in cash, subject to reduction as described below or (ii) that number
(subject to rounding) of shares of the Reporting Person's common stock
determined by dividing $20.92, subject to reduction as described below, by the
average of the per share closing prices on the New York Stock Exchange of the
Reporting Person's common stock during the 20 consecutive trading days ending on
the fifth trading day prior to the special meeting of the shareholders of the
Issuer. The consideration paid by the Reporting Person in the Merger will be
reduced on a pro rata basis by the amount of cash distributions required to be
paid by the Issuer to its shareholders prior to completion of the Merger in
order to satisfy the Issuer's REIT distribution requirements ("Required REIT
Distributions"). The consideration received by the Issuer's shareholders in the
Merger, however, along with any Required REIT Distributions, will not be less
than $20.92 per Share, which amount represents the market value of the Issuer's
real estate assets at May 31, 1996 (based on an independent appraisal) and the
estimated net asset value of its other assets at September 30, 1996. Additional
pre-merger cash distributions would be made to the shareholders of the Issuer to
cause the Issuer's estimated net asset value as of the date of the Merger to be
substantially equivalent to its estimated net asset value as of September 30,
1996. The Shares held by the Reporting Person will be cancelled in the Merger.
The Merger is subject to (among other things) approval by the Issuer's
shareholders and receipt of a satisfactory fairness opinion by the Issuer. The
Reporting
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CUSIP No. 744605 10 6 Page 5 of 26 Pages
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Person believes that the conditions to the Merger will be satisfied, although
there can be no assurance.
For further information regarding the Merger, see the Merger Agreement
which is filed as Exhibit 1 hereto and is incorporated herein by this reference.
Item 5. Interest in Securities of the Issuer
As of June 28, 1996, the Reporting Person beneficially owned 559,509
Shares, representing approximately 25.9% of the 2,157,484 Shares outstanding.
The Reporting Person has the sole power to vote all of these Shares, has the
sole power to dispose of 452,094 of these Shares and has no power to dispose of
107,415 of these Shares.
During the 60-day period ended June 28, 1996 the Reporting Person
engaged in the following transactions in Shares at the following prices (not
including commissions):
<TABLE>
<CAPTION>
Transaction No. of Type of Price
Date Shares Transaction per Share
- ------------- ------ -------------------- ---------
<S> <C> <C> <C>
4/30/96 600 open market purchase $19.25
5/01/96 2,800 open market purchase $19.50
5/02/96 200 open market purchase $19.375
5/03/96 100 open market purchase $19.375
5/06/96 700 open market purchase $19.50
5/15/96 53,100 sale to issuer $18.75
</TABLE>
On June 28, 1996, the Reporting Person acquired 452,094 Shares upon
the automatic conversion of 34,000 shares of Common Stock Series B of the Issuer
and 418,094.4 shares of Common Stock Series C of the Issuer. On the same day,
B. Wayne Hughes acquired 107,415 Shares upon the automatic conversion of 2,890.6
shares of Common Stock Series B and 104,523.6 shares of Common Stock Series C.
The number of Shares beneficially owned by each of the directors and executive
officers of the Reporting Person is set forth on Appendix A attached to this
Statement on Schedule 13D. Unless otherwise indicated, each director and
executive officer has the sole power to vote and the sole power to dispose of
his or her Shares.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer
In connection with the PSMI Merger, the Reporting Person acquired an
option to purchase from B. Wayne Hughes various securities and interests owned
by him for an exercise price of $65 million (subject to adjustment in certain
circumstances). The option expires on November 16, 1998, and is exercisable for
all (but not part) of the
<PAGE>
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CUSIP No. 744605 10 6 Page 6 of 26 Pages
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securities and interests subject to the option. The exercise price of the option
is payable in the Reporting Person's common stock, valued at the higher of (i)
$16 per share or (ii) a stock price necessary to cause the acquisition to be
non-dilutive based on the Reporting Person's funds from operations per share of
Common Stock (calculated in accordance with the agreement evidencing the option)
for the four consecutive quarters preceding the acquisition. B. Wayne Hughes has
agreed not to dispose of any securities or interests subject to the option
during the term of the option. The securities subject to the option include
107,415 Shares. The Reporting Person holds an irrevocable proxy to vote those
Shares.
Except as disclosed herein, to the knowledge of the Reporting Person,
there are no contracts, arrangements, understandings or relationships between
the Reporting Person and any person with respect to any securities of the
Issuer, including but not limited to transfer or voting of any of the securities
of the Issuer, finder's fees, joint ventures, loan or option arrangements, puts
or calls, guarantees of profits, division of profits or loss of the giving or
withholding of proxies, or a pledge or contingency the occurrence of which would
give another person voting or investment power over securities of the Issuer.
Item 7. Material to be Filed as Exhibits
Exhibit 1 - Agreement and Plan of Reorganization dated as of June 20,
1996 by and among the Reporting Person and the Issuer
Exhibit 2 - Option Agreement dated as of November 16, 1995, by and
between the Reporting Person and B. Wayne Hughes
(incorporated by reference from Exhibit 3 to Amendment
No. 1 to Schedule 13D filed by B. Wayne Hughes relating
to the beneficial ownership of securities issued by
Public Storage Properties IX, Inc.)
<PAGE>
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CUSIP No. 744605 10 6 Page 7 of 26 Pages
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SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief,
the undersigned certifies that the information set forth in this Statement on
Schedule 13D is true, complete and correct.
Dated: July 8, 1996 PUBLIC STORAGE, INC.
By: /s/ Sarah Hass
----------------------
Sarah Hass
Vice President
<PAGE>
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CUSIP No. 744605 10 6 Page 8 of 26 Pages
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Appendix A
----------
<TABLE>
<CAPTION>
No. of Shares
Name Title Beneficially Owned
- ---- ----- ------------------
<S> <C> <C>
B. Wayne Hughes Chairman of the Board and
Chief Executive Officer 107,415*
Harvey Lenkin President - 0 -
Ronald L. Havner, Jr. Senior Vice President and
Chief Financial Officer - 0 -
Hugh W. Horne Senior Vice President - 0 -
Marvin M. Lotz Senior Vice President - 0 -
Mary Jayne Howard Senior Vice President - 0 -
David Goldberg Senior Vice President and
General Counsel - 0 -
Obren B. Gerich Senior Vice President 2,050
John Reyes Vice President and
Controller - 0 -
Sarah Hass Vice President and
Secretary - 0 -
Robert J. Abernethy Director - 0 -
Dann V. Angeloff Director 1,450
William C. Baker Director - 0 -
Uri P. Harkham Director 2,000
</TABLE>
* The Reporting Person has the sole power to vote these Shares, which are
subject to the Reporting Person's option.
<PAGE>
Exhibit 1
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") is entered into as
of this 20th day of June, 1996, by and between PUBLIC STORAGE, INC., a
California corporation ("PSI"), and PUBLIC STORAGE PROPERTIES X, INC., a
California corporation ("PSP10").
A. The parties intend that this Agreement shall constitute a Plan of
Reorganization for purposes of Section 368(a)(1)(A) of the Internal Revenue Code
of 1986, as amended. The Plan of Reorganization provides for the merger of
PSP10 with and into PSI in accordance with the applicable provisions of the
General Corporation Law of California (the "GCLC") and an Agreement of Merger
substantially in the form attached hereto as Exhibit A ("Merger Agreement").
B. PSI and PSP10 believe that it is in the best interests of such
corporations and their respective shareholders to enter into and complete this
Agreement and they have approved this Agreement and the transactions
contemplated hereby.
NOW, THEREFORE, the parties agree as follows:
1. Adoption of Plan. The parties hereby adopt the Plan of Reorganization
hereinafter set forth.
2. The Merger.
2.1 Completion of the Merger. At the Effective Time (as defined
below), PSP10 will be merged with and into PSI (the "Merger") in accordance with
the terms, conditions and provisions of this Agreement and the Merger Agreement.
The Merger shall become effective at the time at which the Merger Agreement,
together with the requisite Officers' Certificates of PSI and PSP10, are filed
with the California Secretary of State in accordance with the GCLC (the
"Effective Time"). PSI and PSP10 are sometimes collectively referred to herein
as the "Constituent Corporations" and PSI, as the surviving corporation of the
Merger, is sometimes referred to herein as the "Surviving Corporation."
2.2 Effect of the Merger. At the Effective Time:
2.2.1 Constituent Corporations. The separate corporate existence
of PSP10 shall cease and the Surviving Corporation shall thereupon succeed,
without other transfer, to all the rights and property of PSP10 and shall be
subject to all the debts and liabilities of PSP10 in the same manner as if the
Surviving Corporation had itself incurred them; all rights of creditors and all
liens upon the property of each of the Constituent Corporations shall be
preserved unimpaired, provided that such liens upon property of PSP10 shall be
limited to the property affected thereby immediately prior to the Effective
Time; and any action or proceeding pending by or against PSP10 may be prosecuted
to judgment, which shall bind the Surviving Corporation, or the Surviving
Corporation may be proceeded against or substituted in its place.
2.2.2 Articles and Bylaws. The Articles of Incorporation and the
Bylaws of PSI, as then amended, shall continue to be the Articles of
Incorporation and the Bylaws of the Surviving Corporation until changed as
provided by law and their respective provisions.
2.2.3 Officers and Directors. The officers and directors of PSI
shall continue as officers and directors of the Surviving Corporation until
their successors are elected and qualified as provided by law and in accordance
with the Articles of Incorporation and Bylaws of the Surviving Corporation.
A-1
<PAGE>
2.3 Conversion of PSP10 Shares. The manner of converting the
outstanding shares of Common Stock Series A ($.01 par value) of PSP10 (the
"PSP10 Shares") into cash and/or shares of Common Stock ($.10 par value) of PSI
(the "PSI Shares") shall be as follows:
2.3.1 Cash Election. At the Effective Time, subject to Sections
2.6 and 6.8 hereof, each PSP10 Share as to which a cash election has been made
in accordance with the provisions of Section 2.5 hereof and has not been
revoked, relinquished or lost pursuant to Section 2.5 hereof (the "Cash Election
Shares") shall be converted into and shall represent the right to receive $20.92
in cash (the "Cash Election Price"). As soon as practicable after the Effective
Time, the registered holders of Cash Election Shares shall be paid the cash to
which they are entitled hereunder in respect of such Cash Election Shares.
2.3.2 Share Exchange. At the Effective Time, subject to Sections
2.4, 2.5, 2.7 and 6.8 hereof, each PSP10 Share (other than Cash Election Shares)
shall be converted into that number of PSI Shares equal to, rounded to the
nearest thousandth, the quotient (the "Conversion Number") derived by dividing
$20.92 by the average of the per share closing prices on the New York Stock
Exchange, Inc. (the "NYSE") of PSI Shares during the 20 consecutive trading days
ending on the fifth trading day prior to the meeting of shareholders of PSP10
provided for in Section 6.2 hereof. If, prior to the Effective Time, PSI should
split or combine the PSI Shares, or pay a stock dividend, the Conversion Number
will be appropriately adjusted to reflect such action.
2.4 No Fractional Shares. Notwithstanding any other term or provision
of this Agreement, no fractional PSI Shares and no certificates or script
therefor, or other evidence of ownership thereof, will be issued in the Merger.
In lieu of any such fractional share interests, each holder of PSP10 Shares who
would otherwise be entitled to such fractional share will, upon surrender of the
certificate representing such PSP10 Shares, receive a whole PSI Share if such
fractional share to which such holder would otherwise have been entitled is .5
of a PSI Share or more, and such fractional share shall be disregarded if it
represents less than .5 of a PSI Share; provided, however, that, such fractional
share shall not be disregarded if such fractional share to which such holder
would otherwise have been entitled represents .5 of 1% or more of the total
number of PSI Shares such holder is entitled to receive in the Merger. In such
event, such holder shall be paid an amount in cash (without interest), rounded
to the nearest $.01, determined by multiplying (i) the per share closing price
on the NYSE of the PSI Shares at the Effective Time by (ii) the factional
interest.
2.5 Procedure for Cash Election. At the time of the mailing of the
Proxy Statement and Prospectus provided for in Section 6.5 hereof, PSI will send
to each holder of record of PSP10 Shares at the record date for PSP10 meeting of
shareholders referred to in Section 6.2 hereof a cash election form (the "Form
of Election") providing such holder with the option to elect to receive the Cash
Election Price with respect to all or any portion of such holder's PSP10 Shares.
Any such election to receive the cash payment contemplated by Section 2.3.1
hereof shall have been properly made only if The First National Bank of Boston
(the "Exchange Agent") shall have received at its designated office, by 5:00
p.m., New York time, on the last business day preceding the day of such meeting
of shareholders, a Form of Election properly completed and accompanied by
certificates for the shares to which such Form of Election relates (or an
appropriate guarantee of delivery in a form and on terms satisfactory to PSI),
as set forth in such Form of Election. Any Form of Election may be revoked by
the person submitting the same to the Exchange Agent only by written notice
received by the Exchange Agent prior to 5:00 p.m., New York time, on the last
business day before the day of the meeting of shareholders referred to in
Section 6.2 hereof. In addition, all Forms of Election shall automatically be
revoked if the Exchange Agent is notified in writing by the parties hereto that
the Merger has been abandoned. If a Form of Election is revoked pursuant to
this Section 2.5, the certificate or certificates or any guarantee of delivery
in respect of the PSP10 Shares to which such Form of Election relates shall be
promptly returned to the person submitting the same to the Exchange Agent. The
Exchange Agent may determine whether or not elections to receive cash have been
properly made or revoked pursuant to this Section 2.5, and any such
determination shall be conclusive and binding. If the Exchange Agent determines
that any election to receive cash was not properly or timely made, the PSP10
Shares covered thereby shall not be treated as Cash Election Shares, and shall
be converted in the Merger as provided in Section 2.3.2 hereof. The Exchange
Agent may, with the mutual agreement of PSI and PSP10, establish such
procedures, not inconsistent with this Section 2.5, as may be necessary or
desirable to implement this Section 2.5.
A-2
<PAGE>
2.6 Procedure for Proration.
2.6.1 No Proration. If the aggregate number of Cash Election
Shares and Dissenting Shares (as defined below) is 20% or less than the number
of PSP10 Shares outstanding as of the record date for the meeting of
shareholders of PSP10 referred to in Section 6.2, then each Cash Election Share
shall be converted in the Merger into the right to receive the Cash Election
Price.
2.6.2 Proration. If the aggregate number of Cash Election Shares
and Dissenting Shares exceeds 20%, then each Cash Election Share shall be
converted in the Merger into the right to receive cash or into PSI Shares as
follows: the number of Cash Election Shares owned by a holder of PSP10 Shares
that shall be converted into the right to receive the Cash Election Price shall
equal the number obtained by multiplying (i) (A) 20% of outstanding PSP10 Shares
less (B) the number of Dissenting Shares (as hereinafter defined), if any, by
(ii) a fraction of which the numerator shall be the number of Cash Election
Shares owned by such holder and the denominator shall be the aggregate number of
Cash Election Shares. The balance of such Cash Election Shares shall be
converted into PSI Shares in accordance with the provisions of Section 2.3.2
hereof. Notwithstanding the foregoing, PSI, in its sole discretion, may allow
Cash Election Shares to receive the Cash Election Price even if the aggregate
number of Cash Election Shares and Dissenting Shares exceeds 20% (but not 50%)
of the number of PSP10 Shares outstanding as of the record date for the meeting
of shareholders of PSP10 referred to in Section 6.2.
2.7 Dissenting Shares. PSP10 Shares held by a holder who has demanded
and perfected his right to an appraisal of such shares in accordance with
Section 1300 et seq. of the GCLC and who has not effectively withdrawn or lost
his right to appraisal ("Dissenting Shares") shall not be converted into or
represent the right to receive cash and/or PSI Shares, but the holder thereof
shall be entitled only to such rights as are granted by Section 1300 et seq. of
the GCLC. Each holder of Dissenting Shares who becomes entitled to payment for
PSP10 Shares pursuant to these provisions of the GCLC shall receive payment
therefor from the Surviving Corporation in accordance therewith. If any holder
of PSP10 Shares who demands appraisal in accordance with Section 1300 et seq. of
the GCLC shall effectively withdraw with the consent of the Surviving
Corporation or lose (through failure to perfect or otherwise) his right to
appraisal with respect to PSP10 Shares, such PSP10 Shares shall automatically be
converted into the right to receive PSI Shares pursuant to Section 2.3.2 hereof.
2.8 PSI Shares Unaffected. The Merger shall effect no change in any
of the outstanding PSI Shares and no outstanding PSI shares shall be converted
or exchanged as a result of the Merger, and no cash shall be exchangeable, and
no securities shall be issuable, with respect thereto.
2.9 Cancellation of Shares Held or Owned by Parties. At the Effective
Time, any PSP10 Shares owned by PSI shall be cancelled and retired and no shares
shall be issuable, and no cash shall be exchangeable, with respect thereto.
2.10 Exchange of Certificates. After the Effective Time, each holder
of a certificate theretofore evidencing outstanding PSP10 Shares which were
converted into PSI Shares pursuant hereto, upon surrender of such certificate to
the Exchange Agent or such other agent or agents as shall be appointed by the
Surviving Corporation, shall be entitled to receive a certificate representing
the number of whole PSI Shares into which the PSP10 Shares theretofore
represented by the certificate so surrendered shall have been converted as
provided in Section 2.3.2 hereof and cash payment in lieu of fractional share
interests, if any, as provided in Section 2.4 hereof. As soon as practicable
after the Effective Time, the Exchange Agent will send a notice and a
transmittal form to each holder of PSP10 Shares of record at the Effective Time
whose stock shall have been converted into PSI Shares, advising such holder of
the effectiveness of the Merger and the procedure for surrendering to the
Exchange Agent certificates evidencing PSP10 Shares in exchange for certificates
evidencing PSI Shares.
2.11 Status Until Surrendered. Until surrendered as provided in
Section 2.10 hereof, each outstanding certificate which, prior to the Effective
Time, represented PSP10 Shares (other than Cash Election Shares and Dissenting
Shares, if any) will be deemed for all corporate purposes to evidence ownership
of the number of whole PSI Shares into which the PSP10 Shares evidenced thereby
were converted. However, until such outstanding certificates formerly
evidencing PSP10 Shares are so surrendered, no dividend payable to holders of
record of PSI
A-3
<PAGE>
Shares shall be paid to the holders of such outstanding certificates in respect
of PSP10 Shares, but upon surrender of such certificates by such holders there
shall be paid to such holders the amount of any dividends (without interest)
theretofore paid with respect to such whole PSI Shares as of any record date on
or subsequent to the Effective Time and the amount of any cash (without
interest) payable to such holder in lieu of fractional share interests pursuant
to Section 2.4 hereof.
2.12 Transfer of Shares. After the Effective Time, there shall be no
further registration of transfers of PSP10 Shares on the records of PSP10 and,
if certificates formerly evidencing such shares are presented to the Surviving
Corporation, they shall be cancelled and exchanged for certificates evidencing
PSI Shares and cash in lieu of fractional share interests as herein provided.
3. Closing.
3.1 Time and Place of Closing. If this Agreement is approved by the
shareholders of PSP10, a meeting (the "Closing") shall take place as promptly as
practicable thereafter at which the parties will exchange certificates and other
documents as required by this Agreement. Such Closing shall take place at such
time and place as PSI may designate. The date of the Closing shall be referred
to as the "Closing Date."
3.2 Execution and Filing of Merger Agreement. At or before the
Closing and after shareholder approval by PSP10, PSI and PSP10 shall execute and
deliver the Merger Agreement, together with the requisite Officers'
Certificates, for filing with the California Secretary of State. The Merger
Agreement, together with the requisite Officers' Certificates, shall be duly
filed with the California Secretary of State in accordance with the GCLC as soon
as practicable following the Closing.
4. Representations, Warranties and Agreements of PSP10. PSP10 represents,
warrants and agrees with PSI that:
4.1 Authorization. Subject to approval of this Agreement by the
shareholders of PSP10, (i) the execution, delivery and performance of this
Agreement by PSP10 has been duly authorized and approved by all necessary
corporate action of PSP10, and (ii) PSP10 has necessary corporate power and
authority to enter into this Agreement, to perform its obligations hereunder and
to complete the transactions contemplated hereby.
4.2 Organization and Related Matters. PSP10 is a corporation duly
organized, existing and in good standing under the laws of the State of
California with all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as and where now owned,
leased, operated or carried on, as the case may be; and is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business carried on by it requires such qualification and where the failure to
so qualify would have a material adverse effect on the business, properties,
results of operations or financial condition of PSP10. PSP10 has no direct or
indirect equitable or beneficial interest in any other corporation other than
PSCC, Inc.
4.3 Capital Stock. The authorized capital stock of PSP10 consists
solely of (i) 2,828,989 shares of Common Stock Series A ($.01 par value),
1,655,475 of which were issued and outstanding as of February 29, 1996, (ii)
184,453 shares of Common Stock Series B ($.01 par value), 36,891 of which were
issued and outstanding as of February 29, 1996 and (iii) 522,618 shares of
Common Stock Series C ($.01 par value), all of which were issued and outstanding
as of February 29, 1996. All of the issued and outstanding shares of capital
stock of PSP10 have been duly and validly authorized and issued, and are fully
paid and nonassessable. There are no options or agreements to which PSP10 is a
party or by which it is bound calling for or requiring the issuance of any of
PSP10's capital stock except that the Common Stock Series B and Common Stock
Series C are convertible into shares of Common Stock Series A in accordance with
PSP10's Articles of Incorporation.
4.4 Consents and Approvals; No Violation. Assuming approval of the
Merger and of this Agreement by the shareholders of PSP10, neither the execution
and delivery of this Agreement nor the consummation by PSP10 of the transactions
contemplated hereby will: (i) conflict with or result in any breach of any
provision of its
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Articles of Incorporation or Bylaws; (ii) require any consent, waiver, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, except (A) in connection with the applicable
requirements, if any, of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (B) pursuant to the applicable requirements of
the federal securities laws and the rules and regulations promulgated
thereunder, (C) the filing of the Merger Agreement and Officers' Certificates
pursuant to the GCLC and appropriate documents with the relevant authorities of
other states in which PSP10 is authorized to do business, (D) in connection with
any state or local tax which is attributable to the beneficial ownership of
PSP10's real property, (E) as may be required by any applicable state securities
or takeover laws, or (F) where the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification, would not in
the aggregate have a material adverse effect on PSP10 or adversely affect the
ability of PSP10 to consummate the transactions contemplated hereby; (iii)
result in a violation or breach of, or constitute a default (or give rise to any
right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, license, mortgage, agreement or other
instrument or obligation to which PSP10 is a party or any of its properties or
assets may be bound, except for such violations, breaches and defaults which, in
the aggregate, would not have a material adverse effect on PSP10 or adversely
affect the ability of PSP10 to consummate the transactions contemplated hereby;
or (iv) assuming the consents, approvals, authorizations or permits and filings
or notifications referred to in this Section 4.4 are duly and timely obtained or
made, violate any order, writ, injunction, decree, statute, rule or regulation
applicable to PSP10 or its properties or assets, except for violations which
would not in the aggregate have a material adverse effect on PSP10 or adversely
affect the ability of PSP10 to consummate the transactions contemplated hereby.
4.5 Litigation. There is no litigation, proceeding or governmental
investigation which, individually or in the aggregate, is or may be material and
adverse, pending or, to the knowledge of PSP10, threatened against PSP10 or
involving any of its properties or assets.
4.6 SEC Reports. Since January 1, 1993, PSP10 has filed all forms,
reports and documents with the Securities and Exchange Commission ("SEC")
required to be filed by it pursuant to the federal securities laws and the rules
and regulations promulgated by the SEC thereunder, all of which complied in all
material respects with all applicable requirements of the federal securities
laws and such rules and regulations (collectively, the "PSP10 SEC Reports").
None of the PSP10 SEC Reports, including without limitation any financial
statements or schedules included therein, at the time filed contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
4.7 Financial Statements. The financial statements included in the
PSP10 SEC Reports complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior periods (except
as otherwise noted therein), and present fairly the financial position of PSP10
as of their respective dates, and the results of operations of PSP10 for the
periods presented therein (subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments).
4.8 Absence of Certain Changes or Events. Since January 1, 1996, the
business of PSP10 has been carried on only in the ordinary and usual course and
there has not been any material adverse change in its business, results of
operations or financial condition, or any damage or destruction in the nature of
a casualty loss, whether covered by insurance or not, that would materially and
adversely affect its properties, business or results of operations.
4.9 S-4 Registration Statement and Proxy Statement and Prospectus.
None of the information supplied or to be supplied by PSP10 for inclusion or
incorporation by reference in the S-4 Registration Statement or the Proxy
Statement and Prospectus (as such terms are defined in Section 6.5 hereof) will
(i) in the case of the S-4 Registration Statement, at the time it becomes
effective and at the Effective Time, 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 not misleading, or (ii) in the
case of the Proxy Statement and Prospectus, at the time of the mailing of the
Proxy Statement and Prospectus and at the time of the meetings of the
shareholders of PSP10, contain any untrue statement of
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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.
4.10 Insurance. All material insurance of PSP10 is currently in full
force and effect and PSP10 has reported all claims and occurrences to the extent
required by such insurance.
4.11 Disclosure. The representations and warranties by PSP10 in this
Agreement and any certificate or document delivered by it pursuant hereto do not
and will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained herein or therein not
misleading.
5. Representations, Warranties and Agreements of PSI. PSI hereby
represents, warrants and agrees with PSP10 that:
5.1 Authorization. The execution, delivery and performance of this
Agreement by PSI has been duly authorized and approved by all necessary
corporate action of PSI, and PSI has all necessary corporate power and authority
to enter into this Agreement, to perform its obligations hereunder and to
complete the transactions contemplated hereby.
5.2 Organization and Related Matters. PSI is a corporation duly
organized, existing and in good standing under the laws of the State of
California, with all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as and where now owned,
leased, operated or carried on, as the case may be; and is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business carried on by it requires such qualification and where the failure to
so qualify would have a material adverse effect on the business, properties,
results of operations or financial condition of PSI.
5.3 Capital Stock. The authorized capital stock of PSI consists
solely of (i) 200,000,000 shares of Common Stock ($.10 par value), 71,518,796 of
which were issued and outstanding as of January 31, 1996, (ii) 7,000,000 shares
of Class B Common Stock ($.10 par value), all of which are issued and
outstanding and (iii) 50,000,000 shares of Preferred Stock ($.01 par value),
13,450,850 of which were issued and outstanding as of January 31, 1996. All of
the issued and outstanding shares of Common Stock, Class B Common Stock and
Preferred Stock of PSI have been duly and validly authorized and issued, and are
fully paid and nonassessable. Upon approval of this Agreement by the Board of
Directors of PSI, the issuance of the PSI Shares in the Merger will have been
duly and validly authorized and, when issued and delivered as provided in this
Agreement, the PSI Shares will be duly and validly issued, fully paid and
nonassessable; and the shareholders of PSI have no preemptive rights with
respect to any shares of capital stock of PSI.
5.4 Consents and Approvals; No Violation. Assuming the approval of
the Merger and this Agreement by the Board of Directors of PSI, neither the
execution and delivery of this Agreement nor the consummation by PSI of the
transactions contemplated hereby will: (i) conflict with or result in any breach
of any provision of its Articles of Incorporation or Bylaws; (ii) require any
consent, waiver, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, except (A) in
connection with the applicable requirements, if any, of the HSR Act, (B)
pursuant to the applicable requirements of the federal securities laws and the
rules and regulations promulgated thereunder, (C) the filing of the Merger
Agreement and Officers' Certificates pursuant to the GCLC and appropriate
documents with the relevant authorities of other states in which PSI is
authorized to do business, (D) in connection with any state or local tax which
is attributable to the beneficial ownership of PSP10's real property, (E) as may
be required by any applicable state securities or takeover laws, or (F) where
the failure to obtain such consent, approval, authorization or permit, or to
make such filing or notification, would not in the aggregate have a material
adverse effect on PSI or adversely affect the ability of PSI to consummate the
transactions contemplated hereby; (iii) result in a violation or breach of, or
constitute a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
license, mortgage, agreement or other instrument or obligation to which PSI is a
party or any of its properties or assets may be bound, except for such
violations, breaches and defaults which, in the aggregate, would not have a
material adverse effect on PSI or adversely affect the ability of PSI to
consummate the transactions contemplated hereby; or (iv)
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assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in this Section 5.4 are duly and timely obtained or
made, violate any order, writ, injunction, decree, statute, rule or regulation
applicable to PSI or its properties or assets, except for violations which would
not in the aggregate have a material adverse effect on PSI or adversely affect
the ability of PSI to consummate the transactions contemplated hereby.
5.5 Litigation. There is no litigation, proceeding or governmental
investigation which, individually or in the aggregate, is or may be material and
adverse, pending or, to the knowledge of PSI, threatened against PSI or
involving any of its properties or assets.
5.6 SEC Reports. Since January 1, 1993, PSI has filed all forms,
reports and documents with the SEC required to be filed by it pursuant to the
federal securities laws and the rules and regulations promulgated by the SEC
thereunder, all of which complied in all material respects with all applicable
requirements of the federal securities laws and such rules and regulations
(collectively, the "PSI SEC Reports"). None of the PSI SEC Reports, including
without limitation any financial statements or schedules included therein, at
the time filed contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
5.7 Financial Statements. The financial statements included in PSI's
SEC Reports complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior periods (except
as otherwise noted therein), and present fairly the financial position of PSI as
of their respective dates, and the results of operations of PSI for the periods
presented therein (subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments).
5.8 Absence of Certain Changes or Events. Since January 1, 1996, the
business of PSI has been carried on only in the ordinary and usual course and
there has not been any material adverse change in its business, results of
operations or financial condition, or any damage or destruction in the nature of
a casualty loss, whether covered by insurance or not, that would materially and
adversely affect its properties, business or results of operations.
5.9 S-4 Registration Statement and Proxy Statement and Prospectus.
None of the information supplied or to be supplied by PSI for inclusion or
incorporation by reference in the S-4 Registration Statement or the Proxy
Statement and Prospectus (as those terms are defined in Section 6.5 hereof) will
(i) in the case of the S-4 Registration Statement, at the time it becomes
effective and at the Effective Time, 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 not misleading, or (ii) in the
case of the Proxy Statement and Prospectus, at the time of the mailing of the
Proxy Statement and Prospectus and at the time of the meetings of the
shareholders of PSP10, 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.
5.10 Insurance. All material insurance of PSI is currently in full
force and effect and PSI has reported all claims and occurrences to the extent
required by such insurance.
5.11 Disclosure. The representations and warranties by PSI in this
Agreement and any certificate or document delivered by it pursuant hereto do not
and will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements contained herein or therein not
misleading.
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6. Covenants and Agreements.
6.1 Ordinary Course. Except as contemplated by this Agreement, during
the period from the date of this Agreement to the Effective Time, each of PSI
and PSP10 will carry on its business in the ordinary course in substantially the
same manner as heretofore conducted and use all reasonable efforts to: (a)
preserve intact its present business, organization and goodwill, (b) maintain
all permits, licenses and authorizations required by applicable laws, and (c)
keep available the services of its present employees and preserve its
relationships with customers, suppliers, lenders, lessors, governmental entities
and others having business or regulatory dealings with it. PSP10 will not issue
any capital stock or debt securities convertible into capital stock. Each of PSI
and PSP10 will promptly notify the other of any event or occurrence not in the
ordinary and usual course of business or which may have a material adverse
effect on the properties or financial condition of such party.
6.2 Meeting of Shareholders. PSP10 will take all action necessary in
accordance with applicable law to convene a meeting of its shareholders as
promptly as practicable to consider and vote upon approval of this Agreement, it
being understood that (i) the principal terms of the Agreement must be approved
by the affirmative vote of a majority of the outstanding shares of Common Stock
Series A, Common Stock Series B and Common Stock Series C, counted together as a
single class, and (ii) the shares of Common Stock Series B and Common Stock
Series C will be voted with the holders of a majority of the unaffiliated shares
of Common Stock Series A.
6.3 Tax Reporting. Each of PSI and PSP10 agrees to report the Merger
for federal and state income tax purposes, as a reorganization of the type
described in Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended.
6.4 Acquisition Proposals. PSP10 will not initiate, solicit or
encourage, directly or indirectly, any inquiries or the making of any proposal
with respect to a merger, consolidation, share exchange or similar transaction
involving PSP10, or any purchase of all or any significant portion of the assets
of PSP10, or any equity interest in PSP10, other than the transactions
contemplated hereby (an "Acquisition Proposal"), or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to an Acquisition Proposal; provided,
however, that the Board of Directors on behalf of PSP10 may furnish or cause to
be furnished information and may participate in such discussions and
negotiations through its representatives with persons who have sought the same
if the failure to provide such information or participate in such negotiations
and discussions might cause the members of the Board of Directors to breach
their fiduciary duty to PSP10's shareholders under applicable law as advised by
counsel. PSP10 will notify PSI immediately if any such inquiries or proposals
are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with PSP10,
and will keep PSI informed of the status and terms of any such proposals and any
such negotiations or discussions.
6.5 Registration and Proxy Statements. PSI and PSP10 will promptly
prepare and file with the SEC a preliminary proxy statement in connection with
the vote of shareholders of PSP10 with respect to the Merger. PSI will, as
promptly as practicable, prepare and file with the SEC a registration statement
on Form S-4 (the "S-4 Registration Statement"), containing a proxy
statement/prospectus, in connection with the registration under the Securities
Act of 1933, as amended (the "Securities Act") of the PSI Shares to be issued to
holders of PSP10 Shares in the Merger (such proxy statement/prospectus, together
with any amendments thereof or supplements thereto, in the form or forms to be
mailed to the shareholders of PSP10, being herein called the "Proxy Statement
and Prospectus"). PSI and PSP10 will each use its best efforts to have or cause
the S-4 Registration Statement to be declared effective as promptly as
practicable, and also will take any other action required to be taken under
federal or state securities laws, and PSP10 will use its best efforts to cause
the Proxy Statement and Prospectus to be mailed to its shareholders at the
earliest practicable date. PSP10 agrees that if at any time prior to the
Effective Time any event with respect to PSP10 should occur which is required to
be described in an amendment of, or a supplement to, the Proxy Statement and
Prospectus or the S-4 Registration Statement, such event shall be so described,
and such amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the shareholders of PSP10 and (ii) the Proxy
Statement and Prospectus will (with respect to PSP10) comply as to form in all
material respects with the requirements of the federal securities laws. PSI
agrees that (i) if at any time prior to the Effective Time any event with
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respect to PSI should occur which is required to be described in an amendment
of, or a supplement to, the Proxy Statement and Prospectus or the S-4
Registration Statement, such event shall be so described, and such amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the shareholders of PSP10 and (ii) the Proxy Statement and
Prospectus will (with respect to PSI) comply as to form in all material respects
with the requirements of the federal securities laws.
6.6 Best Efforts. Each of PSI and PSP10 shall: (i) promptly make its
respective filings and thereafter make any other required submissions under all
applicable laws with respect to the Merger and the other transactions
contemplated hereby; and (ii) use its best efforts to promptly take, or cause to
be taken, all other actions and do, or cause to be done, all other things
necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement as soon as practicable.
6.7 Registration and Listing of PSI Shares. PSI will use its best
efforts to register the PSI Shares under the applicable provisions of the
Securities Act and to cause the PSI Shares to be listed for trading on the NYSE
upon official notice of issuance.
6.8 Distributions. PSP10 will not, at any time prior to the
Effective Time, declare or pay any cash distribution on its capital stock or
make any other distribution of assets to its shareholders, except (i) regular
quarterly dividends on its Common Stock at a quarterly rate not in excess of
$.35 per share, (ii) distributions to shareholders of record immediately prior
to the Effective Time in an aggregate amount equal to the amount by which the
estimated Net Asset Value of PSP10 (as defined below) as of the Effective Time
exceeds the estimated Net Asset Value of PSP10 as of September 30, 1996 and
(iii) additional pre-Merger cash distributions required to satisfy PSP10's REIT
distribution requirements (the number of PSI Shares issued in the Merger and the
amount receivable upon Cash Elections would be reduced on a pro rata basis in an
aggregate amount equal to such additional distributions). For this purpose, the
Net Asset Value of PSP10 is the sum of (a) the fair market value of PSP10's real
estate assets as determined by appraisal by Charles R. Wilson & Associates, Inc.
as of May 31, 1996, and (b) the book value of PSP10's non-real estate assets as
of the date of determination and less (c) PSP10's liabilities as of the date of
determination. The determination of book value and liabilities shall be from
PSP10's financial statements prepared in accordance with generally accepted
accounting principles on a basis consistent with prior periods.
7. Conditions.
7.1 Conditions to Each Party's Obligations. The respective
obligations of each party to consummate the transactions contemplated by this
Agreement are subject to the fulfillment at or prior to the Closing of each of
the following conditions, any or all of which may be waived in whole or in part,
to the extent permitted by applicable law:
7.1.1 Shareholder Approval. This Agreement and the transactions
contemplated hereby shall have been duly approved by the shareholders of PSP10
as contemplated by Section 6.2.
7.1.2 Governmental and Regulatory Consents. All filings required
to be made prior to the Effective Time with, and all consents, approvals,
permits and authorizations required to be obtained prior to the Effective Time
from, governmental and regulatory authorities in connection with the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby (including the expiration of the waiting period requirements
of the HSR Act) shall have been made or obtained (as the case may be) without
material restrictions, except where the failure to obtain such consents,
approvals, permits and authorizations could not reasonably be expected to have a
material adverse effect on either PSI or PSP10.
7.1.3 Litigation. No court or governmental or regulatory
authority of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, judgment, decree, injunction
or other order (whether temporary, preliminary or permanent) or taken any action
which prohibits the consummation of the transactions contemplated by this
Agreement; provided, however, that the party invoking this condition shall use
its best efforts to have any such judgment, decree, injunction or other order
vacated.
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7.1.4 Registration Statement. The S-4 Registration Statement
shall have been declared effective and no stop order suspending effectiveness
shall have been issued, no action, suit, proceeding or investigation by the SEC
to suspend the effectiveness thereof shall have been initiated and be
continuing, and all necessary approvals under federal and state securities laws
relating to the issuance or trading of the PSI Shares shall have been received.
7.1.5 Listing of PSI Shares on NYSE. The PSI Shares shall have
been approved for listing on the NYSE upon official notice of issuance.
7.1.6 PSP10 Fairness Opinion. The Board of Directors of PSP10
shall have received the opinion of Robert A. Stanger & Co., Inc. in form and
substance satisfactory to it to the effect that the consideration to be received
by the shareholders of PSP10 in the Merger is fair to such shareholders from a
financial point of view, and such opinion shall not have been withdrawn or
revoked.
7.1.7 Tax Opinion. The Board of Directors of PSI and PSP10
shall have received a legal opinion of Hogan & Hartson L.L.P. that the Merger
will qualify as a tax-free reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended.
7.2 Conditions to Obligations of PSI. The obligations of PSI to
consummate the transactions contemplated by this Agreement are subject to the
fulfillment at or prior to the Closing of the following conditions, which may be
waived in whole or in part by PSI to the extent permitted by applicable law:
7.2.1 Accuracy of Representations; Performance of Agreements.
Each of the representations and warranties of PSP10 contained in this Agreement
shall be true and correct in all material respects at and as of the Closing Date
as if made at and as of the Closing Date (except to the extent they relate to a
particular date) and PSP10 shall have performed or complied with all agreements
and covenants required by this Agreement to be performed or complied with by it
at or prior to the Closing.
7.2.2 Certificate of Officers. PSI shall have received such
certificates of officers of PSP10 as PSI may reasonably request in connection
with the Closing, including upon request a certificate satisfactory to it of the
Chief Executive Officer and the Chief Financial Officer of PSP10, to the effect
that, to the best of their knowledge, all representations and warranties of
PSP10 contained in this Agreement are true and correct in all material respects
at and as of the Closing Date as if made at and as of the Closing Date, and
PSP10 has performed or complied with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the
Closing.
7.2.3 Title to Properties; Environmental Audits. PSI in its
sole discretion shall be satisfied as to the status of title to (including the
existence and effect of liens and encumbrances), and the results of an
environmental audit of, each of the real properties owned by PSP10.
7.2.4 Trading Price of PSI Shares. The average of the per share
closing prices of the PSI Shares on the NYSE during the 20 consecutive trading
days ending on the fifth trading day prior to the meeting of shareholders of
PSP10 provided for in Section 6.2 hereof (the "Average PSI Share Price") shall
be not less than $20.
7.2.5 Dissenting Shares. The number of Dissenting Shares shall
be less than 5% of the outstanding PSP10 Shares.
7.3 Conditions to Obligations of PSP10. The obligations of PSP10 to
consummate the transactions contemplated by this Agreement are subject to the
fulfillment at or prior to the Closing of the following conditions, which may be
waived in whole or in part by PSP10 to the extent permitted by applicable law.
7.3.1 Accuracy of Representations; Performance of Agreements.
Each of the representations and warranties of PSI contained in this Agreement
shall be true and correct in all material respects at and as of the Closing Date
as if made at and as of the Closing Date (except to the extent they relate to a
particular date)
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and PSI shall have performed or complied in all material respects with all
agreements and covenants required by this Agreement to be performed or complied
with by it at or prior to the Closing.
7.3.2 Certificate of Officers. PSP10 shall have received such
certificates of officers of PSI as PSP10 may reasonably request in connection
with the Closing, including upon request a certificate satisfactory to it of the
Chief Executive Officer and the Chief Financial Officer of PSI, to the effect
that, to the best of their knowledge, all representations and warranties of PSI
contained in this Agreement are true and correct in all material respects at and
as of the Closing Date as if made at and as of the Closing Date, and PSI has
performed or complied with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing.
8. Termination.
8.1 Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after shareholder approval, by the mutual written consent of PSI and PSP10.
8.2 Termination by Either PSI or PSP10. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of either PSI or PSP10 if (i) the Merger shall not have been consummated by
March 31, 1997 (provided that the right to terminate this Agreement under this
Section 8.2(i) 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 Merger to occur on or before such date); (ii) any court of competent
jurisdiction in the United States or some other governmental body or regulatory
authority shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and nonappealable;
or (iii) the shareholders of PSP10 shall have failed to approve this Agreement
and the transactions contemplated hereby at its meeting of shareholders.
8.3 Termination by PSI. This Agreement may be terminated by PSI and
the Merger may be abandoned at any time prior to the Effective Time, if (i)
PSP10 shall have failed to comply in any material respect with any of the
covenants, conditions or agreements contained in this Agreement to be complied
with or performed by PSP10 at or prior to such date of termination, which
failure to comply has not been cured within five business days following notice
to PSP10 of such failure to comply, or (ii) any representation or warranty of
PSP10 contained in this Agreement shall not be true in all material respects
when made, which inaccuracy or breach (if capable of cure) has not been cured
within five business days following notice to PSP10 of the inaccuracy or breach,
or on and as of the Closing as if made on and as of the Closing Date.
8.4 Termination by PSP10. This Agreement may be terminated by PSP10
and the Merger may be abandoned at any time prior to the Effective Time, before
or after shareholder approval, if (i) PSI shall have failed to comply in any
material respect with any of the covenants, conditions or agreements contained
in this Agreement to be complied with or performed by PSI at or prior to such
date of termination, which failure to comply has not been cured within five
business days following notice to PSI of such failure to comply, or (ii) any
representation or warranty of PSI contained in this Agreement shall not be true
in all material respects when made, which inaccuracy or beach (if capable of
cure) has not been cured within five business days following notice to PSI of
the inaccuracy or breach, or on and as of the Closing as if made on and as of
the Closing Date.
8.5 Effect of Termination and Abandonment. In the event of
termination of this Agreement and abandonment of the Merger pursuant to this
Section 8, no party (or any directors, officers, employees, agents or
representatives of any party) shall have any liability or further obligation to
any other party or any person who controls a party within the meaning of the
Securities Act, except as provided in Section 9.1 and except that nothing herein
will relieve any party from liability for any breach of this Agreement.
A-11
<PAGE>
9. Miscellaneous.
9.1 Payment of Expenses. If the Merger is consummated, the Surviving
Corporation shall pay all the expenses incident to preparing for, entering into
and carrying out this Agreement and the consummation of the transactions
contemplated hereby. If the Merger is not consummated, each of PSI and PSP10
shall pay its own expenses, except that they shall each pay 50% of any expenses
incurred in connection with the printing of the S-4 Registration Statement and
the Proxy Statement and Prospectus, the real estate appraisals and environmental
audits of PSP10's properties and preparation for real estate closings, and any
filing fees under the HSR Act, the Securities Act and the Securities Exchange
Act of 1934, as amended.
9.2 Survival of Representations, Warranties and Covenants. The
respective representations and warranties of PSI and PSP10 contained herein or
in any certificate or document delivered pursuant hereto shall expire with and
be terminated and extinguished by the effectiveness of the Merger and shall not
survive the Effective Time. The sole right and remedy arising from a
misrepresentation or breach of warranty, or from the failure of any of the
conditions to be met, shall be the termination of this Agreement by the other
party. This Section 9.2 shall not limit any covenant or agreement of the
parties, which by its terms contemplates performance after the Effective Time.
9.3 Modification or Amendment. The parties may modify or amend this
Agreement by written agreement authorized by the Boards of Directors and
executed and delivered by officers of the respective parties; provided, however,
that after approval of this Agreement by the shareholders of PSP10, no amendment
shall be made which changes any of the principal terms of the Merger or this
Agreement, without the approval of such shareholders.
9.4 Waiver of Conditions. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party in whole or in part to the extent permitted by
applicable law.
9.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without giving effect to
the principles of conflict of laws thereof.
9.6 Interpretation. This Agreement has been negotiated by the
parties and is to be interpreted according to its fair meaning as if the parties
had prepared it together and not strictly for or against any party. Each of the
capitalized terms defined in this Agreement shall, for all purposes of this
Agreement (and whether defined in the plural and used in the singular, or vice
versa), have the respective meaning assigned to such term in the Section in
which such meaning is set forth. References in this Agreement to "parties" or a
"party" refer to parties to this Agreement unless expressly indicated otherwise.
At each place in this Agreement where the context so requires, the masculine,
feminine or neuter gender includes the others and the singular or plural number
includes the other. "Including" means "including without limitation."
9.7 Headings. The descriptive headings contained in the Sections and
subsections of this Agreement are for convenience of reference only and shall
not affect in any way the meaning or interpretation of this Agreement.
9.8 Parties in Interest. This Agreement, and the rights, interests
and obligations created by this Agreement, shall bind and inure to the benefit
of the parties and their respective successors and permitted assigns, and shall
confer no right, benefit or interest upon any other person, including
shareholders of the respective parties.
9.9 Notices. All notices or other communications required or
permitted under this Agreement shall be in writing and shall be delivered
personally or sent by U.S. mail, postage prepaid, addressed as follows or such
other address as the party to be notified has furnished in writing by a notice
given in accordance with this Section 9.9:
A-12
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If to PSI:
Public Storage, Inc.
701 Western Avenue, Suite 200
Glendale, California 91201-2397
Attention: Harvey Lenkin
President
If to PSP10:
Public Storage Properties X, Inc.
701 Western Avenue, Suite 200
Glendale, California 91201-2397
Attention: B. Wayne Hughes
Chief Executive Officer
Any such notice or communication shall be deemed given as of the date of
delivery, if delivered personally, or on the second day after deposit with the
U.S. Postal Service, if sent by U.S. mail.
9.10 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be considered one and the same agreement.
9.11 Assignment. No rights, interests or obligations of either party
under this Agreement may be assigned or delegated without the prior written
consent of the other party.
9.12 Entire Agreement. This Agreement, including the Merger
Agreement, embodies the entire agreement and understanding between the parties
pertaining to the subject matter hereof, and supersedes all prior agreements,
understandings, negotiations, representations and discussions, whether written
or oral.
9.13 Severable Provisions. If any of the provisions of this Agreement
may be determined to be illegal or otherwise unenforceable, in whole or in part,
the remaining provisions, and any partially enforceable provisions to the extent
enforceable, shall nevertheless be binding and enforceable.
9.14 Further Action. If at any time after the Effective Time, the
Surviving Corporation shall determine that any assignments, transfers, deeds or
other assurances are necessary or desirable to vest, perfect or confirm, of
record or otherwise, in the Surviving Corporation, title to any property or
rights of PSP10, the officers of either Constituent Corporation are fully
authorized in the name of PSP10 or otherwise to execute and deliver such
documents and do all things necessary and proper to vest, perfect or confirm
title to such property or rights in the Surviving Corporation.
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<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date first above written.
PUBLIC STORAGE, INC.
By: /s/ HARVEY LENKIN
-------------------------------
Harvey Lenkin
President
PUBLIC STORAGE PROPERTIES X, INC.
By: /s/ B. WAYNE HUGHES
-------------------------------
B. Wayne Hughes
Chief Executive Officer
A-14
<PAGE>
Exhibit A to
Exhibit 1
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER ("Agreement") is entered into as of this _____ day
of _____________, 1996, by and between PUBLIC STORAGE, INC., a California
corporation ("PSI"), and PUBLIC STORAGE PROPERTIES X, INC., a California
corporation ("PSP10"), with reference to the following:
A. PSI was incorporated in 1980 under the laws of California, and on the
date hereof its authorized capital stock consists of 200,000,000 shares of
Common Stock, $.10 par value (the "PSI Shares"), ___________ of which are issued
and outstanding, 7,000,000 shares of Class B Common Stock, all of which are
issued and outstanding and 50,000,000 shares of Preferred Stock ($.01 par
value), __________ of which are issued and outstanding.
B. PSP10 was incorporated in 1990 under the laws of California, and on the
date hereof has _______________ shares of Common Stock Series A, $.01 par value
(the "PSP10 Shares") outstanding. PSP10's Common Stock Series B and Common
Stock Series C have been fully converted and are no longer authorized or
outstanding.
C. PSI and PSP10 have entered into an Agreement and Plan of Reorganization
dated as of June ___, 1996 (the "Plan"), setting forth certain representations,
warranties, conditions and agreements pertaining to the Merger (as defined
below).
D. The Boards of Directors of PSI and PSP10 have approved the Plan and
this Agreement of Merger, and the requisite shareholder approval has been
obtained.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
---------
1.1 The Merger. At the Effective Time (as defined below), PSP10 will
be merged with and into PSI (the "Merger") and PSI shall be the surviving
corporation. PSI and PSP10 are sometimes collectively referred to herein as the
"Constituent Corporations" and PSI, as the surviving corporation of the Merger,
is sometimes referred to herein as the "Surviving Corporation."
1.2 Effective Time. The Merger shall become effective at the time at
which this Agreement, together with the requisite Officers' Certificates of PSI
and PSP10, are filed with the California Secretary of State (the "Effective
Time").
1.3 Effect of the Merger. At the Effective Time:
(a) The separate corporate existence of PSP10 shall cease and the
Surviving Corporation shall thereupon succeed, without other transfer, to all
the rights and property of PSP10 and shall be subject to all the debts and
liabilities of PSP10 in the same manner as if the Surviving Corporation had
itself incurred them; all rights of creditors and all liens upon the property of
each of the Constituent Corporations shall be preserved unimpaired, provided
that such liens upon property of PSP10 shall be limited to the property affected
thereby immediately prior to the Effective Time; and any action or proceeding
pending by or against PSP10 may be prosecuted to judgment, which shall bind the
Surviving Corporation, or the Surviving Corporation may be proceeded against or
substituted in its place.
E.A-1
<PAGE>
(b) The Articles of Incorporation and the Bylaws of PSI, as then
amended, shall continue to be the Articles of Incorporation and the Bylaws of
the Surviving Corporation until changed as provided by law and their respective
provisions.
(c) The directors of PSI shall continue as directors of the
Surviving Corporation until their successors are elected and qualified as
provided by law and in accordance with the Articles of Incorporation and Bylaws
of the Surviving Corporation.
ARTICLE II
----------
2.1 Conversion of PSP10 Shares. The manner of converting the
outstanding PSP10 Shares into cash and/or PSI Shares shall be as follows:
(a) At the Effective Time, subject to Section 2.6 of the Plan, each
PSP10 Share as to which a cash election has been made in accordance with the
provisions of Section 2.5 of the Plan and has not been revoked, relinquished or
lost pursuant to Section 2.5 of the Plan (the "Cash Election Shares") shall be
converted into and shall represent the right to receive $_______ in cash (the
"Cash Election Price"). As soon as practicable after the Effective Time, the
registered holders of Cash Election Shares shall be paid the cash to which they
are entitled hereunder in respect of such Cash Election Shares.
(b) At the Effective Time, subject to Sections 2.4, 2.5 and 2.7 of
the Plan, each PSP10 Share (other than Cash Election Shares) shall be converted
into __________ PSI Shares.
2.2 No Fractional Shares. Notwithstanding any other term or provision
of this Agreement or the Plan, no fractional PSI Shares and no certificates or
script therefor, or other evidence of ownership thereof, will be issued in the
Merger. In lieu of any such fractional share interests, each holder of PSP10
Shares who would otherwise be entitled to such fractional share will, upon
surrender of the certificate representing such PSP10 shares, receive a whole PSI
Share if such fractional share to which such holder would otherwise have been
entitled is .5 of an PSI Share or more, and such fractional share shall be
disregarded if it represents less than .5 of an PSI Share; provided, however,
that, such fractional share shall not be disregarded if such fractional share to
which such holder would otherwise have been entitled represents .5 of 1% or more
of the total number of PSI Shares such holder is entitled to receive in the
Merger. In such event, such holder shall be paid an amount in cash (without
interest), rounded to the nearest $.01, determined by multiplying (i) the per
share closing price on the New York Stock Exchange, Inc. of the PSI Shares at
the Effective Time by (ii) the fractional interest.
2.3 Dissenting Shares. PSP10 Shares held by a holder who has demanded
and perfected his right to an appraisal of such shares in accordance with
Section 1300 et seq. of the General Corporation Law of California (the "GCLC")
and who has not effectively withdrawn or lost his right to appraisal
("Dissenting Shares") shall not be converted into or represent the right to
receive cash and/or PSI Shares, but the holder thereof shall be entitled only to
such rights as are granted by Section 1300 et seq. of the GCLC. Each holder of
Dissenting Shares who becomes entitled to payment for PSP10 Shares pursuant to
these provisions of the GCLC shall receive payment therefor from the Surviving
Corporation in accordance therewith. If any holder of PSP10 Shares who demands
appraisal in accordance with Section 1300 et seq. of the GCLC shall effectively
withdraw with the consent of the Surviving Corporation or lose (through failure
to perfect or otherwise) his right to appraisal with respect to PSP10 Shares,
such PSP10 Shares shall automatically be converted into the right to receive PSI
Shares pursuant to Section 2.1(b) hereof.
2.4 PSI Shares Unaffected. The Merger shall effect no change in any of
the PSI Shares and no outstanding PSI shares shall be converted or exchanged as
a result of the Merger, and no cash shall be exchangeable and no securities
shall be issuable, with respect thereto.
2.5 Cancellation of Shares Held or Owned by Parties. At the Effective
Time, any PSP10 Shares owned by PSI shall be cancelled and retired and no shares
shall be issuable, and no cash shall be exchangeable, with respect thereto.
E.A-2
<PAGE>
2.6 Exchange of Certificates. After the Effective Time, each holder of
a certificate theretofore evidencing outstanding PSP10 Shares which were
converted into PSI Shares pursuant hereto, upon surrender of such certificate to
First National Bank of Boston (the "Exchange Agent") or such other agent or
agents as shall be appointed by the Surviving Corporation, shall be entitled to
receive a certificate representing the number of whole PSI Shares into which the
PSP10 Shares theretofore represented by the certificate so surrendered shall
have been converted and cash payment in lieu of fractional share interests, if
any. As soon as practicable after the Effective Time, the Exchange Agent will
send a notice and a transmittal form to each holder of PSP10 Shares of record at
the Effective Time whose stock shall have been converted into PSI Shares,
advising such holder of the effectiveness of the Merger and the procedure for
surrendering to the Exchange Agent certificates evidencing PSP10 Shares in
exchange for certificates evidencing PSI Shares.
2.7 Status Until Surrendered. Until surrendered as provided in
Section 2.6 hereof, each outstanding certificate which, prior to the Effective
Time, represented PSP10 Shares (other than Cash Election Shares and Dissenting
Shares, if any) will be deemed for all corporate purposes to evidence ownership
of the number of whole PSI Shares into which the PSP10 Shares evidenced thereby
were converted. However, until such outstanding certificates formerly evidencing
PSP10 Shares are so surrendered, no dividend payable to holders of record of PSI
Shares shall be paid to the holders of such outstanding certificates in respect
of PSP10 Shares, but upon surrender of such certificates by such holders there
shall be paid to such holders the amount of any dividends (without interest)
theretofore paid with respect to such whole PSI Shares as of any record date on
or subsequent to the Effective Time and the amount of any cash (without
interest) payable to such holder in lieu of fractional share interests.
2.8 Transfer of Shares. After the Effective Time, there shall be no
further registration of transfers of PSP10 Shares on the records of PSP10 and,
if certificates formerly evidencing such shares are presented to the Surviving
Corporation, they shall be cancelled and exchanged for certificates evidencing
PSI Shares and cash in lieu of fractional share interests as herein provided.
ARTICLE III
-----------
3.1 Headings. The descriptive headings contained in the Sections of
this Agreement are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
3.2 Parties in Interest. This Agreement, and the rights, interests and
obligations created by this Agreement, shall bind and inure to the benefit of
the parties and their respective successors and permitted assigns, and shall
confer no right, benefit or interest upon any other person, including
shareholders of the respective parties.
3.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be considered one and the same agreement.
3.4 Further Action. If at any time after the Effective Time, the
Surviving Corporation shall determine that any assignments, transfers, deeds or
other assurances are necessary or desirable to vest, perfect or confirm, of
record or otherwise, in the Surviving Corporation, title to any property or
rights of PSP10, the officers of either Constituent Corporation are fully
authorized in the name of PSP10 or otherwise to execute and deliver such
documents and do all things necessary and proper to vest, perfect or confirm
title to such property or rights in the Surviving Corporation.
3.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, without giving effect to
the principles of conflict of laws thereof.
E.A-3
<PAGE>
3.6 Abandonment of Merger. The Constituent Corporations have the power
to abandon the Merger by mutual written consent prior to the filing of this
Agreement with the California Secretary of State.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date first above written.
PUBLIC STORAGE, INC.
By: _________________________________
Harvey Lenkin
President
By: _________________________________
Obren B. Gerich
Senior Vice President
PUBLIC STORAGE PROPERTIES X, INC.
By: _________________________________
B. Wayne Hughes
Chairman of the Board of Directors
and Chief Executive Officer
By: _________________________________
Obren B. Gerich
Secretary
E.A-4
