<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
May 22, 1995
------------
Date of Report (Date of earliest event reported)
MIP PROPERTIES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Maryland 1-8898 52-1394207
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2020 Santa Monica Boulevard, Suite #480
Santa Monica, California 90404
------------------------------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (310) 449-4444
N/A
---
(Former name or former address, if changed since last report.)
<PAGE>
MIP PROPERTIES, INC.
FORM 8-K
MAY 22, 1995
Item 5. Other Events
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The Company announced on May 22, 1995 that it had signed a definitive merger
agreement to be acquired by JER Partners L.L.C., an affiliate of J.E. Robert
Companies, the text of which is as follows:
MIP PROPERTIES TO BE ACQUIRED
BY J.E. ROBERT COMPANIES' AFFILIATE
Santa Monica, California, May 22, 1995 -- MIP Properties, Inc. (AMEX-MIP), an
equity real estate investment trust (REIT), announced today that it has signed a
definitive merger agreement to be acquired by JER Partners L.L.C., an affiliate
of J.E. Robert Companies ("JER"), a leading U.S. real estate investment and
asset management firm.
Under the terms of the agreement, JER Partners L.L.C. will acquire 100% of the
outstanding MIP stock through a merger transaction for $2.475 per share in cash,
or approximately $23.1 million. In addition, the properties and partnerships are
encumbered by approximately $47 million in debt resulting in an aggregate
consideration of approximately $70.1 million.
The proposed transaction is subject to a number of conditions, including the
receipt of all required government approvals, the receipt of a financing
commitment by JER Partners L.L.C., and the approval of at least 80% of the
outstanding shares of MIP. It is anticipated that pending these approvals the
transaction will close during the third quarter of 1995.
JER Partners L.L.C. has obtained a proxy from certain stockholders of MIP owning
an aggregate of 1,380,964 shares of common stock of MIP, or approximately 15% of
all of the outstanding shares of common stock of MIP, to vote such shares in
favor of the merger. In addition, JER Partners L.L.C. owns approximately 1.7% of
the outstanding shares of common stock of MIP and members of the Board of
Directors of MIP collectively control approximately 4.3% of the outstanding
shares of the common stock of MIP.
Commenting on the proposed transaction, Carl C. Gregory, III, Chairman of the
Board and Chief Executive Officer, said, "The Board enthusiastically supports
this transaction because it believes that it is the best alternative to deliver
the highest value to the stockholders in the near term. JER is a successful,
nationally respected company that has completed its due diligence and entered
into a transaction which the Board believes is in the stockholders' best
interest."
<PAGE>
The agreement with MIP marks the second time in the last six weeks that JER has
announced plans to acquire a REIT. In mid-April, JER signed a nonbinding letter
of intent to acquire Landsing Pacific Fund, Inc. (AMEX-LPF), a self-administered
equity REIT based in San Mateo, California for a total consideration of $70
million. The MIP transaction, along with Landsing, represent what are believed
to be the first acquisitions by a private company of a public REIT in recent
years.
"JER sees exceptional opportunities in the consolidation of the REIT industry,
particularly smaller REITs that can benefit from JER's access to capital and
management expertise," said Joseph E. Robert, Jr., founder, Chairman of the
Board and CEO of the J.E. Robert Companies.
MIP Properties is a self-administered REIT with 12 equity investments all
located in California, including four office buildings comprising 519,000 square
feet; two industrial facilities totaling 195,000 square feet; three retail
buildings consisting of 185,000 square feet; and 21 acres of land zoned for
office and industrial use.
Founded in 1981, J.E. Robert Companies employs approximately 600 people and is
headquartered in Alexandria, Virginia, with regional offices in Boston, Dallas,
Houston, Los Angeles, Fort Lauderdale, and Milford and Stamford, Connecticut.
JER is one of the nation's largest real estate and commercial mortgage
investment advisory firms. In the past four years, the company has acquired more
than $7 billion in real estate-related assets with its capital partners and
recovered on more than $6 billion in troubled assets for various government and
institutional clients nationwide.
Item 7. Financial Statements and Exhibits
---------------------------------
(a) Not applicable
(b) Not applicable
(c) Exhibits
10.28 Agreement and Plan of Merger dated as of May 21, 1995,
by and among MIP Properties, Inc., JER Partners, L.L.C.
and MIP Acquisition Corporation.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MIP PROPERTIES, INC.
Dated: May 25, 1995 By: /s/ MARSHA Z. DAY
---------------------------
Marsha Z. Day
Duly Authorized Officer and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
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Exhibit No. Description of Documents
- ----------- ------------------------
10.28 Agreement and Plan of Merger dated as of May 21, 1995,
by and among MIP Properties, Inc., JER Partners, L.L.C.,
and MIP Acquisition Corporation.
<PAGE>
AGREEMENT AND PLAN OF MERGER
DATED AS OF MAY 21, 1995
BY AND AMONG
MIP PROPERTIES, INC.,
JER PARTNERS, L.L.C.,
AND
MIP ACQUISITION CORPORATION
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<C> <S> <C>
ARTICLE I THE MERGER; CLOSING; EFFECTIVE TIME.......................... 1
1.1 The Merger................................................... 1
1.2 Closing...................................................... 2
1.3 Effective Time............................................... 2
ARTICLE II CHARTER AND BYLAWS OF THE SURVIVING CORPORATION 2
2.1 Charter...................................................... 2
2.2 Bylaws....................................................... 2
ARTICLE III OFFICERS AND DIRECTORS OF THE SURVIVING CORPORATION.......... 3
3.1 Officers and Directors....................................... 3
ARTICLE IV CONVERSION AND CANCELLATION OF SHARES IN THE MERGER.......... 3
4.1 Conversion and Cancellation of Shares........................ 3
4.2 Payment for Shares........................................... 4
4.3 Transfer of Shares After the Effective Time.................. 5
ARTICLE V REPRESENTATIONS AND WARRANTIES............................... 5
5.1 Representations and Warranties of the Company................ 5
5.2 Representations and Warranties of Purchaser and Merger Sub... 20
ARTICLE VI COVENANTS.................................................... 22
6.1 Interim Operations of the Company............................ 22
6.2 Meeting of the Company's Stockholders........................ 25
6.3 No Solicitation.............................................. 26
6.4 Estoppel Certificates........................................ 26
6.5 Filings; Consents; Other Action.............................. 27
6.6 Access....................................................... 27
6.7 Publicity.................................................... 27
6.8 Stock Options and Deferred Shares............................ 28
6.9 Indemnification.............................................. 28
6.10 Financing.................................................... 29
6.11 SEC Filings.................................................. 29
6.12 Cooperation with Lender Diligence............................ 30
6.13 Financial and Operating Covenants of Purchaser............... 30
6.14 Notice of Developments....................................... 30
6.15 Purchase Agreement........................................... 30
</TABLE>
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<TABLE>
<C> <S> <C>
ARTICLE VII CONDITIONS................................................... 30
7.1 Conditions to Obligations of the Purchasing Entities......... 30
7.2 Conditions to Obligation of the Company...................... 33
ARTICLE VIII TERMINATION.................................................. 34
8.1 Termination by Mutual Consent................................ 34
8.2 Termination by Either Purchaser or the Company............... 34
8.3 Termination by Purchaser..................................... 34
8.4 Termination by the Company................................... 35
8.5 Effect of Termination and Abandonment........................ 35
8.6 Termination Fee.............................................. 36
ARTICLE IX MISCELLANEOUS AND GENERAL.................................... 36
9.1 Payment of Expenses.......................................... 36
9.2 Survival..................................................... 36
9.3 Amendment.................................................... 37
9.4 Waiver of Conditions......................................... 37
9.5 Counterparts................................................. 37
9.6 Governing Law................................................ 37
9.7 Notices...................................................... 37
9.8 Entire Agreement; Assignment................................. 38
9.9 Captions..................................................... 38
9.10 Waiver....................................................... 38
9.11 Severability................................................. 38
9.12 Attorneys' Fees.............................................. 38
ARTICLE X CERTAIN DEFINITIONS.......................................... 39
10.1 Definition of "Knowledge of the Company"..................... 39
10.2 Definition of "Subsidiary"................................... 39
SIGNATURE PAGE................................................................ 41
</TABLE>
EXHIBITS
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EXHIBIT A Form of Articles of Merger
EXHIBIT B Substance of Opinion of AMLGM, Corporate Counsel to the Company
EXHIBIT C Substance of Opinion of Real Estate Counsel to the Company
EXHIBIT D Substance of Opinion of Piper & Marbury, Special Maryland
Counsel to the Company
EXHIBIT E Form of Estoppel Certificate
EXHIBIT F Substance of Opinion of SASMF, Special Counsel to Purchaser
and Merger Sub
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EXHIBIT G Form of Opinion of Gordon, Feinblatt, Rothman, Hoffberger &
Hollander, Special Maryland Counsel to Purchaser and Merger Sub
SCHEDULES
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SCHEDULE 5.1(a) Subsidiaries and Partnerships
SCHEDULE 5.1(d) Breaches or Defaults; Consents
SCHEDULE 5.1(f) Changes
SCHEDULE 5.1(g) Benefit Plans
SCHEDULE 5.1(i) Tax Liens, Waivers or Extensions
SCHEDULE 5.1(l) Material Contracts
SCHEDULE 5.1(m) Real Property
SCHEDULE 5.1(m) (iii) Permits and Proceedings
SCHEDULE 5.1(m) (iv) Engineering Reports
SCHEDULE 5.1(m) (v) Improvements
SCHEDULE 5.1(p) Litigation
SCHEDULE 5.1(s) Related Party Transactions
SCHEDULE 5.1(t) Environmental Reports
SCHEDULE 5.1(u) Insurance
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<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into
as of May 21, 1995 by and among MIP PROPERTIES, INC., a Maryland corporation
(the "Company"), JER PARTNERS, L.L.C., a Maryland limited liability company
("Purchaser"), and MIP ACQUISITION CORPORATION, a Maryland corporation and a
wholly-owned subsidiary of Purchaser ("Merger Sub"). The Purchaser and Merger
Sub are sometimes hereinafter collectively referred to as the "Purchasing
Entities".
R E C I T A L S :
----------------
A. Purchaser and the Board of Directors of the Company each have
determined that it is in the best interests of their members and stockholders,
respectively, for Purchaser to acquire the Company upon the terms and subject to
the conditions set forth herein.
B. The Company, Purchaser and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement.
A G R E E M E N T :
------------------
In consideration of the premises and of the representations,
warranties, covenants and agreements contained herein, the parties hereto agree
as follows:
ARTICLE I
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THE MERGER; CLOSING; EFFECTIVE TIME
-----------------------------------
1.1 The Merger
--- ----------
Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 1.3) Merger Sub shall be merged with and
into the Company and the separate corporate existence of Merger Sub shall
thereupon cease (the "Merger"). The Company shall be the surviving corporation
in the Merger (sometimes hereinafter referred to as the "Surviving Corporation")
and shall continue to be governed by the laws of the State of Maryland. The
separate corporate existence of the Company with all of its rights, privileges,
immunities, powers and franchises shall continue unaffected by the Merger,
subject to the provisions of Article II hereof (as it relates to the Charter and
Bylaws of the Company), Article III hereof (as it relates to directors and
officers of the Company) and Article IV hereof (as it relates to the capital
stock of the Company), and the Company shall succeed, without other transfer, to
all of the rights and properties of Merger Sub and shall be subject to all of
the debts and liabilities of Merger Sub.
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The Merger shall have the effects specified in the Maryland General Corporation
Law (the "MCL").
1.2 Closing
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The closing of the Merger (the "Closing") shall take place (i) at the
offices of Allen, Matkins, Leck, Gamble & Mallory, 515 South Figueroa Street,
Eighth Floor, Los Angeles, California 90071, at 9:00 A.M., California time, on
the first business day following the date upon which the last to be fulfilled or
waived of the conditions set forth in Article VII hereof shall be fulfilled or
waived in accordance with this Agreement or (ii) at such other place and time
and/or on such other date as the Company and Purchaser may agree.
1.3 Effective Time
--- --------------
As soon as practicable following the Closing, and provided that this
Agreement has not been terminated or abandoned pursuant to Article VIII hereof,
Articles of Merger in the form attached hereto as Exhibit A (the "Articles of
---------
Merger") shall be promptly filed and recorded in accordance with the MCL. The
Merger shall thereupon become effective at the time and date of such filing or
at such date and time otherwise specified in the Articles of Merger, and such
time is hereinafter referred to as the "Effective Time".
ARTICLE II
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CHARTER AND BYLAWS
-------------------
OF THE SURVIVING CORPORATION
----------------------------
2.1 Charter
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By operation of the Merger, the Articles of Restatement of Charter
(the "Charter") of the Company, as the Surviving Corporation, shall be amended
and restated in its entirety as of the Effective Time to be in the form of the
Charter of Merger Sub as in effect immediately prior to the Effective Time,
until duly amended in accordance with the terms thereof and the MCL, except as
otherwise set forth in the Articles of Merger.
2.2 Bylaws
--- ------
Immediately after the Effective Time, the Bylaws of the Company, as
the Surviving Corporation, shall be amended and restated in their entirety, by
action of the Board of Directors of the Surviving Corporation, or by Purchaser
as the sole stockholder of the Surviving Corporation, to be in the form of the
Bylaws of Merger Sub as in effect immediately prior to the Effective Time, until
duly amended in accordance with the terms thereof and the MCL.
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ARTICLE III
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OFFICERS AND DIRECTORS
-----------------------
OF THE SURVIVING CORPORATION
----------------------------
3.1 Officers and Directors
--- ----------------------
At the Effective Time, each of the officers and directors of the
Company shall submit written resignations as officers and/or directors of the
Company, and immediately thereafter the Purchaser, as the sole stockholder of
the Surviving Corporation, shall cause the officers and directors of the Merger
Sub immediately prior to the Effective Time to be elected as the officers and
directors, respectively, of the Surviving Corporation. Such directors and
officers shall remain as such until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Charter and Bylaws.
ARTICLE IV
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CONVERSION AND CANCELLATION
----------------------------
OF SHARES IN THE MERGER
-----------------------
4.1 Conversion and Cancellation of Shares
--- -------------------------------------
The manner of converting and canceling shares of the Company and
Merger Sub in the Merger shall be as follows:
(a) At the Effective Time, each share of Common Stock, $.01 par
value per share, of the Company (the "Common Stock") issued and outstanding
immediately prior to the Effective Time (other than shares owned by one of
the Purchasing Entities but including all shares that have been deferred
under the Company's First Amended and Restated Long-Term Incentive
Compensation Plan and Fee Deferral Plan) (the "Shares") shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into the right to receive, without interest, an amount in cash
equal to $2.475 per share (the "Cash Merger Consideration").
(b) At the Effective Time, all Shares, by virtue of the Merger
and without any action on the part of the holders thereof, shall cease to
be outstanding and shall be canceled and retired and shall cease to exist,
and each holder of a certificate representing any such Shares shall
thereafter cease to have any rights with respect to such Shares, except the
right of holders (other than the Purchasing Entities) to receive the Cash
Merger Consideration upon the surrender of such certificate in accordance
with Section 4.2.
(c) At the Effective Time, each share of Common Stock issued and
outstanding at the Effective Time and owned by any of the Purchasing
Entities shall, by virtue of the Merger and without any action on the part
of the holder thereof, cease to be
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<PAGE>
outstanding, shall be canceled and retired without payment of any
consideration therefor and shall cease to exist.
(d) At the Effective Time, each share of Common Stock, $.01 par
value per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into and become one fully paid and
nonassessable share of Common Stock of the Surviving Corporation.
4.2 Payment for Shares
--- ------------------
(a) At the Effective Time, Purchaser shall make available or
cause to be made available to an exchange agent mutually satisfactory to
the Company and Purchaser (the "Exchange Agent"), amounts sufficient in the
aggregate to provide all funds necessary for the Exchange Agent to make
payments pursuant to Section 4.1(a) hereof to holders of Shares issued and
outstanding immediately prior to the Effective Time who are to receive the
Cash Merger Consideration. Promptly, and in no event later than five (5)
business days, after the Effective Time, the Surviving Corporation shall
cause to be mailed to each person who was, at the Effective Time, a holder
of record (other than any of the Purchasing Entities) of issued and
outstanding Shares, a form (mutually agreed to by Purchaser and the
Company) of letter of transmittal and instructions for use in effecting the
surrender of the certificates which, immediately prior to the Effective
Time, represented any of such Shares in exchange for payment of the Cash
Merger Consideration therefor. Upon surrender to the Exchange Agent of
such certificates, together with such letter of transmittal, duly executed
and completed in accordance with the instructions thereto, and only upon
such surrender, the Purchaser shall promptly cause to be delivered to the
persons entitled thereto a check in the amount that such persons are
entitled under Section 4.1(a) hereof, after giving effect to any required
tax withholdings.
(b) No interest will be paid or will accrue on the amount payable
upon the surrender of any certificate, whether or not such certificate was
surrendered for the Cash Merger Consideration. If payment is to be made to
a person other than the registered holder of the certificate surrendered,
it shall be a condition of such payment that the certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer, as
determined by the Exchange Agent or Purchaser, and that the person
requesting such payment shall pay any transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
certificate surrendered or establish to the satisfaction of the Purchaser
or the Exchange Agent that such tax has been paid or is not payable. One
hundred and eighty days following the Effective Time, Purchaser shall be
entitled to cause the Exchange Agent to deliver to it any funds (including
any interest received with respect thereto) made available to the Exchange
Agent which have not been disbursed to holders of certificates formerly
representing Shares outstanding on the Effective Time, and thereafter such
holders shall be entitled to look to the Purchaser only as general
creditors thereof with respect to the Cash Merger Consideration payable
upon due surrender of their certificates. Notwithstanding the
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<PAGE>
foregoing, neither the Exchange Agent nor any party hereto shall be liable
to any holder of certificates formerly representing Shares for any amount
paid to a public official as required by any applicable abandoned property,
escheat or similar law.
(c) The Company shall pay all charges and expenses, including
those of the Exchange Agent, in connection with the exchange of Shares for
the Cash Merger Consideration.
4.3 Transfer of Shares After the Effective Time
--- -------------------------------------------
No transfers of Shares shall be made on the stock transfer books of
the Surviving Corporation at or after the Effective Time. If, after the
Effective Time, certificates representing Shares are presented to the Surviving
Corporation or its agents, they shall be canceled and exchanged for the Cash
Merger Consideration after giving effect to any required tax withholdings. To
the extent that any amounts are withheld, such amounts shall be treated as
having been paid. Until such certificates are surrendered, each certificate
shall be deemed to evidence only the right to receive the Cash Merger
Consideration upon such surrender in accordance with the terms and conditions
set forth herein.
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
5.1 Representations and Warranties of the Company
--- ---------------------------------------------
The Company hereby represents and warrants to Purchaser and Merger Sub
that:
(a) Corporate Organization and Qualification. The Company is a
----------------------------------------
corporation duly organized, validly existing and in good standing under the
laws of the State of Maryland and is in good standing as a foreign
corporation in each jurisdiction where the properties owned, leased or
operated, or the business conducted, by it require such qualification,
except where such failure to so qualify or be in such good standing, would
not have a material adverse effect on the financial condition, properties,
business or results of operations of the Company and its subsidiaries taken
as a whole (a "Material Adverse Effect"). Redwood Shores MIP, Inc., a
California corporation and a wholly-owned subsidiary of the Company
("Redwood"), is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and is in good standing
as a foreign corporation in each jurisdiction where the properties owned,
leased or operated, or the business conducted, by it require such
qualification, except where such failure to so qualify or be in such good
standing, would not have a Material Adverse Effect. The Company, Redwood
and, to the Knowledge of the Company (as defined in Section 10.1 hereof),
the Partnerships have the requisite corporate or partnership power and
corporate or partnership authority, as applicable, to carry on their
respective businesses as they are now being conducted. Schedule 5.1(a)
---------------
sets forth: each of the Company's subsidiaries (as defined in Section 10.2
hereof); each subsidiary's jurisdiction of organization; each partnership,
joint venture or other organization, including, but not
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limited to, Discovery Plaza, Shorebreeze I and II, and Harbor Point (the
"Partnerships"), in which the Company or any of its subsidiaries owns any
beneficial equity interest and the jurisdiction of organization and the
nature and percentage of the Company's ownership interest in such
Partnerships; and the names of persons other than the Company that are
equity owners of the Company's subsidiaries or, to the Knowledge of the
Company, are equity owners of any such Partnership. Except for Redwood,
which is the general partner of Shorebreeze Associates, a California
limited partnership ("Shorebreeze LP"), each of the subsidiaries listed on
Schedule 5.1(a) is an inactive corporation with no substantial assets,
---------------
liabilities (contingent or otherwise) in excess of $10,000 in the aggregate
or businesses. To the Knowledge of the Company, each of the Partnerships
has been duly organized and is validly existing as a limited partnership
under the laws of the jurisdiction of its organization. With respect to the
Company's and Redwood's interests in its subsidiaries and the Partnerships,
(i) the Company or Redwood (as the case may be) owns such interests free
and clear of all liens, pledges, security interests, claims, options or
other encumbrances, except as set forth in the partnership agreements
(ii) except as set forth in Schedule 5.1(d), neither the Company nor
---------------
Redwood is in breach of any provision of any agreement, document or
contract governing the Company's or Redwood's rights in or to the interests
owned or held by the Company or Redwood which could, individually or in the
aggregate, have a Material Adverse Effect (all of which agreements,
documents and contracts are set forth on Schedule 5.1(l), are unmodified as
---------------
described therein and are in full force and effect) and (iii) to the
Knowledge of the Company, the other parties to such agreements, documents
or contracts are not in breach of any of their respective obligations under
such agreements, documents or contracts which could, individually or in the
aggregate, have a Material Adverse Effect. Other than as disclosed in
Schedule 5.1(a), the Company has no subsidiaries or equity investments in
---------------
any corporation, partnership, joint venture or other organization. The
Company has made available to Purchaser a complete and correct copy of the
Company's Charter and Bylaws, Redwood's Articles of Incorporation and
Bylaws, and the organizational documents of the Partnerships, each as
amended to date. The Company's Charter and Bylaws, Redwood's Articles of
Incorporation and Bylaws, and, to the Knowledge of the Company, the
organizational documents of the Partnerships, so delivered are in full
force and effect as of the date hereof.
(b) Authorized Capital. The authorized capital stock of the
------------------
Company consists of: 75,000,000 shares of Common Stock, of which (i)
9,223,105 shares of Common Stock are outstanding on the date hereof, (ii)
5,000 shares of Common Stock are issuable upon exercise of currently
outstanding stock options granted under the Stock Plans (as defined below)
and with per share exercise prices below the per share Cash Merger
Consideration and (iii) 110,492 shares of Common Stock have been deferred
under the Company's Stock Plans; and 25,000,000 shares of preferred stock,
$.01 par value per share, of which no shares are outstanding. All of the
outstanding shares of Common Stock have been duly authorized and are
validly issued, fully paid and nonassessable. At the Effective Time, there
will be a maximum of 9,338,597 shares of Common Stock outstanding and
entitled to conversion into the Cash Merger Consideration. The Company has
no shares of Common Stock reserved for issuance,
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except that there are 636,895 shares of Common Stock reserved for issuance
pursuant to the Company's Incentive Stock Option Plan, Non-Qualified Stock
Option Plan, First Amended and Restated Directors Stock Plan, Fee Deferral
Plan and First Amended and Restated Long-Term Incentive Compensation Plan
(collectively, the "Stock Plans"), of which there are (1) 320,000 shares of
Common Stock subject to options outstanding under the Stock Plans (5,000 of
which are currently exercisable and have per share exercise prices below
the per share Cash Merger Consideration), and (2) 110,492 shares of Common
Stock that have been deferred under the First Amended and Restated Long-
Term Incentive Compensation Plan and/or the Fee Deferral Plan (the
"Deferred Shares"). Except as set forth above and in Schedule 5.1(a), there
---------------
are no shares of capital stock of the Company authorized, issued or
outstanding and there are no preemptive rights or any outstanding
subscriptions, options, warrants, rights (including any form of "poison
pill" rights), convertible securities or other agreements or commitments of
any character to which the Company or any of its subsidiaries is a party
relating to the issued or unissued capital stock or other securities of the
Company or any of its subsidiaries.
(c) Corporate Authority. Subject only to approval of this
-------------------
Agreement and the Merger by the holders of not less than eighty percent
(80%) of the outstanding shares of Common Stock, the Company has the
requisite corporate power and corporate authority and has taken all
corporate action necessary in order to execute and deliver this Agreement
and consummate the transactions contemplated hereby. This Agreement is a
valid and binding agreement of the Company enforceable against the Company
in accordance with its terms, except to the extent that such enforcement
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
by general principles of equity.
(d) Governmental Filings; No Violations.
-----------------------------------
(i) Other than the filings provided for in Section 1.3,
state securities and "Blue Sky" laws, and the Securities Exchange Act
of 1934, as amended (the "Exchange Act") (together, the "Regulatory
Filings"), no notices, reports or other filings are required to be
made by the Company or Redwood with, nor are any consents,
registrations, approvals, permits or authorizations required to be
obtained by the Company or Redwood from, any governmental or
regulatory authorities of the United States, the several states or any
foreign jurisdiction in connection with the execution and delivery of
this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby, except for such notices,
reports, filings, consents, registrations, approvals, permits or
authorizations, the failure of which to make or obtain would not have
a Material Adverse Effect or would not prevent or materially delay the
consummation of the Merger.
(ii) The execution and delivery of this Agreement by the
Company do not, and, assuming the requisite approval of the Company's
stockholders is obtained, the consummation by the Company of the
transactions
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contemplated by this Agreement will not, constitute or result in (1) a
breach or violation of, or a default under, or a conflict with, the
Charter or Bylaws of the Company, the Articles of Incorporation or
Bylaws of Redwood, or the organizational documents of the
Partnerships, (2) to the Knowledge of the Company, except as set forth
in Schedule 5.1(d), (A) a breach or violation of, a default under or
---------------
the triggering of any payment or other obligations pursuant to, any
existing Benefit Plan (as defined in Section 5.1(g)) or any grant or
award made under any such Benefit Plan, (B) with or without the giving
of notice or passage of time, a breach or violation of, a default
under, the acceleration of or the creation of a lien, pledge, charge,
security interest or similar encumbrance on assets pursuant to, or
being declared void or voidable, any provision of any Material
Contract (listed on Schedule 5.1(l)) of the Company, Redwood, or, to
----------------
the Knowledge of the Company, the Partnerships, or (C) a violation of
or a default under any law, rule, ordinance, regulation, judgment,
decree, order, award, permit or license to which the Company, Redwood
or, to the Knowledge of the Company, the Partnerships are subject,
except, in the case of clauses 2(A), (B) and (C) above, for such
breaches, violations, defaults, accelerations, creations of liens or
declarations of voidability that, alone or in the aggregate, would not
have a Material Adverse Effect or that would not prevent or materially
delay the consummation of the Merger.
(e) Company Reports; Financial Statements. The Company has filed
-------------------------------------
in a timely manner all forms, reports and documents (collectively, the
"Company Reports") required to be filed by it since December 31, 1992 under
the Securities Act of 1933, as amended, the Exchange Act, and the rules and
regulations promulgated thereunder (the "Securities Laws"). The Company
has delivered to Purchaser all the Company Reports, each in the form
(including exhibits and any amendments thereto) filed with the Securities
and Exchange Commission (the "SEC"). As of their respective dates, the
Company Reports complied as to form in all material respects with the
applicable requirements of the Securities Laws and did 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 therein,
in the light of the circumstances under which they were made, not
misleading. Each of the Consolidated Balance Sheets included in or
incorporated by reference into the Company Reports (including the related
notes and schedules) fairly presents the consolidated financial position of
the Company and its subsidiaries as of its date, and each of the
consolidated statements of income and of cash flows included in or
incorporated by reference into the Company Reports (including any related
notes and schedules) fairly presents the consolidated results of
operations, retained earnings 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,
which, with respect to unaudited statements after December 31, 1994, are
not expected to be material in amount), in each case in accordance with
generally accepted accounting principles ("GAAP") consistently applied
during the periods involved, except as may be noted therein. Except as and
to the extent set forth in the Company Reports, neither the Company nor
Redwood has any material liabilities or
-8-
<PAGE>
material obligations of any nature (whether accrued, absolute, contingent
or otherwise) that would be required to be reflected on, or reserved
against in, a consolidated balance sheet of the Company or in the notes
thereto, prepared in accordance with GAAP consistently applied, except for
(i) liabilities or obligations arising in the ordinary course of business
since December 31, 1994, and (ii) liabilities or obligations which have
been incurred for legal, accounting and investment banking fees and out-of-
pocket expenses in connection with the Merger and the transactions related
thereto.
(f) Absence of Certain Changes. Except as set forth on Schedule
-------------------------- --------
5.1(f), since December 31, 1994, the Company and Redwood have, and, to the
------
Knowledge of the Company, the Partnerships have, conducted their respective
businesses only in, and have not engaged in any material commitment,
contractual obligations, borrowing, capital expenditure or transaction
other than in, the ordinary and usual course of business and there has not
been:
(i) any material adverse change in the financial condition,
properties, business or results of operations of the Company and
Redwood taken as a whole or, to the Knowledge of the Company, the
Partnerships, or to the Knowledge of the Company, any development or
combination of developments which would result in any such change,
other than developments affecting industry, economic and market
conditions generally;
(ii) any declaration, setting aside or payment of any
dividend or other distribution with respect to the capital stock of
the Company or Redwood or, to the Knowledge of the Company, any
interest in any Partnership;
(iii) any change by the Company or Redwood or, to the
Knowledge of the Company, any Partnership, in accounting principles,
practices or methods other than required by GAAP or as set forth in
the Company Reports;
(iv) any commitment, contractual obligation, borrowing,
capital expenditure or transaction (each a "Commitment") entered into
by the Company or Redwood, or, to the Knowledge of the Company, the
Partnerships, other than (1) immaterial Commitments entered into in
the ordinary course of business which may be canceled by the Company
or Redwood or, to the Knowledge of the Company, such Partnership
without penalty upon not more than 30 days' notice, (2) Leases
covering less than 3,000 square feet in any individual case and (3)
Commitments involving obligations that do not exceed $10,000
individually or $100,000 in the aggregate;
(v) any increase in the compensation (including, without
limitation, bonuses or severance payments) payable or to become
payable by the Company or Redwood to any of its employees, directors
or officers other than increases in the ordinary course of business
and consistent with past practice and except as provided in Schedule
--------
5.1(g) with respect to certain officers and in Section 7.1(h) hereof
------
with respect to Carl C. Gregory, III;
-9-
<PAGE>
(vi) subject to de minimis exceptions, any payment or
-- -------
agreement to pay by the Company or Redwood any pension, retirement
allowance or other employee benefit to any of its past or present
directors, officers or employees, except as required by previously
existing plans, agreements or arrangements or except as otherwise
permitted by this Agreement; or
(vii) any amendment to the Charter or Bylaws of the Company
or the organizational documents of the Company's subsidiaries or, to
the Knowledge of the Company, the Partnerships except for any
amendments filed as exhibits to the Company's Annual Report on Form
10-K/A for the year ended December 31, 1994;
except for sales of real estate completed prior to the date hereof and set
forth on Schedule 5.1(f), the sales of approximately six acres of the North
---------------
Bay land and the refinancing of outstanding loans with respect to
Shorebreeze I and II, the terms of which are set forth on Schedule 5.1(f).
---------------
To the Knowledge of the Company, none of the Partnerships has any
employees.
(g) Employee Benefits.
-----------------
(i) Schedule 5.1(g) contains a true and complete list of
---------------
each collective bargaining, bonus, deferred compensation, incentive
compensation, thrift, savings, stock purchase, stock option, severance
or termination pay, hospitalization or other medical, life or other
insurance, supplemental unemployment benefits, profit-sharing,
pension, employee stock ownership, or retirement plan, program,
agreement or arrangement, and each other employee benefit plan,
program, agreement or arrangement, sponsored, maintained or
contributed to or required to be contributed to by the Company or
Redwood or by any trade or business, whether or not incorporated (an
"ERISA Affiliate"), that together with the Company would be deemed a
"single employer" within the meaning of section 4001 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), for the
benefit of any employee or terminated employee of the Company or any
ERISA Affiliate, whether formal or informal and whether legally
binding or not (collectively, the "Benefit Plans"). Schedule 5.1(g)
---------------
identifies each of the Benefit Plans that is an "employee benefit
plan," as that term is defined in section 3(3) of ERISA (such plans
being hereinafter referred to collectively as the "ERISA Plans").
With respect to each Benefit Plan, the Company has heretofore made
available to Purchaser true and complete copies of each such Benefit
Plan (including all amendments thereto), any trust or other funding
agreement (including all amendments thereto) and the latest financial
statements thereof, and any insurance contracts (including all
amendments thereto).
(ii) Neither the Company nor Redwood currently maintains,
and to the Knowledge of the Company, has no present or contingent
liability with
-10-
<PAGE>
respect to, any "Employee Pension Benefit Plan". "Employee Pension
Benefit Plan" shall mean any employee pension benefit plan (as defined
in Section 3(2)(A) of ERISA) maintained by the Company, Redwood or any
ERISA Affiliate.
(iii) To the Knowledge of the Company, each Benefit Plan
has been operated and administered in all material respects in
accordance with its terms and applicable law, including but not
limited to ERISA and the Internal Revenue Code of 1986, as amended
(the "Code").
(iv) To the Knowledge of the Company, neither the Company,
Redwood nor any ERISA Affiliate, nor any ERISA Plan, nor any trust
created thereunder, nor any trustee or administrator thereof has
engaged in a transaction in connection with which the Company, Redwood
or any ERISA Affiliate, any ERISA Plan, any such trust, or any trustee
or administrator thereof, or any party dealing with any ERISA Plan or
any such trust could be subject to either a civil penalty assessed
pursuant to section 409 or 502(i) of ERISA or a tax imposed pursuant
to section 4975 or 4976 of the Code which, in either case, would have
a Material Adverse Effect.
(v) Full payment has been made, or will be made in
accordance with section 404(a)(6) of the Code, of all amounts which
the Company, Redwood or any ERISA Affiliate is required to pay under
the terms of each ERISA Plan as of the last day of the most recent
plan year thereof ended prior to the date of this Agreement, and all
such amounts properly accrued through the Closing with respect to the
current plan year thereof will be paid by the Company on or prior to
the Closing or will be properly recorded on the Company's balance
sheet; and no ERISA Plan or any trust established thereunder has
incurred any "accumulated funding deficiency" (as defined in section
302 of ERISA and section 412 of the Code), whether or not waived, as
of the last day of the most recent fiscal year of each ERISA Plan
ended prior to the date of this Agreement; and all contributions
required to be made with respect thereto (whether pursuant to the
terms of any ERISA Plan or otherwise) on or prior to the Closing have
been timely made.
(vi) The consummation of the transactions contemplated by
this Agreement will not (1) entitle any current or former employee or
officer of the Company, Redwood or any ERISA Affiliate to severance
pay, unemployment compensation or any other payment, except as
expressly provided in this Agreement, in any schedule attached hereto
or under the terms of the Stock Plans or any stock option or
restricted stock agreements in effect as of the date hereof and
entered into pursuant thereto, (2) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee
or officer except as expressly provided in this Agreement, in any
schedule attached hereto or under the terms of the Stock Plans or any
agreements entered into pursuant thereto, or
-11-
<PAGE>
(3) to the Knowledge of the Company, result in any prohibited
transaction described in section 406 of ERISA or section 4975 of the
Code for which an exemption is not available.
(vii) To the Knowledge of the Company, with respect to each
Benefit Plan that is funded wholly or partially through an insurance
policy, there will be no liability of the Company, Redwood or any
ERISA Affiliate, as of the Closing, under any such insurance policy or
ancillary agreement with respect to such insurance policy in the
nature of a retroactive rate adjustment, loss sharing arrangement or
other actual or contingent liability arising wholly or partially out
of events occurring prior to the Closing.
(viii) To the Knowledge of the Company, there are no
pending, threatened or anticipated claims by or on behalf of any
Benefit Plan, by any employee or beneficiary covered under any such
Benefit Plan, or otherwise involving any such Benefit Plan (other than
routine claims for benefits) which would have a Material Adverse
Effect.
(h) Proxy Statement. The Company's proxy statement with respect
---------------
to the meeting of the Company's stockholders referred to in Section 6.2
(the "Proxy Statement") shall not, on the date the Proxy Statement
(including any amendment or supplement thereto) is first mailed to
stockholders, or at the time of the Stockholders Meeting referred to in
Section 6.2, 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 the light of the circumstances under
which they are made, not misleading. The Proxy Statement shall comply as
to form in all material respects with the requirements of the Exchange Act
and the rules and regulations thereunder. Notwithstanding the foregoing,
the Company makes no representation or warranty with respect to any
information concerning Purchaser or any of its subsidiaries, affiliates or
advisers provided by Purchaser in writing (or confirmed by Purchaser as
being accurate in writing) for inclusion in the Proxy Statement.
(i) Taxes. The Company and Redwood have timely and duly filed,
-----
or caused to be filed, all federal, state, local and foreign tax returns or
reports required to be filed by it, and has paid or withheld, or caused to
be paid or withheld, all such taxes, including any related penalties,
interest and liabilities (any of the foregoing being referred to herein as
a "Tax"), required to be paid as described therein, other than where the
failure to file such returns or to pay or withhold such taxes would not
have a Material Adverse Effect or where such Taxes are being contested in
good faith and for which adequate reserves have been established in
accordance with GAAP. There are no claims or assessments pending or
proceeding against the Company or Redwood for any alleged deficiency in any
Tax, and, to the Knowledge of the Company, there are no threatened Tax
claims or assessments against the Company or Redwood, which if upheld are
reasonably likely to have a Material Adverse Effect. Except as set forth
in Schedule 5.1(i), there are no liens for Taxes upon the assets of the
---------------
Company or Redwood
-12-
<PAGE>
other than statutory liens for current Taxes not yet due. Except as set
forth in Schedule 5.1(i), neither the Company nor Redwood has any currently
---------------
effective waivers or extensions of any applicable statute of limitations to
assess any Taxes. Except as set forth in Schedule 5.1(i), there are no
---------------
outstanding requests by the Company or Redwood for any extension of time
within which to file any return or within which to pay any Taxes shown to
be due on any return. Except as set forth in Schedule 5.1(i), to the
---------------
Knowledge of the Company, no part of the Real Property is included for tax
purposes in a parcel of real estate owned by a third party.
(j) REIT Status. The Company has been organized and operated in
-----------
a manner so as to qualify as a "real estate investment trust" ("REIT")
under Sections 856 through 860 of the Code, and has elected to, has been
qualified to, remains qualified to, be taxed as a REIT under the Code and
pursuant to any applicable state tax laws. The Company has not taken or
omitted to take any action, and no event has occurred, which would cause
the Company to fail to qualify as a REIT, with respect to or in any year in
which any applicable tax statutes of limitations remain open, at the
Effective Time.
(k) Compliance with Law. Except as set forth in the
-------------------
Environmental Reports (as defined in Section 5.2(t)), to the Knowledge of
the Company, the conduct of the Company's and Redwood's business is in
conformity with all foreign, federal, state, local and other governmental
and regulatory requirements, except where such nonconformities,
individually or in the aggregate, would not have a Material Adverse Effect.
Except as set forth in the Environmental Reports, neither the Company nor
Redwood has received written notice of any violation of any zoning,
building, health or other law, ordinance or regulation with respect to the
Real Property or any portion thereof which would have a Material Adverse
Effect and the Company will promptly deliver to the Purchaser any notices
with respect to any violation of any such laws, ordinances or regulations
that the Company or Redwood receives from and after the date hereof. To
the Knowledge of the Company, the present use of the Real Property is in
compliance with all zoning laws as currently in effect except for any
failures to comply that would not have a Material Adverse Effect.
(l) Certain Agreements. Schedule 5.1(l) sets forth a true and
------------------ ---------------
complete list of each note, bond, mortgage, contract, license, lease,
commitment, indenture or other agreement of the Company and/or Redwood in
effect as of the date of this Agreement, (i) which may result in payment by
the Company or Redwood of over $25,000, (ii) which would be required by
Rule 601(b)(10) of SEC Regulation S-K to be filed as an exhibit to an
Annual Report on Form 10-K (other than any Benefit Plan), (iii) with
respect to indebtedness for money borrowed by the Company or Redwood in
excess of $25,000 (other than trade payables incurred in the ordinary and
usual course of business), and to the Knowledge of the Company, with
respect to indebtedness for borrowed money of any Partnership which is
secured by any of the Real Property, (iv) which constitutes any other
liability (including, without limitation, any guarantee, surety contract or
similar instrument), obligation or transaction involving expenditures
required to be made by, or liabilities of, the Company or Redwood in excess
of $25,000,
-13-
<PAGE>
(v) which represents the partnership agreement of each of the Partnerships,
as the same have been amended, supplemented, modified or assigned as of the
date hereof; (vi) with respect to the pending sale of any asset or property
owned by the Company or Redwood or the purchase by the Company or Redwood
of any capital asset, in either case with a purchase price in excess of
$25,000; (vii) permitting or granting the right to use or occupy more than
5,000 square feet of the Real Property (each such agreement being referred
to herein as a "Major Lease") (the items referred to in clauses (i)-(vii)
of this sentence being referred to herein as "Material Contracts"). A true
and complete copy of each Material Contract and each lease that is not a
Major Lease has been made available to Purchaser or its representatives.
Except as set forth in Schedule 5.1(l), each Material Contract is a valid
---------------
and legally binding obligation of the Company or Redwood or, to the
Knowledge of the Company, the Partnerships (as the case may be), is in full
force and effect, all obligations required to be performed thereunder as of
the date hereof by the Company or Redwood or, to the Knowledge of the
Company, the Partnerships (as the case may be) have been performed to date,
neither the Company, Redwood nor, to the Knowledge of the Company, the
Partnerships (as the case may be) has received notice of default under any
Material Contract and, to the Knowledge of the Company, no other party to
any such Material Contract is in default in any respect under the terms
thereof except for such failures to perform or defaults which individually
and in the aggregate would not have a Material Adverse Effect.
(m) Real Property.
-------------
(i) Real Property. Except for mortgages, liens, security
-------------
interests, encumbrances, options, rights, covenants, easement, leases
and other rights in favor of third parties disclosed in the Company
Reports, the ALTA policies and/or Preliminary Title Reports provided
by the Company to Purchaser with respect thereto (the "Title Reports")
or Schedule 5.1(m), and except for liens for taxes, assessments and
----------------
other governmental charges which are not due and payable or which, if
payable, are not yet delinquent, or are being contested in good faith
by appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP (the items described above being
referred to herein as "Permitted Exceptions"), to the Knowledge of the
Company, the Company owns or is a limited partner in, or has a wholly-
owned subsidiary that is a general partner in, a Partnership that owns
good and marketable fee simple title to the real property listed on
Schedule 5.1(m) attached hereto (the "Land"), together with all
---------------
improvements and buildings, structures and fixtures located thereon
(collectively, the "Improvements") and together with all rights,
privileges, easements, rights of way and appurtenances benefiting the
Land and/or the Improvements or used or connected with the beneficial
use or enjoyment of the Land and/or the Improvement (the Land, the
Improvements, and all such rights, privileges, easements, rights of
way, and appurtenances are collectively referred to herein as the
"Real Property"). The Real Property constitutes all of the real
estate properties owned by the Company or Redwood or, to the Knowledge
of the Company, the Partnerships.
-14-
<PAGE>
(ii) Leasehold. Since the date that the Company acquired
---------
title to such Real Property, neither the Company nor Redwood nor, to
the Knowledge of the Company, any of the Partnerships, has received
written notice from any tenant under any of the leases of the Real
Property (the "Leases") (1) that the Company, Redwood or any of the
Partnerships is in default under any of the Leases, or (2) regarding
any physical, structural or mechanical defects on the Real Property or
Improvements that could, in either event, individually or in the
aggregate, have a Material Adverse Effect, and to the Knowledge of the
Company, neither the Company nor Redwood has received any such notice
prior to the date the Company acquired title to such Real Property.
There are no uncured defaults by the Company, Redwood or, to the
Knowledge of the Company, any of the Partnerships, under any of the
Leases or, to the Knowledge of the Company, any uncured defaults by a
tenant under any of the Leases, that could, in either event,
individually or in the aggregate, have a Material Adverse Effect.
(iii) Permits and Proceedings. Except as disclosed on
-----------------------
Schedule 5.1(m)(iii), to the Knowledge of the Company, (1) there are
--------------------
now in full force and effect (A) all certificates, permits, approvals,
consents, authorizations and licenses required by any federal, state,
city or other governmental authority in connection with the ownership,
operation and maintenance of the Real Property, and (B) all
agreements, easements and other rights which are necessary to permit
the lawful use and operation of the buildings and improvements on any
of the Real Property or which are necessary to permit the lawful use
and operation of all driveways, roads and other means of egress and
ingress to and from any of the Real Property, and there is no pending
threat of modification or cancellation of any of the foregoing, (2)
there is no proceeding, pending or threatened, for the total or
partial condemnation of the Real Property or any portion thereof, and
(3) the Company has not received any notice that any rezoning
proceedings are pending or threatened with respect to the Real
Property or any portion thereof, except for such failures to have in
full force and effect or such proceedings that would not have a
Material Adverse Effect.
(iv) Engineering Reports. Except as set forth in Schedule
------------------- --------
5.1(m)(iv), since January 1, 1992 neither the Company nor Redwood has
----------
prepared, caused to be prepared or, to the Knowledge of the Company,
received any engineering reports in respect of the Real Property or
any improvements thereon.
(v) Improvements. Except as set forth in Schedule
------------ --------
5.1(m)(v), to the Knowledge of the Company, (A) all of the
Improvements are structurally sound with no known material defects and
are in good condition, order and repair and are not damaged by waste,
fire, earthquake or earth movement or other casualty or other physical
conditions that could, individually or in the aggregate, have a
Material Adverse Effect, and (B) none of the Improvements is in need
of
-15-
<PAGE>
maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost.
(n) Brokers and Finders. Neither the Company and any of its
-------------------
subsidiaries nor any of their respective officers, directors or employees
has employed any broker or finder or entered into any agreement, contract,
arrangement or understanding with any person or firm which may result in
the obligation of the Company, Redwood, the Purchaser or Merger Sub for any
brokerage, finder's, breakup, topping, termination or similar fees or
commissions in connection with the transactions contemplated herein, except
that the Company has employed Duff & Phelps as its financial advisor and
the Company may retain one or more other investment bankers; provided,
however, the fees to Duff & Phelps and any of the other investment bankers
will not exceed in the aggregate $125,000.
(o) Fairness Opinion. The Company has received the written
----------------
opinion of Duff & Phelps Capital Markets Co. on the date of this Agreement
to the effect that the consideration to be received by the holders of
Company Common Stock in the Merger is fair, from a financial point of view,
to such holders, and a copy of such opinion has been delivered to
Purchaser.
(p) Litigation. Except as disclosed in the Company Reports or
----------
set forth in Schedule 5.1(p), (i) there are no continuing orders,
---------------
injunctions or decrees of any court, arbitrator or governmental authority
to which the Company, Redwood or, to the Knowledge of the Company, any of
the Partnerships, is a party or by which any of their respective properties
or assets are bound, and (ii) there are no suits, claims, actions,
proceedings or investigations pending or, to the Knowledge of the Company,
threatened, against the Company, Redwood or, to the Knowledge of the
Company, pending or threatened against any Partnership, which are
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect or a material adverse effect on the ability of the Company
to consummate the transactions contemplated by this Agreement.
(q) Certain Actions. The Board of Directors of the Company has
---------------
taken the following actions on or prior to the date hereof:
(i) Adopted resolutions exempting from the provisions of
Section 3-602 of the MCL any and all "business combinations" (as that
term is defined in Section 3-601 of the MCL) of any type that the
Company at any time after the date of such adoption may enter into or
be a party to or with or involving J.E. Robert Companies or any of its
existing or future affiliates (as that term is defined in Section 3-
601 of the MCL); and
(ii) Adopted resolutions adopting an amendment to the Bylaws
of the Company exempting the acquisition of shares of Common Stock by
the Purchaser from the provisions of Section 3-701 to 3-708 of the
MCL.
-16-
<PAGE>
Such resolutions have not been amended since their adoption
and remain in full force and effect.
(r) Labor Relations. Neither the Company nor Redwood is a party
---------------
to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor union organization.
To the Knowledge of the Company, there are no organizational efforts with
respect to the formation of a collective bargaining unit presently being
made or threatened involving employees of the Company or Redwood.
(s) Related Party Transactions. Schedule 5.1(s) sets forth all
-------------------------- ---------------
arrangements, agreements and contracts in effect as of the date hereof
entered into by the Company, Redwood or, to the Knowledge of the Company,
any of the Partnerships, with (i) any person who is an officer, director or
affiliate of the Company, Redwood or such Partnership, any relative of any
of the foregoing or any entity of which any of the foregoing is an
affiliate, or (ii) any person who acquired common stock of the Company or
Redwood, or partnership interests in such Partnership in a private
placement.
(t) Environmental.
-------------
(i) Except as set forth in the environmental reports listed
on Schedule 5.1(t) (the "Environmental Reports"), to the Knowledge of
---------------
the Company, the Company, Redwood and each of the tenants of the Real
Property is in compliance with all applicable Environmental Laws
(which compliance includes, but is not limited to, the possession by
the Company, Redwood and, to the Knowledge of the Company, each of the
tenants of the Real Property, of all permits and other governmental
authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof). Except as set
forth in the Environmental Reports or on Schedule 5.1(t), neither the
---------------
Company nor Redwood has received any communication (written or oral)
from any governmental authority that alleges that the Company, Redwood
or any tenant of the Real Property is not in such compliance and, to
the Knowledge of the Company, except as set forth in the Environmental
Reports or on Schedule 5.1(t), there are no past or present actions,
---------------
activities, circumstances, conditions, events or incidents that may
prevent or interfere with such compliance in the future.
(ii) There is no Environmental Claim pending or, to the
Knowledge of the Company, threatened against the Company, Redwood or,
to the Knowledge of the Company, pending or threatened against any
tenant of the Real Property or any other person or entity whose
liability for any Environmental Claim the Company or any of its
subsidiaries has or may have retained or assumed either contractually
or by operation of law.
(iii) To the Knowledge of the Company, except as set forth
in the Environmental Reports, there are no past or present actions,
activities,
-17-
<PAGE>
circumstances, conditions, events or incidents (including, without
limitation, the release, emission, discharge, presence or disposal of
any Hazardous Material) which could form the basis of any
Environmental Claim against the Company, Redwood, or against any
tenant of the Real Property or any other person or entity whose
liability for any Environmental Claim the Company or any of its
subsidiaries has or may have retained or assumed either contractually
or by operation of law.
(iv) To the Knowledge of the Company, except as set forth in
the Environmental Reports, neither the Company, Redwood nor any tenant
of the Real Property nor any other person has Released, placed,
stored, buried or dumped Hazardous Materials or any other wastes
produced by, or resulting from, any business, commercial or industrial
activities, operations or processes, on, beneath or adjacent to the
Real Property or any property formerly owned, operated or leased by
the Company or Redwood, other than general office supplies used in the
ordinary course of business, including without limitation, copier
toner, liquid paper, glue, ink, and cleaning solvents and other than
any such Hazardous Materials used, stored or sold by a tenant of any
such Real Property in the ordinary course of such tenant's business
(which general office supplies and other Hazardous Materials, to the
Knowledge of the Company, were and are stored or disposed of in
accordance with applicable laws and regulations and in a manner such
that, to the Knowledge of the Company, there has been no Release of
any such substances into the indoor or outdoor environment).
(v) The Company has delivered or otherwise made available
for inspection to the Purchaser true, complete and correct copies of
any reports, studies, analyses, tests or monitoring possessed or
initiated by the Company or Redwood pertaining to Hazardous Materials
in, on, beneath or adjacent to the Real Property or regarding the
Company's, Redwood's and, to the Knowledge of the Company, any
tenant's of the Real Property compliance with applicable Environmental
Laws.
(vi) Except as set forth in Schedule 5.1(t), to the
---------------
Knowledge of the Company, no transfers of permits or other
governmental authorizations under Environmental Laws, and no
additional permits or other governmental authorizations under
Environmental Laws, will be required to permit the Purchaser to
conduct the business of the Company and Redwood in full compliance
with all applicable Environmental Laws immediately following the
Effective Time, as conducted by the Company and Redwood immediately
prior to the Effective Time. To the extent that such transfers or
additional permits and other governmental authorizations are required,
the Company agrees, and shall cause Redwood, to cooperate with the
Purchaser to effect such transfers and use commercially reasonable
efforts to obtain such permits and other governmental authorizations
prior to the Effective Time.
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<PAGE>
(vii) The following terms as used in this Section shall
have the following meanings:
"Cleanup" means all actions required to: (1) cleanup,
remove, treat or remediate Hazardous Materials in the indoor or
outdoor environment; (2) prevent the Release of Hazardous Materials so
that they do not migrate, endanger or threaten to endanger public
health or welfare of the indoor or outdoor environment; (3) perform
pre-remedial studies and investigations and post-remedial monitoring
and care; or (4) respond to any government requests for information or
documents in any way relating to cleanup, removal, treatment or
remediation or potential cleanup, removal, treatment or remediation or
Hazardous Materials in the indoor or outdoor environment.
"Environmental Claim" means any claim, action, cause of
action, investigation or notice (written or oral) by any person or
entity alleging potential liability (including, without limitation,
potential liability for investigatory costs, Cleanup costs,
governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or
resulting from (A) the presence, or Release into the indoor or outdoor
environment, of any Hazardous Materials at any location, whether or
not owned or operated by the Company, or (B) circumstances forming the
basis of any violation, or alleged violating, of any Environmental
Law.
"Environmental Laws" means all federal, state, local and
foreign laws and regulations relating to pollution or protection of
human health or the environment, including without limitation, laws
relating to Releases or threatened Releases of Hazardous Materials
into the indoor or outdoor environment (including, without limitation,
ambient air, surface water, ground water, land surface or subsurface
strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release, disposal, transport or
handling of Hazardous Materials and all laws and regulations with
regard to record keeping, notification, disclosure and reporting
requirements respecting Hazardous Materials.
"Hazardous Materials" means all substances defined as
Hazardous Substances, Oils, Pollutants or Contaminants in the National
Oil and Hazardous Substances Pollution Contingency Plan, 40 C.F.R. (S)
300.5, or defined as such by, or regulated as such under, any
Environmental Law.
"Release" means any release, spill, emission, discharge,
leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment
(including, without limitation, ambient air, surface water,
groundwater and surface or subsurface strata) or into or out of any
property, including the movement of Hazardous Materials through or in
the air, soil, surface water, groundwater or property.
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<PAGE>
(u) Insurance. Set forth on Schedule 5.1(u) is a true, correct
--------- ---------------
and complete list of all primary, excess and umbrella policies, bonds and
other forms of insurance currently owned or held by or on behalf of and/or
providing insurance coverage to the Company, Redwood or their respective
properties and assets (or any of its directors, officers, salespersons,
agents or employees) other than such policies held by tenants of any of the
Real Property (collectively, the "Insurance Policies"), including the
following information for each such policy: type(s) of insurance coverage
provided; name of insurer; effective dates; policy numbers; per occurrence
and annual aggregate deductibles, per occurrence and annual aggregate
limits of liability and the extent, if any, to which the limits of
liability have been exhausted. The Insurance Policies held by the Company
and Redwood, and, to the Knowledge of the Company, the Insurance Policies
held by any Partnership with respect to the Real Property, are in full
force and effect, and all premiums currently payable or previously due for
the Insurance Policies held by the Company and Redwood, and, to the
Knowledge of the Company, the Insurance Policies held by any Partnership
with respect to the Real Property, have been paid, and no notice of
cancellation or termination has been received with respect to any of the
Insurance Policies held by the Company or Redwood, or, to the Knowledge of
the Company, the Insurance Policies held by any Partnership with respect to
the Real Property. The Company will use its commercially reasonable
efforts to keep the Insurance Policies in full force and effect through the
date of the Closing. True, correct and complete copies of the Insurance
Policies have previously been provided to the Purchaser.
(v) No Misrepresentations or Omissions. None of the
----------------------------------
representations and warranties made by the Company herein, nor in any of
the closing certificates required to be delivered hereunder or the
schedules attached hereto, contains or shall, as of the Effective Time,
contain any untrue statement of a material fact or omits or shall, as of
the Effective Time, omit to state a material fact necessary to make the
statements made therein not misleading.
5.2 Representations and Warranties of Purchaser and Merger Sub
--- ----------------------------------------------------------
Purchaser and Merger Sub represent and warrant to the Company that:
(a) Limited Liability Company Organization and Qualification.
--------------------------------------------------------
Purchaser is a limited liability company duly formed and organized and in
good standing under the laws of the State of Maryland. Purchaser has the
requisite power and authority to carry on its business as it is now being
conducted. Purchaser has delivered to the Company true, correct and
complete copies of its Articles of Organization and Operating Agreement as
in effect as of the date hereof.
(b) Corporate Organization and Qualification of Merger Sub.
------------------------------------------------------
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Maryland. Merger Sub has the
requisite corporate power and corporate authority to carry on its business
as it is now being conducted. Merger Sub is a wholly-owned subsidiary of
Purchaser and conducts no business and has no assets or liabilities
-20-
<PAGE>
other than its rights and obligations under this Agreement and under that
certain Purchase Agreement dated of even date herewith by and between Palm
Finance Corporation, a California corporation, and Merger Sub (the
"Purchase Agreement"). Merger Sub has delivered to the Company true,
correct and complete copies of its Charter and Bylaws as in effect as of
the date hereof.
(c) Limited Liability Company Authority of Purchaser. Purchaser
------------------------------------------------
has the requisite power and authority and has taken all action necessary in
order to execute and deliver this Agreement and to consummate the
transactions contemplated hereby.
(d) Corporate Authority of Merger Sub. Merger Sub has the
---------------------------------
requisite corporate power and corporate authority and has taken all
corporate action necessary in order to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, including, without
limitation, the taking of all requisite action by the Board of Directors of
Merger Sub and the approval of this Agreement and the Merger by Purchaser,
as the sole stockholder of Merger Sub, in accordance with the requirements
of Title 3, Subtitle 1 of the MCL.
(e) Binding Agreement. This Agreement is a valid and binding
-----------------
agreement of each of the Purchasing Entities enforceable against each of
the Purchasing Entities in accordance with its terms, except to the extent
that such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting creditors'
rights generally and by general principles of equity.
(f) Governmental Filings; No Violations.
-----------------------------------
(i) Other than the Regulatory Filings, no notices, reports
or other filings are required to be made by the Purchasing Entities
with, nor are any consents, registrations, approvals, permits or
authorizations required to be obtained by the Purchasing Entities
from, any governmental or regulatory authorities of the United States,
the several states or any foreign jurisdiction in connection with the
execution and delivery of this Agreement by the Purchasing Entities
and the consummation by the Purchasing Entities of the transactions
contemplated hereby, except for such notices, reports, filings,
consents, registrations, approvals, permits or authorizations, the
failure of which to make or obtain would not have a material adverse
effect on the financial condition, properties, businesses or results
of operations of the Purchasing Entities taken as a whole, or would
prevent or materially delay the consummation of the Merger.
(ii) The execution and delivery of this Agreement by the
Purchasing Entities do not, and the consummation by the Purchasing
Entities of the transactions contemplated by this Agreement will not,
constitute or result in (1) a breach or violation of, or a default
under, or a conflict with, the Articles of Organization or the
Operating Agreement of Purchaser or the Charter or Bylaws of Merger
Sub, or (2)(A) with or without the giving of notice or passage of
time, a breach or violation of, a default under, the acceleration of
or the creation of a
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<PAGE>
lien, pledge, charge, security interest or similar encumbrance on
assets pursuant to or being declared void or voidable, any provision
of any material contract of the Purchasing Entities or (B) a violation
of or a default under any law, rule, ordinance, regulation, judgment,
decree, order, award, permit or license to which the Purchasing
Entities is subject, except, in the case of clause (2)(A) and (B)
above, for such breaches, violations, defaults, accelerations or
creations of liens that, alone or in the aggregate, would not have a
material adverse effect on the financial condition, properties,
businesses or results of operations of the Purchasing Entities taken
as a whole or that would not prevent or materially delay the
consummation of the Merger.
(g) Capitalization; Financial Statements. As of the date hereof,
------------------------------------
the Purchaser has, and at all times through and including the Effective
Time, will have, at least One Million Dollars ($1,000,000) in cash in its
possession and reflected on its unconsolidated balance sheet. The
unconsolidated balance sheet of the Purchaser as of May 15, 1995 (the
"Unconsolidated Balance Sheet"), including the related notes and schedules,
shows cash on hand of at least $1,000,000 and fairly presents the
unconsolidated financial position of the Purchaser as of its date.
Purchaser has no material liabilities (liquidated or unliquidated, fixed or
contingent) other than those set forth in its Unconsolidated Balance Sheet.
(h) Compliance with Law. To the knowledge of the Purchasing
-------------------
Entities, the conduct of each of the Purchasing Entities' businesses is in
conformity with all foreign, federal, state, local other governmental and
regulatory requirements, except where such nonconformities, individually or
in the aggregate, would not have a Material Adverse Effect on the business,
properties, financial condition or results of operation of the Purchasing
Entities taken as a whole.
(i) Brokers and Finders. Neither the Purchasing Entities nor any
-------------------
of their respective officers, directors or employees has employed any
broker or finder or entered into any agreement, contract, arrangement or
understanding with any person or firm which may result in the obligation of
the Company, the Purchaser or Merger Sub for any brokerage, finder's,
breakup, topping, termination or similar fees or commissions in connection
with the transactions contemplated herein.
(j) Proxy Statement. None of the information supplied by the
---------------
Purchasing Entities in writing (or confirmed by any Purchasing Entity as
being accurate in writing) for inclusion in the Proxy Statement and any
amendments or supplements thereto will, at the time they are mailed to the
stockholders of the Company, or at the time of the Company's stockholder's
meeting to approve the transactions contemplated hereby, contain any untrue
statement of a material fact required to be stated therein or omit to state
any material fact required to be stated therein necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
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<PAGE>
(k) Litigation. Except as disclosed in writing to the Company,
----------
there are no claims, suits, actions or proceedings pending or, to the
knowledge of the Purchasing Entities, threatened against either of the
Purchasing Entities which would, if determined adversely against such
Purchasing Entity have a material adverse effect on the business,
operations, properties, results of operations or financial condition of the
Purchasing Entities taken as a whole.
ARTICLE VI
----------
COVENANTS
---------
6.1 Interim Operations of the Company
--- ---------------------------------
The Company covenants and agrees that, after the date hereof and prior
to the Effective Time (unless Purchaser shall otherwise agree in writing and
except as otherwise contemplated by this Agreement, including the schedules
attached hereto):
(a) The business of the Company and its subsidiaries shall be
conducted only in the ordinary and usual course including operating,
repairing, maintaining and managing the Real Property consistent with past
practice, and to the extent consistent therewith, the Company and its
subsidiaries shall use its reasonable commercial efforts to preserve its
business organization intact and maintain its existing relations with
tenants, customers, suppliers, employees and business associates; provided
--------
that if any Real Property or the Improvements thereon is damaged or
destroyed by fire, flood, earthquake or other natural disasters, the
Company shall not be obligated to rebuild or repair such Real Property or
Improvements;
(b) The Company and its subsidiaries shall not, (and, to the
extent that the Company's or Redwood's consent is required to do any of the
following, the Company or Redwood, as the case may be, shall not authorize
or consent to any of the Partnerships doing any of the following) (i)
increase the compensation payable to or to become payable to any director,
officer or employee (other than increases made in the ordinary course of
business and consistent with past practice), (ii) grant any severance or
termination pay (other than pursuant to the normal severance policy of the
Company or Redwood (or any Partnership, as applicable), severance
agreements as in effect on the date of this Agreement and the severance to
be paid to Carl Gregory as contemplated by Section 7.1(h) of this
Agreement) to, or enter into any employment or severance agreement with,
any director, officer or employee other than Carl Gregory as contemplated
by Section 7.1(h) of this Agreement, or (iii) lend or contribute any funds
to any director, officer, employee, affiliate or associate of the Company,
the subsidiaries or the Partnerships;
(c) The Company and its subsidiaries shall not, (and, to the
extent that the Company's or Redwood's consent is required to do any of the
following, the Company or Redwood, as the case may be, shall not authorize
or consent to any of the Partnerships doing any of the following) (i)
acquire or agree to acquire, by merging or
-23-
<PAGE>
consolidating with, by purchasing an equity interest in or a portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division (other
than a wholly owned subsidiary) thereof, or (ii) otherwise acquire or agree
to acquire any assets of any other person (other than the purchase of
assets from suppliers or vendors in the ordinary course of business and
consistent with past practice);
(d) The Company shall only make expenditures in connection with
the Real Property in accordance with the Company's 1995 budget as currently
in effect and shall not make expenditures in excess thereof;
(e) The Company and its subsidiaries shall not, (and, to the
extent that the Company's or Redwood's consent is required to do any of the
following, the Company or Redwood, as the case may be, shall not authorize
or consent to any of the Partnerships doing any of the following) (i)
change any of its methods of accounting in effect at December 31, 1994, or
(ii) make or rescind any express or deemed election relating to taxes,
settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to taxes, or
change any of its methods of reporting income or deductions for federal
income tax purposes from those employed in the preparation of the federal
income tax returns for the taxable year ending December 31, 1994, except as
may be required by law or changes in GAAP;
(f) Neither the Company nor Redwood shall amend its Charter or
Articles of Incorporation, as the case may be, or Bylaws (other than as
contemplated by Article II hereof) or take any action approving,
authorizing or consenting to the amendment of the organizational documents
of any of the subsidiaries or Partnerships;
(g) Neither the Company nor Redwood shall (i) sell or pledge or
agree to sell or pledge any equity securities of its subsidiaries or the
Partnerships owned by it except pursuant to agreements listed in Schedule
--------
5.1(a); (ii) split, combine or reclassify any of their respective
------
outstanding securities; or (iii) declare, set aside or pay any dividend
payable in cash, stock or property with respect to any of their respective
securities; provided, however, that the Company may, after consultation
with Purchaser, make whatever minimum distribution is required to maintain
REIT status;
(h) The Company and its subsidiaries shall not (and with respect
to clauses (ii), (v), (vi) and (viii) below, to the extent that the
Company's or Redwood's consent is required to do any of the matters set
forth in such clauses, the Company or Redwood, as the case may be, shall
not authorize or consent to any of the Partnerships doing any of the
specified actions) (i) issue, sell, pledge, dispose of or encumber any
additional shares of, or securities convertible or exchangeable for, or
options, warrants, calls, commitments or rights of any kind to acquire, any
shares of capital stock of any class of the Company or any subsidiary of
the Company other than pursuant to agreements listed on Schedule 5.1(a),
---------------
other than additional purchases of securities from wholly-owned
subsidiaries of the Company for nominal consideration and, other than
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<PAGE>
issuances of Shares pursuant to "in the money" options outstanding on the
date hereof, or stock grants required to be made after the date hereof,
under the Stock Plans; (ii) transfer, license, guarantee, sell, mortgage,
pledge, dispose of or encumber any of the Real Property, other than the
sales of approximately six acres of North Bay Land, the refinancing of
outstanding loans with respect to Shorebreeze I and II; (iii) transfer,
license, guarantee, sell, mortgage, pledge, dispose of or encumber any
other assets or incur any other liability other than (1) in the ordinary
and usual course of business; (2) the refinancing of Shorebreeze I and II
and (3) assets or liabilities which do not exceed $10,000 individually or
in the aggregate; (iv) incur any indebtedness for borrowed money in excess
of $10,000 in the aggregate (other than trade payables incurred in the
ordinary course of business); (v) enter into any new contracts or
agreements materially affecting the Real Property which will survive the
Merger or will otherwise materially effect the use or operation of the Real
Property after the Merger; (vi) amend, modify, cancel, alter or supplement
in a material way any of the Material Contracts or any agreements which
affect the Real Property, including without limitation, Leases; (vii)
acquire directly or indirectly by redemption or otherwise any shares of the
capital stock of the Company; (viii) authorize capital expenditures in
excess of $50,000 (other than as disclosed to Purchaser in writing prior to
the date hereof and other than tenant improvements constructed in the
ordinary course of business);(ix) make any loans, advances or capital
contributions to, or investments in, any other person; or (x) lease any (1)
Real Property covering in any individual case in excess of 3,000 square
feet other than the leases set forth on Schedule 6.1(g) attached hereto, or
---------------
(2) personal property other than leases which involve personal property or
lease obligations that do not exceed $10,000 individually or in the
aggregate;
(i) Except as listed on Schedule 5.1(g), the Company and Redwood
---------------
shall not establish, adopt, or enter into any plans of the type which would
be considered Benefit Plans if in effect as of the date of this Agreement,
or amend or terminate any existing Benefit Plans;
(j) The Company and Redwood shall not (and, to the extent the
Company's or Redwood's consent is required for any Partnership to do any of
the following, the Company or Redwood, as the case may be, shall not
authorize or consent to any Partnership doing any of the following) settle
or compromise any material claims or material litigation against the
Company, Redwood or any Partnership, as the case may be, for an amount
greater than any reserve established therefor on the date hereof;
(k) Neither the Company nor Redwood shall make any tax election
or cause any insurance policy naming it as a beneficiary or a loss payable
payee to be canceled or terminated as a result of actions or inactions by
the Company or Redwood, as the case may be;
(l) Neither the Company nor Redwood will authorize or enter into
an agreement to do any of the foregoing and, to the extent that the
Company's or Redwood's consent is required by any Partnership for such
Partnership to authorize or enter into any
-25-
<PAGE>
agreement to do any of the foregoing, neither the Company nor Redwood, as
the case may be, shall authorize or consent to such Partnership authorizing
or entering into any such agreement; and
(m) The Company will give Purchaser notice of any event of which
the Company becomes aware that in the Company's judgment may have a
Material Adverse Effect or result in the breach of any Material Contract.
6.2 Meeting of the Company's Stockholders
--- -------------------------------------
The Company will take all action necessary in accordance with
applicable law and its Charter and Bylaws to convene a meeting (the
/"/Stockholders Meeting") of holders of Shares as promptly as practicable to
consider and vote upon the approval of this Agreement and the Merger. Subject
to the exercise of its fiduciary duty in accordance with Section 6.3(b) hereof,
the Board of Directors of the Company shall recommend such approval and the
Company shall take all lawful action to solicit such approval. The Proxy
Statement shall not be filed, and no amendment or supplement to the Proxy
Statement will be made by the Company, without prior consultation with Purchaser
and its counsel.
6.3 No Solicitation
--- ---------------
(a) Except as hereinafter provided to the contrary, the Company
shall not, directly or indirectly, through any director, officer, employee,
agent, financial advisor or otherwise, solicit, initiate or encourage the
submission of an offer or proposal from any person, or engage in
negotiations, furnish confidential information or have discussions,
relating to the acquisition of all or a material portion of the assets of
the Company (whether through an acquisition of assets of, or an equity
interest in, or a merger, exchange offer, tender offer or other business
combination involving the Company) (any of the foregoing being herein
referred to as an "Acquisition Proposal") and it will immediately cease and
cause to be terminated any existing negotiations with any parties conducted
heretofore with respect to any of the foregoing.
(b) Notwithstanding the foregoing, nothing herein shall require
the Company to take any action, or refrain from taking any action, in the
event the Board of Directors shall determine in good faith that such action
or failure would involve a violation of its fiduciary duty to the Company's
stockholders, and is so advised to that effect by its outside legal
counsel. In the event the Company receives any Acquisition Proposal after
the date hereof from a party other than one of the Purchasing Entities, the
Company shall promptly notify Purchaser of the terms of such Acquisition
Proposal and if an Acquisition Proposal is in writing, then the Company
will also promptly deliver to the Purchaser a copy of such written
Acquisition Proposal.
(c) In the event that the Company receives an Acquisition
Proposal, or a communication from a third party with respect to a potential
Acquisition Proposal, and such party requests access to nonpublic
information regarding the Company, then, if the Board of Directors
determines in good faith that the failure to provide such access would
-26-
<PAGE>
involve a violation of its fiduciary duty to the Company's stockholders,
and is so advised to that effect by its outside legal counsel, then the
Company may provide access to such nonpublic information regarding the
Company to such third party; provided that such third party has executed a
--------
confidentiality agreement substantially similar to the Confidentiality
Agreement dated January 3, 1995 by and between the Company and J.E. Robert
Companies (the "Confidentiality Agreement").
6.4 Estoppel Certificates.
--- ---------------------
The Company shall use its commercially reasonable efforts to obtain
and deliver to Purchaser, on or prior to the twentieth business day after the
date hereof (the "Lender Due Diligence Date"), estoppel certificates in the form
of Exhibit E attached hereto from the tenants of the Company's (including the
---------
Partnerships'), Real Property as follows: (i) each of the following tenants:
Jillian's Billiard Club of Long Beach, Inc.; The Home Depot, Inc.; Oracle
Corporation; TRW Technar, Inc.; and Sega of America, Inc.; (ii) at least four of
the following five tenants: Sola Optical U.S.A., Inc.; Magellan Systems
Corporation; GSIC Realty Corporation; California Society of CPA's; and IDS
Financial Services, Inc.; and (iii) at least sixty percent (60%) of the total
number of the tenants (excluding each of the tenants set forth above) that
occupy over 5,000 square feet. In addition, the Company shall use its
commercially reasonable efforts to obtain and deliver to Purchaser, on or prior
to the Closing Date, Estoppel Certificates in the form of Exhibit "E" attached
----------
hereto from at least 80% of the total number of the tenants at Irwindale
Executive Plaza.
6.5 Filings; Consents; Other Action
--- -------------------------------
Subject to the terms and conditions herein provided, the Company,
Redwood and Purchaser shall: (a) promptly make their respective Regulatory
filings and thereafter make any other required submissions under such other
Regulatory Filings; and (b) use their best efforts to promptly take, or cause to
be taken, all other action 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, including
(i) using their best efforts to obtain the consents referred to in Schedule
--------
5.1(d) and (ii) voting any and all shares of Common Stock owned by any party or
- ------
which any party has the right to vote in favor of consummation of the Merger and
the other transactions contemplated by this Agreement. The Company shall use
its commercially reasonable efforts to obtain the consent of the general partner
of Discovery Partners, a California limited partnership (the "Occidental
Partnership"), to the substitution of Palm Finance Corporation, a California
corporation, as the limited partner of the Occidental Partnership replacing the
Company. Each party shall promptly provide the other (or its counsel) copies of
all filings in connection with the Merger made by such party, all filings after
the date hereof and prior to the Effective Time made by such party under the
Exchange Act (other than Company Reports and filings under Section 13 of the
Exchange Act with respect to investments in other companies) and all other
Regulatory Filings in connection with this Agreement and the transactions
contemplated hereby and thereby.
-27-
<PAGE>
6.6 Access
--- ------
Upon reasonable notice, the Company shall afford the Purchasing
Entities and their respective officers, employees, counsel, accountants,
lenders, agents, designees and other authorized representatives
("Representatives") access, during normal business hours throughout the period
from the date hereof to the Effective Time, to its properties, books, contracts,
papers and records and, during such period, the Company shall (and shall cause
each of its subsidiaries to) furnish promptly to the Purchasing Entities and
their Representatives all information concerning its business, properties and
personnel as such party or its Representatives may reasonably request, provided
that no investigation pursuant to this Section 6.6 shall affect or be deemed to
modify any representation or warranty made by any party herein and provided
further that all such investigations shall be subject to the terms of the
Confidentiality Agreement. The Purchasing Entities shall indemnify, defend and
hold the Company harmless from and against any loss, cost, damage or liability
caused by the Purchasing Entities or any of their Representatives arising out of
any such investigations.
6.7 Publicity
--- ---------
Neither the Company and its subsidiaries nor Purchaser shall issue any
press releases or otherwise make public statements with respect to the
transactions contemplated hereby, without the prior approval of the other,
except any party hereto may make any public statement as required by law after
consultation with the other parties as to the timing and content of such
statement. Prior to making any filings with any federal or state governmental
or regulatory agency or with any national securities exchange with respect to
the transactions contemplated by this Agreement, the Company and Purchaser shall
consult with each other.
6.8 Stock Options and Deferred Shares
--- ---------------------------------
Prior to the Effective Time, the Company shall take such actions as
may be necessary such that at the Effective Time (a) except as set forth on
Schedule 6.8, each stock option outstanding pursuant to the Stock Plans (each an
- ------------
"Option"), whether or not then exercisable, shall be canceled and only entitle
the holder thereof, upon surrender thereof to receive an amount in cash equal to
the difference between the Cash Merger Consideration and the exercise price per
Share of such Option multiplied by the number of Shares previously subject to
such Option and (b) all arrangements with respect to deferred compensation,
including the deferral of receipt of the Deferred Shares, shall be terminated
and the persons entitled to receive such Deferred Shares shall receive prior to
the Effective Time, shares of Common Stock in an amount equal to the number of
Deferred Shares receivable by such person.
6.9 Indemnification
--- ---------------
(a) From and after the Effective Time, the Purchaser shall cause
the Surviving Corporation to indemnify, defend and hold harmless, to the
extent provided in the Company's Charter and By-laws, as in effect on the
date hereof, each person who is or was a present or former officer,
director, employee or agent of the Company, or is or was serving at the
request of the Company as a director, officer, partner, trustee,
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<PAGE>
employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to
employee benefit plans (the "Indemnified Parties") with respect to actions
or omissions occurring at or prior to the Effective Time. Without limiting
the foregoing, after the Effective Time, the Surviving Corporation shall
pay all out-of-pocket fees and expenses, including reasonable legal fees,
for the Indemnified Parties incurred with respect to the foregoing to the
fullest extent permitted under applicable law promptly after statements
therefor are received by the Surviving Corporation; provided the person on
--------
whose behalf the expenses are paid provides an undertaking to repay such
payments if it is ultimately determined that such person is not entitled to
indemnification.
(b) If after the Effective Time, the Surviving Corporation or any
of its successors or assigns (i) shall consolidate with or merge into any
other corporation or entity and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii) shall
transfer all or substantially all of its properties and assets to any
individual, corporation or other entity, then and in each such case, proper
provision shall be made so that the successors and assigns of the Surviving
Corporation shall assume the obligations of the Surviving Corporation set
forth in this Section 6.9. If the Surviving Corporation shall liquidate,
dissolve or otherwise wind up its business, then the Purchaser shall
indemnify, defend and hold harmless each Indemnified Party to the same
extent and on the same terms that the Surviving Corporation was so
obligated pursuant to this Section 6.9.
(c) At or prior to the Effective Time, the Purchaser will
purchase a two (2) year "tail" on the Company's existing directors and
officers liability insurance coverage (up to $5 million limit) with respect
to actions occurring prior to or at the Effective Time to the extent that
such coverage is obtainable for an aggregate premium for such two (2) year
period not to exceed $450,000, and if not, will obtain the maximum
directors and officers liability insurance available for such two (2) year
period for an aggregate premium of $450,000.
(d) The agreement of the Surviving Corporation to indemnify and
advance or reimburse Losses to Indemnified Parties hereunder and each of
the other provisions of this Section 6.9 shall survive the consummation of
the Merger and the other transactions contemplated by this Agreement and
shall inure to the benefit of and be enforceable by the Indemnified Parties
and their respective heirs, successors and legal representatives. The
Indemnified Parties are intended to be and shall be deemed third-party
beneficiaries of this Section 6.9 and shall be entitled to enforce its
provisions directly against the Surviving Corporation or the Purchaser, as
applicable. This Section 6.9 makes mandatory the indemnification permitted
under Section 2-418 of the MCL.
6.10 Financing
---- ---------
The Purchaser shall use commercially reasonable efforts to obtain the
financing needed to pay the Cash Merger Consideration and to consummate the
Merger from Wells Fargo
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<PAGE>
Bank or another reputable financial institution (the "Financing"). Not later
than the Lenders Due Diligence Date, Purchaser will obtain a firm commitment
letter, subject to customary conditions, from Wells Fargo Bank or other
reputable financial institutions to provide immediately available funds in an
amount sufficient, taken together with Purchaser's own funds, to pay at the
Effective Time an amount equal to the product of (a) the Cash Merger
Consideration multiplied by (b) the number of Shares disclosed in Sections
5.1(b)(i), (ii) and (iii), and the fees and expenses expected to be incurred in
connection with the transactions contemplated hereby. In the event that any
portion of the Financing becomes unavailable, regardless of the reason therefor,
the Purchaser will use commercially reasonable efforts to obtain the financing
necessary for this transaction from other sources. The Company, the Purchaser
and Merger Sub shall each use commercially reasonable efforts to satisfy on or
before the date of the Closing all requirements of the definitive credit
agreements and related agreements pursuant to which the Financing will be
obtained (the "Financing Agreements") which are conditions to closing all
transactions constituting the Financing and to drawing down the cash proceeds
thereunder.
6.11 SEC Filings.
---- ------------
Each proxy statement or information statement and report on Form 8-K
filed by the Company after the date hereof will comply as to form in all
material respects with the applicable requirements of the Securities Laws and
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
therein, in the light of the circumstances under which they were made, not
misleading.
6.12 Cooperation with Lender Diligence.
---- ---------------------------------
The Company covenants and agrees that it shall use commercially
reasonable efforts to cooperate with the Purchaser, and to cause each of Redwood
and the Partnerships to cooperate with the Purchaser, to satisfy all
requirements and closing conditions of any lender providing financing for this
transaction, including, without limitation, (a) providing access to the Real
Property in connection with the preparation of surveys, physical inspection
reports or environmental site assessments, (b) removing or otherwise satisfying
such lender's objections to the state of title to the Real Property, (c)
providing copies of documents relating to the ownership, operation, maintenance
and use of the Real Property (including, without limitation, rent rolls) or the
conduct of the Company's or Redwood's business and (d) providing copies of the
Company's or Redwood's financial statements.
6.13 Financial and Operating Covenants of Purchaser.
---- ----------------------------------------------
From and after the date hereof through the Effective Time, the
Purchaser shall maintain not less than One Million Dollars ($1,000,000) in cash
on hand and the Purchaser shall not incur any obligations or liabilities
(liquidated or unliquidated, fixed or contingent) other than the obligations and
liabilities reflected on the Unconsolidated Balance Sheet and its obligations
incurred under, or contemplated by, this Agreement.
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<PAGE>
6.14 Notice of Developments.
---- -----------------------
Each party shall give prompt notice to the others in the event it
discovers any of its own representations or warranties to be untrue as of the
time made or in the event it determines that any of its representations or
warranties will be untrue as of the Effective Time. No disclosure by any party
pursuant to this section will be deemed to amend any Disclosure Schedule
delivered herewith or cure any misrepresentation or omission.
6.15 Purchase Agreement
---- ------------------
The Company agrees that it will not take any actions with respect to
any of the properties or assets that are subject to the Purchase Agreement that
would prohibit or impair in any material respect the ability of the Merger Sub
or the Surviving Corporation to consummate the transactions contemplated by the
Purchase Agreement.
ARTICLE VII
-----------
CONDITIONS
----------
7.1 Conditions to Obligations of the Purchasing Entities
--- ----------------------------------------------------
The respective obligations of each of the Purchasing Entities to
consummate the Merger are subject to the fulfillment of each of the following
conditions, any or all of which may be waived in whole or in part by Purchaser
or Merger Sub, as the case may be, to the extent permitted by applicable law:
(a) Stockholder Approval. This Agreement and the Merger
--------------------
contemplated hereby shall have been duly approved by the holders of not
less than eighty percent (80%) of the outstanding shares of Common Stock,
in accordance with applicable law and the Charter and Bylaws of the
Company;
(b) Governmental and Regulatory Consents. Except for the filings
------------------------------------
provided for in Section 1.3, all other filings required to be made prior to
the Effective Time by the Company with, and all consents, approvals and
authorizations required to be obtained prior to the Effective Time by
Purchaser, Merger Sub, the Company or Redwood from, governmental and
regulatory authorities in connection with the execution and delivery of
this Agreement by the Company and the consummation of the transactions
contemplated hereby by the Company, Purchaser and Merger Sub shall have
been made or obtained (as the case may be);
(c) 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) which is in
effect and prohibits consummation of the transactions contemplated by this
Agreement (collectively, an "Order");
-31-
<PAGE>
(d) Continuing Warranties; Certificate. The representations and
----------------------------------
warranties of the Company contained in this Agreement shall be true and
correct in all material respects on and as of the Effective Time as though
made on and as of the Effective Time, except for changes contemplated by
this Agreement, and the Company shall have performed in all material
respects all of its obligations required to be performed hereunder on or
prior to the Effective Time, and Purchaser shall have received at the
Effective Time a certificate to the foregoing effect, dated the Effective
Time, and executed on behalf of the Company by an executive officer of the
Company;
(e) Certain Authorizations and Consents. All consents referred
-----------------------------------
to in Schedule 5.1(d) required to be obtained under any Material Contract,
---------------
the failure of which to obtain would have a Material Adverse Effect, shall
have been obtained by the Company or Redwood, as the case may be;
(f) Financing. The Purchaser shall have obtained in immediately
---------
available funds an amount sufficient, taken together with Purchaser's own
funds, to pay at the Effective Time an amount equal to the product of (i)
the Cash Merger Consideration multiplied by (ii) the number of Shares
disclosed in Sections 5.1(b)(i)(ii) and (iii), and the fees and expenses
expected to be incurred in connection with the transactions contemplated
hereby; provided that this condition shall cease to be a condition to the
--------
Purchasing Entities' obligations hereunder after the Lender Due Diligence
Date;
(g) Legal Opinion. Purchaser shall have received the opinions of
-------------
the Company's corporate counsel, real estate counsel and special Maryland
counsel, each dated the Effective Date, substantially in the forms of the
opinions attached hereto as Exhibits B, C and D;
-------------------
(h) Severance Payments. The obligation of the Company or Redwood
------------------
to make salary, severance, bonus or accrued vacation payments of any kind
to Carl C. Gregory, III and all other employees of the Company or Redwood
upon consummation of the Merger or thereafter shall not exceed $265,000 in
the aggregate ($179,500 of which shall be payable to Mr. Gregory);
(i) Estoppel Certificates. Purchaser shall have received, on or
---------------------
prior to the Lender Due Diligence Date, estoppel certificates from tenants
of the Company's properties in the form of Exhibit E attached hereto from
---------
the tenants of the Company's (including the Partnerships'), Real Property
as follows: (i) each of the following tenants: Jillian's Billiard Club of
Long Beach, Inc.; The Home Depot, Inc.; Oracle Corporation; TRW Technar,
Inc.; and Sega of America, Inc.; (ii) at least four of the following five
tenants: Sola Optical U.S.A., Inc.; Magellan Systems Corporation; GSIC
Realty Corporation; California Society of CPA's; and IDS Financial
Services, Inc.; and (iii) at least sixty percent (60%) of the total number
of the tenants (excluding each of the tenants set forth above) that occupy
over 5,000 square feet;
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<PAGE>
(j) Reconveyances. Purchaser shall have received confirmation of
-------------
the reconveyances obtained in connection with the repayment of the
Company's corporate debt to TCW Special Credits in form and substance
reasonably satisfactory to Purchaser;
(k) Capital Account Certificate. The Purchaser shall have
---------------------------
received a certificate of the general partner of the limited partnership
that owns the Harbor Point property certifying the capital account balances
of such partnership as of the end of its latest tax year end; and
(l) Certain Changes. There shall have occurred no changes after
---------------
December 31, 1994, in the financial condition, properties, business or
results of operations of the Company and its subsidiaries, taken as a
whole, which, individually or in the aggregate, would have a Material
Adverse Effect. At or prior to the Effective Time, Purchaser shall have
received a certificate of the President or Chief Financial Officer of the
Company to such effect. Each of Purchaser and Merger Sub acknowledges,
however, that the loan agreements with respect to the Shorebreeze property
expire at or near the end of June 1995 and agrees that such expirations and
the effects, if any, thereof, including, without limitation, any effects
resulting from the failure to obtain a refinancing of either or both of
such loan agreements, shall not be deemed to be a change that would have a
Material Adverse Effect within the meaning of this Section, and that any
refinancing thereof shall not be deemed to be a change that would have a
Material Adverse Effect if the refinancing either (i) involves an extension
of the existing loans with a term of not more than one year and which has
no material prepayment penalty and an interest rate not to exceed twelve
percent (12%) per annum or (ii) complies with the terms of the loan set
forth on Schedule 5.1(f).
---------------
7.2 Conditions to Obligation of the Company
--- ---------------------------------------
The obligation of the Company to consummate the Merger is subject to
the fulfillment of each of the following conditions, any or all of which may be
waived in whole or in part by the Company to the extent permitted by applicable
law:
(a) Stockholder Approval. This Agreement and the Merger
--------------------
contemplated hereby shall have been duly approved by the holders of not
less than eighty percent (80%) of the outstanding shares of Common Stock in
accordance with applicable law and the Charter and Bylaws of the Company;
(b) Governmental and Regulatory Consents. Except for the filings
------------------------------------
provided for in Section 1.3, all other filings required to be made prior to
the Effective Time by Purchaser and Merger Sub with, and all consents,
approvals, permits and authorizations required to be obtained prior to the
Effective Time by the Company, Redwood, Purchaser or Merger Sub from,
governmental and regulatory authorities in connection with the execution
and delivery of this Agreement by Purchaser and Merger Sub and the
consummation of the transactions contemplated hereby by Purchaser, Merger
Sub and the Company shall have been made or obtained (as the case may be);
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<PAGE>
(c) Litigation. No court or governmental or regulatory authority
----------
of competent jurisdiction shall have enacted, issued, promulgated, enforced
or entered any Order which is in effect and prohibits consummation of the
transactions contemplated by this Agreement;
(d) Continuing Warranties; Certificate. The representations and
----------------------------------
warranties of the Purchasing Entities contained in this Agreement hereof
shall be true and correct in all material respects on and as of the
Effective Time as though made on and as of the Effective Time, except for
the changes contemplated by this Agreement, and each of Purchaser and
Merger Sub shall have performed in all material respects all of its
obligations required to be performed hereunder on or prior to the Effective
Time, and the Company shall have received at the Effective Time a
certificate to the foregoing effect, dated the Effective Time, and executed
on behalf of Purchaser and Merger Sub, respectively, by the general manager
of the Purchaser and an executive officer of Merger Sub; and
(e) Legal Opinion. The Company shall have received the opinions
-------------
of the Purchaser's counsel, dated as of the Effective Time, substantially
in the forms of the opinions attached hereto as Exhibits F and G,
----------------
respectively.
ARTICLE VIII
------------
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 the approval by holders of
the outstanding shares of Common Stock, by the mutual consent of Purchaser and
the Company.
8.2 Termination by Either Purchaser or the Company
--- ----------------------------------------------
This Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, before or after the approval by holders of
the outstanding shares of Common Stock, by Purchaser or by action of the Board
of Directors of the Company if the Merger shall not have been consummated by
November 30, 1995.
8.3 Termination by Purchaser
--- ------------------------
(a) This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, before or after the
approval by holders of the outstanding shares of Common Stock, by
Purchaser, if (i) the Company shall have failed to comply in any material
respect with any of the covenants or agreements contained in this Agreement
to be complied with or performed by the Company at the time of such
termination and such failure has not been cured within 10 business days of
delivery of written notice to the Company from the Purchaser, (ii) any
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<PAGE>
material representation or warranty by the Company contained in this
Agreement shall be incorrect in any material respect when made, or (iii)
the Board of Directors of the Company shall have withdrawn or modified in a
manner adverse to one of the Purchasing Entities its approval or
recommendation of this Agreement or the Merger.
(b) This Agreement may be terminated and the Merger may be
abandoned by Purchaser at any time on or prior to the Lender Due Diligence
Date in the event that the Purchaser fails to obtain a commitment to
provide the Financing in accordance with Section 6.10 hereof; provided,
--------
however, that in the event of termination of this Agreement by Purchaser
-------
under this Section 8.3(b), and provided that the Company has not breached
its representations and warranties and has satisfied the conditions and
obligations contained in Section 6.4 not later than the date required by
such Section 6.4, the Purchaser shall pay a fee in the amount of $350,000
to the Company concurrently with delivery of the notice of termination to
the Company. Such fee shall be paid by certified or cashier's check
payable to the order of the Company or by federal funds wire transfer to an
account specified by the Company.
(c) This Agreement may be terminated and the Merger may be
abandoned by Purchaser if the Merger does not receive for any reason the
affirmative vote of at least eighty percent (80%) of the shares of Common
Stock outstanding and entitled to vote thereon at a duly called and held
meeting of the stockholders of the Company by November 28, 1995.
8.4 Termination by the Company
--- --------------------------
(a) This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, before or after the
approval by holders of the outstanding shares of Common Stock, by action of
the Board of Directors of the Company, if (i) one or both of the Purchasing
Entities shall have failed to comply in any material respect with any of
the covenants or agreements contained in this Agreement to be complied with
or performed by such Purchasing Entity at the time of such termination and
such failure has not been cured within 10 business days of delivery of
written notice to such Purchasing Entity from the Company, (ii) any
material representation or warranty by one of the Purchasing Entities
contained in this Agreement shall be incorrect in any material respect when
made or (iii) provided that the Company has not breached its
representations and warranties and has satisfied the conditions and
obligations contained in Section 6.4, the Purchaser fails to confirm in
writing to the Company on or prior to the Lender Due Diligence Date that it
has obtained a commitment to provide the Financing required by Section 6.10
hereof. In the event of a termination of this Agreement by the Company
pursuant to Section 8.4(a)(iii) above, the Purchaser shall pay to the
Company a fee in the amount of $350,000 within five (5) business days of
receipt of written notice of such termination and such fee shall be paid by
certified or cashier's check payable to the order of the Company or by
federal funds wire transfer to an account specified by the Company.
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<PAGE>
(b) This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time before or after the
approval by holders of the outstanding shares of Common Stock, by action of
the Board of Directors of the Company, if the Board of Directors determines
to enter into a definitive agreement with respect to an Acquisition
Proposal after being advised by counsel that the failure to consider such
Acquisition Proposal may breach the directors' fiduciary duty to
stockholders of the Company.
8.5 Effect of Termination and Abandonment
--- -------------------------------------
Subject to the payment of the fees and expenses required by Article
VIII and Section 9.1 hereof, in the event of termination of this Agreement and
abandonment of the Merger pursuant to this Article VIII, no party hereto (or any
of its members, directors or officers) shall have any liability or further
obligation to any other party to this Agreement, except that nothing herein will
relieve any party from liability for any breach of this Agreement.
8.6 Termination Fee
--- ---------------
In the event this Agreement is terminated by the Purchaser pursuant to
Section 8.3(a)(iii) or Section 8.3(c) or by the Company pursuant to Section
8.4(b), the Company shall pay to Purchaser a fee in the amount of $400,000,
provided that neither of the Purchasing Entities has breached its
- --------
representations and warranties and each of the Purchasing Entities has complied
with all of its respective covenants contained in this Agreement. Payment of
such fee shall be made within five (5) business days of the termination of this
Agreement pursuant to Section 8.3(a)(iii), 8.3(c) or 8.4(b).
ARTICLE IX
----------
MISCELLANEOUS AND GENERAL
-------------------------
9.1 Payment of Expenses
--- -------------------
The Purchaser and the Company shall each be responsible to pay its own
costs and expenses incurred in connection with the negotiation and execution of
this Agreement. Without limiting the generality of the foregoing, but subject
to Section 8.6 above, the Purchaser shall be responsible for all of its own due
diligence and legal costs and expenses and the due diligence and legal costs and
expenses of the sources of the Financing. Except with respect to any costs and
expenses incurred by the Purchaser prior to the date hereof, and except for any
due diligence costs and legal fees and expenses incurred by the sources of the
Financing, the Company shall pay, promptly after receipt of appropriate invoices
therefor, all of the expenses of the Company and the Purchaser incurred in
connection with preparation of the Proxy Statement and soliciting the approval
of this Agreement and the Merger by the stockholders of the Company and the
consummation of the Merger unless and until the Purchaser breaches any of the
terms or provisions of, or is otherwise in default of any of its obligations
under, this Agreement. No expenses that are required to be paid by the Company
in accordance with the immediately preceding sentence that are in excess of
$10,000 individually or in the aggregate
-36-
<PAGE>
shall be incurred or paid without the prior approval of the Company which will
not be unreasonably withheld. Investment banking fees may be paid by the Company
only in respect of fairness opinions, valuation reviews or consulting services
related to the valuation review. The total investment banking expenses so
incurred may not exceed $125,000. If the Merger shall not be consummated for any
reason, then, except as otherwise expressly provided in Sections 8.3(b), 8.4(a)
and 8.6, each party hereto shall be responsible for and shall pay its own costs
and expenses incident to preparing for, negotiating, entering into and carrying
out this Agreement and the consummation of the Merger and, except for the
amounts required to be paid by the Company to Purchaser under Section 8.6,
Purchaser shall promptly reimburse the Company for any amounts previously paid
by the Company on behalf of Purchaser.
9.2 Survival
--- --------
The agreements of the Company, Purchaser and Merger Sub contained in
Sections 2.1, 2.2, 3.1, 4.1, 4.2, 4.3, 6.5, 6.9, 9.1 and this Section 9.2 shall
survive the consummation of the Merger. The agreements of the Company,
Purchaser and Merger Sub, contained in Article VIII and Sections 5.2(g), and 9.1
and this Section 9.2 shall survive the termination of this Agreement All other
representations, warranties, agreements and covenants in this Agreement shall
not survive the consummation of the Merger or the termination of this Agreement.
9.3 Amendment
--- ---------
Subject to the applicable provisions of the MCL, at any time prior to
the Effective Time, the parties hereto may amend, modify or supplement the terms
of this Agreement, including, without limitation, to (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 contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements contained herein; provided, however, that any
-------- -------
amendment, modification, supplement, extension or waiver of any provision of
this Agreement executed after the stockholders of the Company have approved this
Agreement and the Merger shall not modify either the amount or the form of the
Cash Merger Consideration or otherwise materially adversely affect such
stockholders (except for any delay in the consummation of the Merger) without
their requisite approval. Any agreement on the part of a party hereto to any
such amendment, modification, supplement, extension or waiver shall be valid and
enforceable against such party only if set forth in a written instrument signed
on behalf of such party.
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.
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<PAGE>
9.5 Counterparts
--- ------------
For the convenience of the parties hereto, this Agreement may be
executed in any number of counterparts, each such counterpart being deemed to be
an original instrument, and all such counterparts shall together constitute one
and the same agreement.
9.6 Governing Law
--- -------------
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Maryland, without giving effect to
conflicts of law principles.
9.7 Notices
--- -------
Any notice, request, instruction or other document to be given
hereunder by any party to the other shall be in writing and delivered personally
or sent by registered or certified mail, postage prepaid, return receipt
requested, if to Purchaser or Merger Sub, addressed to Purchaser or Merger Sub,
as the case may be, at c/o J.E. Robert Companies, 11 Canal Center Plaza, Suite
200, Alexandria, Virginia 22314, Attention: Jonathan Kern, Gary Stevens and
Murry Gunty (with a copy to Skadden, Arps, Slate, Meagher & Flom, 1440 New York
Avenue, N.W., Washington, D.C. 20005-2107, Attention: Stephen W. Hamilton,
Esq.); and if to the Company, addressed to the Company at MIP Properties, Inc.,
2020 Santa Monica Boulevard, Suite 480, Santa Monica, California 90404,
Attention: Carl C. Gregory, III (with a copy to Allen, Matkins, Leck, Gamble &
Mallory, 515 South Figueroa Street, Eighth Floor, Los Angeles, California 90071,
Attention: Brian C. Leck, Esq.), or to such other persons or addresses as may
be designated in writing by the party to receive such notice.
9.8 Entire Agreement; Assignment
--- ----------------------------
This Agreement (including all schedules and any exhibits or annexes
hereto) (a) constitutes the entire agreement, and supersedes all other prior or
contemporaneous agreements, understandings, representations and warranties, both
written and oral, among the parties, with respect to the subject matter hereof;
provided that the Confidentiality Agreement shall continue in full force and
- --------
effect and (b) shall not be assignable by either party, by operation of law or
otherwise, and, except as set forth in Section 6.8 hereof, is not intended to
create any obligations to, or rights in respect of, any persons other than the
parties hereto.
9.9 Captions
--- --------
The Article, Section and paragraph captions herein are for convenience
of reference only, do not constitute part of this Agreement and shall not be
deemed to limit or otherwise affect any of the provisions hereof. All
references to sections, schedules and exhibits in this Agreement refer to the
sections of and the schedules and exhibits attached to, or delivered in
connection with, this Agreement.
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<PAGE>
9.10 Waiver
---- ------
Any failure to exercise or delay in exercising any right, power or
privilege herein contained, or any failure or delay at any time to require the
other party's performance of any obligation under this Agreement, shall not
affect the right to subsequently exercise that right, power or privilege, or to
require performance of that obligation. A waiver of any of the provisions of
this Agreement shall not be deemed, nor shall constitute, a waiver of any other
provision, whether or not similar, nor shall any waiver constitute a continuing
waiver. A waiver shall not be binding unless executed in writing by the party
making the waiver.
9.11 Severability
---- ------------
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be valid and effective under applicable law.
If any provision of this Agreement shall be unlawful, void or for any reason
unenforceable it shall be deemed separable from, and shall in no way affect the
validity or enforceability of, the remaining provisions of this Agreement, and
the rights and obligations of the parties shall be enforced to the fullest
extent possible.
9.12 Attorneys' Fees
---- ---------------
In any judicial action or proceeding or any arbitration proceeding
between the parties to enforce any of the provisions of this Agreement, to seek
damages on account of the breach hereof, to seek injunctive relief to prevent
the breach hereof, to seek a judicial determination of the rights or obligations
of any party hereto, or in any judicial action or proceeding or any arbitration
proceeding between the parties in which this Agreement is raised as a defense,
regardless of whether the action or proceeding is prosecuted to judgment and in
addition to any other remedy, the unsuccessful party shall pay the successful
party all costs and expenses, including reasonable attorneys' fees, incurred by
the successful party.
ARTICLE X
---------
CERTAIN DEFINITIONS
-------------------
10.1 Definition of "Knowledge of the Company"
---- ----------------------------------------
As used in this Agreement, the term "Knowledge of the Company" means
the actual knowledge of Carl C. Gregory, III, the Chairman of the Board and
Chief Executive Officer of the Company, Philip H. Bowman, Vice President of the
Company, and/or Marsha Z. Day, the Chief Financial Officer of the Company, and
any other officer of the Company, without the necessity of any investigation. In
addition, no knowledge shall be imputed to the Company or any of the foregoing
officers from any documents or files in the possession or control of the Company
or such officers, including, without limitation, any and all documents and files
with respect to any Real Property owned or leased by the Company or any of the
Partnerships or with respect to which the Company or any of the Partnerships has
a security interest or has filed a
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<PAGE>
deed of trust or mortgage; provided, however, that the foregoing limitation
--------- --------
shall not apply with respect to documents or files relating to the time period
from and after September 1, 1991.
10.2 Definition of "Subsidiary"
---- --------------------------
As used in this Agreement, the term "subsidiary" means any corporation
or other organization whether incorporated or unincorporated of which at least a
majority of the securities or interests having by the terms thereof ordinary
voting power to elect at least a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its subsidiaries, or by such party and one or more of its
subsidiaries. The term "subsidiary" as used in this Agreement, however, does
not include any partnership, joint venture or other organization in which the
Company has an interest as a limited partner or joint venture partner and that
is listed on Schedule 5.1(a).
---------------
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto on the date
first hereinabove written.
JER PARTNERS, L.L.C.,
a Maryland limited liability company
By: JOSEPH E. ROBERT
--------------------------------------
Name: Joseph E. Robert
-----------------------------------
Title: Member
-----------------------------------
MIP ACQUISITION CORPORATION,
a Maryland corporation
By: JOSEPH E. ROBERT
--------------------------------------
Name: Joseph E. Robert
-----------------------------------
Title: President
-----------------------------------
MIP PROPERTIES, INC.,
a Maryland corporation
By: CARL C. GREGORY, III
--------------------------------------
Carl C. Gregory, III
Chairman of the Board and
Chief Executive Officer
-41-
<PAGE>
EXHIBIT "A"
-----------
ARTICLES OF MERGER
BETWEEN
MIP PROPERTIES, INC.,
(A MARYLAND CORPORATION)
AND
MIP ACQUISITION CORPORATION,
(A MARYLAND CORPORATION)
MIP Properties, Inc., a corporation duly organized and existing under
the laws of the State of Maryland ("MIP"), and MIP Acquisition Corporation, a
corporation duly organized and existing under the laws of the State of Maryland
("Merger Sub"), do hereby certify that:
FIRST: MIP and Merger Sub agree to merge.
SECOND: The name and place of incorporation of each party to these
Articles are MIP Properties, Inc., a corporation incorporated under the laws of
the State of Maryland, and MIP Acquisition Corporation, a corporation
incorporated under the laws of the State of Maryland. MIP shall survive the
merger.
THIRD: The principal office of MIP in the State of Maryland is
located in Baltimore City, and the principal office of Merger Sub in the State
of Maryland is located in Baltimore City. Neither MIP nor Merger Sub owns an
interest in land in the State of Maryland.
FOURTH: The terms and conditions of the transaction set forth in
these Articles were advised, authorized and approved by each corporation party
to these Articles in the manner and by the vote required by its charter and the
laws of the state of its incorporation. The manner of approval was as follows:
(a) The Board of Directors of Merger Sub, by written consent,
dated ___________, 1995, signed by each member of the Board and filed with
the minutes of proceedings of the Board, adopted a resolution which
declared that the merger was advisable on substantially the terms and
conditions set forth or referred to in these Articles and directed that the
proposed merger be submitted for consideration by the sole stockholder of
Merger Sub. The merger on substantially the terms and conditions set forth
or referred to in these Articles was approved by the sole stockholder of
Merger Sub, by written consent, dated __________, 1995, signed by the sole
stockholder of Merger Sub and filed with the minutes of meetings of the
sole stockholder of Merger Sub.
(b) The Board of Directors of MIP at a meeting held on May 14,
1995, adopted a resolution which declared that the merger on substantially
the terms and conditions set forth or referred to in these Articles was
advisable and
<PAGE>
directed that the proposed merger be submitted for consideration by the
stockholders of MIP. The merger was approved by the stockholders of MIP at
a special meeting of stockholders held on ___________, 1995, by the
affirmative vote of the holders of at least eighty percent (80%) of the
outstanding shares of stock entitled to be voted on the matter.
FIFTH: As of the effective time of the merger, the charter of MIP
is amended and restated in its entirety to read as follows:
_________________________________
ARTICLES OF INCORPORATION
-------------------------
ARTICLE I
The name of the corporation (which is hereinafter called the
"Corporation") is
_________________________________
ARTICLE II
The purposes for which the Corporation is formed are as
follows:
To engage in any lawful act or activities permitted by a
corporation organized under the laws of the State of Maryland.
The foregoing enumeration of the purposes, objects and business
of the Corporation is made in furtherance, and not in limitation, of the
powers conferred upon the Corporation by law, and is not intended, by the
mention of any particular purpose, object or business, in any manner to
limit or restrict the generality of any other purpose, object or business
mentioned, or to limit or restrict any of the powers of the Corporation,
and the said Corporation shall enjoy and exercise all of the powers and
rights now or hereafter conferred by statute upon corporations. Nothing
herein contained shall be deemed `to authorize or permit the Corporation
to carry on any business or exercise any power or do any act which a
corporation formed under the laws of the State of Maryland may not at the
time lawfully carry on or do.
ARTICLE III
The post office address of the principal office of the
Corporation in this State is c/o Abba D. Poliakoff, 233 E. Redwood
Street, Baltimore, Maryland 21202. The name and post office address of
the resident agent of the Corporation in this State are Diane Heckert,
Director of
A-2
<PAGE>
Operations, c/o CorpAssist, Inc., 11 E. Chase Street, Suite 9E,
Baltimore, Maryland 21202. Said resident agent is an individual actually
residing in this State.
ARTICLE IV
The total number of shares of stock which the Corporation has
authority to issue is five thousand (5,000) shares of common stock with a
par value of One Cent ($.01) per share, for an aggregate par value of
Fifty Dollars ($50.00).
ARTICLE V
The number of Directors of the Corporation shall be not less
than three (3) nor more than twelve (12); provided, however, that (a) if
at any time there is no stock outstanding, the Corporation may have less
than three (3) but not less than one (1) Director; and (b) if there is
stock outstanding and there are less than three (3) stockholders, the
number of Directors may be less than three (3) but not less than the
number of stockholders. The number of Directors may be increased or
decreased pursuant to the By-laws of the Corporation, subject, however,
to the above provisions. The name of the Director who shall act until his
successor is duly elected and qualifies is Joseph Robert [any other
Directors of Merger Sub elected prior to the filing of these Articles of
Merger will be required to be listed].
ARTICLE VI
The following provisions are hereby adopted for the purposes of
describing the rights and powers of the Corporation and of the Directors
and Stockholders:
(a) The Board of Directors of the Corporation is hereby
empowered to authorize the issuance from time to time of shares of stock
of any class, whether now or hereafter authorized and securities
convertible into shares of its stock of any class whether now or
hereafter authorized for such consideration as said Board of Directors
may deem advisable, subject to such limitations and restrictions, if any,
as may be set forth in the By-laws of the Corporation.
(b) The Board of Directors of the Corporation may classify or
reclassify any unissued shares by fixing or altering in any one or more
respects, from time to time before issuance of such shares, the
preferences, rights, voting powers, restrictions and qualifications of,
the dividends on, the times and prices of redemption of, and the
conversion rights of, such shares.
A-3
<PAGE>
(c) The Corporation reserves the right to amend its Charter so
that such amendment may alter the contract rights, as expressly set forth
in the Charter, of any outstanding stock, and any objecting stockholder
whose rights may or shall be thereby substantially adversely affected
shall not be entitled to demand and receive payment of the fair value of
his stock.
(d) Except as may otherwise be provided by the Board of
Directors, no holder of any shares of the stock of the Corporation shall
have any preemptive right to purchase, subscribe for, or otherwise
acquire any shares of stock of the Corporation of any class now or
hereafter authorized, or any securities or rights exchangeable for,
convertible into or evidencing rights to acquire such shares.
The enumeration and definition of a particular power of the
Board of Directors included in the foregoing is for descriptive purposes
only and shall in no way limit or restrict the terms of any other clause
of this or any other Article of these Articles of Incorporation, or in
any manner exclude or limit any powers conferred upon the Board of
Directors under the Maryland General Corporation Law now or hereafter in
force.
ARTICLE VII
No director or officer of the Corporation shall be liable to
the Corporation or to its stockholders for money damages except (i) to
the extent that it is proved that such director or officer actually
received an improper benefit or profit in money, property or services,
for the amount of the benefit or profit in money, property or services
actually received, or (ii) to the extent that a judgment or other final
adjudication adverse to such director or officer is entered in a
proceeding based on a finding in the proceeding that such director's or
officer'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.
ARTICLE VIII
Any provision of the By-laws of the Corporation in effect
immediately prior to _____________, 1995 [merger effective date] which
prohibits an amendment thereto, unless there has been compliance with
certain provisions of the Articles of Incorporation of the Corporation,
shall have no further force or effect. On and after ______________, 1995
[merger effective date], any provision of the By-laws may be amended in
accordance with the provisions hereof and the Maryland General
Corporation Law.
SIXTH: The total number of shares of stock of all classes which MIP
has authority to issue is 100,000,000, of which 75,000,000 are shares of common
stock (par value
A-4
<PAGE>
$.01 per share) (the "Common Stock") and 25,000,000 are shares of preferred
stock (par value $.01 per share). The aggregate par value of all the shares of
stock of all classes of MIP is $1,000,000. Immediately before the merger, the
total number of shares of stock which MIP has authority to issue, the number of
shares of stock of each class of MIP, the par value of the shares of stock of
each such class, and the aggregate par value of all the shares of stock of all
classes of MIP are as set forth in the immediately preceding sentence. As
changed by the merger pursuant to Article Fifth of these Articles, immediately
after the merger, the total number of shares of stock of all classes which MIP
has authority to issue will be 5,000 shares, all of one class of common stock
(par value $.01 per share), and the aggregate par value of all the shares of
stock of all classes of MIP will be $50.00. The total number of shares of stock
of all classes which Merger Sub has authority to issue is 5,000 shares, all of
one class of common stock (par value $.01 per share). The aggregate par value of
all the shares of stock of all classes of Merger Sub is $50.00.
SEVENTH: The manner and basis of converting or exchanging issued
stock of the merging corporations into different stock of a corporation, or
other consideration, and the treatment of any issued stock of the merging
corporations not to be converted or exchanged are as follows:
(a) At the effective time of the merger, each share of Common
Stock of MIP (other than shares owned by Merger Sub or the limited
liability company that owns all of the shares of Merger Sub, but including
all shares that have been deferred under MIP's First Amended and Restated
Long-Term Incentive Compensation Plan and Fee Deferral Plan) (the "Shares")
issued and outstanding immediately prior to such effective time shall, by
virtue of the merger and without any action on the part of the holder
thereof, be converted into the right to receive, without interest, an
amount in cash equal to $2.475 (the "Cash Merger Consideration"). The Cash
Merger Consideration shall be payable in accordance with, and subject to,
the terms and conditions of the Agreement and Plan of Merger dated as of
May 21, 1995 by and among MIP, Merger Sub, and JER Partners, L.L.C., a
Maryland limited liability company.
(b) At the effective time of the merger, all previously issued
and outstanding Shares, by virtue of the merger and without any action on
the part of the holders thereof, shall cease to be outstanding and shall be
canceled and retired and shall cease to exist, and each holder of a
certificate representing any such Shares shall thereafter cease to have any
rights with respect to such Shares except the right of holders (other than
Merger Sub or the limited liability company that owns all of the shares of
Merger Sub) to receive the Cash Merger Consideration set forth in clause
(a) above in this Article Seventh upon the surrender of such certificate.
(c) At the effective time of the merger, each Share issued and
outstanding at such effective time and owned by Merger Sub (or the limited
liability company that owns all of the shares of Merger Sub) shall, by
virtue of the merger and without any action on the part of the holder
thereof, cease to be outstanding, shall be
A-5
<PAGE>
canceled and retired without payment of any consideration therefor and
shall cease to exist.
(d) At the effective time of the merger, each share of common
stock, $.01 par value per share, of Merger Sub issued and outstanding
immediately prior to such effective time shall be converted into and become
one fully paid and nonassessable share of Common Stock of MIP.
EIGHTH: The merger shall become effective upon acceptance of these
Articles for record by the Maryland State Department of Assessments and
Taxation. At such effective time, Merger Sub shall be merged with and into MIP,
the separate existence of Merger Sub shall cease and MIP shall continue in
existence and shall possess any and all purposes and powers of Merger Sub, and
all assets, rights, properties and privileges of Merger Sub shall be transferred
to, vested in and devolved upon MIP without further act or deed, and MIP shall
be liable for all the debts and obligations of Merger Sub.
A-6
<PAGE>
IN WITNESS WHEREOF, MIP Properties, Inc., a Maryland corporation, and
MIP Acquisition Corporation, a Maryland corporation, have caused these Articles
to be signed in their respective names and on their respective behalves by their
respective chairmen of the board of directors or presidents and witnessed by
their respective secretaries or assistant secretaries on _____________, 1995.
MIP Properties, Inc.,
a Maryland corporation
ATTEST: (SEAL)
By:
- ---------------------------------- ---------------------------------
Name: Name:
----------------------------- -------------------------------
Secretary Chairman of the Board and
Chief Executive Officer
MIP Acquisition Corporation,
a Maryland corporation
ATTEST: (SEAL)
By:
- ---------------------------------- ---------------------------------
Name: Name:
----------------------------- -------------------------------
Secretary President
A-7
<PAGE>
THE UNDERSIGNED, Chairman of the Board and Chief Executive Officer of
MIP Properties, Inc., a Maryland corporation, who executed on behalf of said
Corporation the foregoing Articles of Merger of which this certificate is made a
part, hereby acknowledges the foregoing Articles of Merger to be the corporate
act of said Corporation and hereby certifies that to the best of his knowledge,
information and belief the matters and facts set forth therein with respect to
the authorization and approval thereof are true in all material respects under
the penalties of perjury.
------------------------------------
Name:
-------------------------------
Chairman of the Board and
Chief Executive Officer
THE UNDERSIGNED, President of MIP Acquisition Corporation, a Maryland
corporation, who executed on behalf of said Corporation the foregoing Articles
of Merger of which this certificate is made a part, hereby acknowledges the
foregoing Articles of Merger to be the corporate act of said Corporation and
hereby certifies that to the best of his knowledge, information and belief the
matters and facts set forth therein with respect to the authorization and
approval thereof are true in all material respects under the penalties of
perjury.
-------------------------------------
Name:
--------------------------------
President
A-8
<PAGE>
EXHIBIT "B"
-----------
SUBSTANCE OF OPINION
OF ALLEN, MATKINS, LECK, GAMBLE & MALLORY,
CORPORATE COUNSEL TO MIP PROPERTIES, INC.
-----------------------------------------
1. Neither the execution and delivery by the Company of the Agreement
and Plan of Merger (the "Merger Agreement") nor the consummation by the Company
of the transactions contemplated thereby will, to our actual knowledge, (i)
conflict with or result in a breach by the Company of, or constitute a default
under, any Material Contract (as defined in the Merger Agreement) listed on
Exhibit A attached hereto to which the Company is a party, or (ii) violate (a)
- ----------
any judgment, order or decree listed on Exhibit B attached hereto applicable to
---------
the Company or (b) any California or federal law applicable to the Company.
2. No consent, order or approval of any California or federal court
or governmental agency or body is required on the part of the Company for the
execution and delivery of the Merger Agreement or the consummation of the
transactions contemplated thereby, except such as have been obtained prior to
the date hereof and remain valid and outstanding. We express no opinion,
however, as to any such consent, order or approval (i) which may be required as
a result of the involvement of Purchaser, Merger Sub or any affiliate or agent
of either of them in the transactions contemplated by the Merger Agreement
because of such entities or persons legal or regulatory status or because of any
other facts specifically pertaining to Purchaser, Merger Sub or any of their
affiliates or agents; (ii) the absence of which does not have any material
adverse effect on the Purchaser, Merger Sub or the Company and does not deprive
the Purchaser or Merger Sub of any material benefit under the Merger Agreement;
or (iii) which can be readily obtained without significant delay or expense to
Purchaser and Merger Sub, without the loss to Purchaser or Merger Sub of any
material benefit under the Merger Agreement and without any material adverse
effect on Purchaser, Merger Sub or the Company during the period such consent,
order or approval was not obtained. We refer you to the opinion of Piper &
Marbury, special Maryland counsel to the Company, for issues relating to
compliance with Maryland law.
3. To our actual knowledge, except for the matters set forth in the
Company Reports, in the Merger Agreement or on Exhibit C attached to this
---------
opinion, the Company is not the subject of any pending or threatened action,
suit, proceeding or investigation against or affecting the Company in any court
or by or before any arbitrator or governmental entity which would have a
material adverse effect on the Company taken as a whole if determined adversely
to the Company or which seeks to prevent or delay the consummation of the
Merger.
4. To our actual knowledge, all options or rights, if any, to acquire
the Company's common stock, $.01 par value per share (the "Common Stock"), have
been exercised, have expired or have been canceled as of the Effective Time as
contemplated in the Merger Agreement. To our actual knowledge, except as
disclosed in the Company Reports or in the Merger Agreement, the authorized but
unissued shares of capital stock of the Company are not subject to any presently
outstanding and effective warrants, options, rights or commitments
<PAGE>
granted by the Company, and the Company is not obligated to issue, purchase or
redeem any additional shares of its capital stock.
5. The Proxy Statement, as of the date it was mailed to the
shareholders of the Company, complied as to form in all material respects with
the requirements of Regulation 14A of the Securities Exchange Act of 1934, as
amended, and the related rules and regulations. In addition, we have
participated in conferences with officers and other representatives of the
Company, representatives of the independent public accountants of the Company,
your representatives and your counsel at which the Proxy Statement and related
matters were discussed and, although we are not passing upon, and do not assume
any responsibility for, the accuracy, completeness or fairness of the statements
contained in the Proxy Statement and have not made any independent check or
verification thereof, during the course of such participation, nothing came to
our attention that caused us to believe that, on the date the Proxy Statement
was first mailed to stockholders, or at the time of the Stockholders Meeting,
the Proxy Statement contained an 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 the light of the circumstances under which they
were made, not misleading; provided, however, that no opinion is expressed as to
-------- -------
any information concerning either of the Purchasing Entities or any of their
respective subsidiaries, affiliates or advisors provided by either of the
Purchasing Entities for inclusion in the Proxy Statement; and provided further
----------------
that we express no opinion or belief as to the financial statements and the
notes thereto or the schedules and other financial or statistical data included
or incorporated by reference in the Proxy Statement or as to any information
incorporated by reference in the Proxy Statement. In passing upon the form of
the Proxy Statement, we necessarily assume that the statements made or included
therein are complete, fair and correct and take no responsibility therefor
except as specifically set forth in this Paragraph 6.
B-2
<PAGE>
EXHIBIT "C"
-----------
SUBSTANCE OF OPINION
OF REAL ESTATE COUNSEL TO MIP PROPERTIES, INC.
----------------------------------------------
1. Neither the execution and delivery by the Company of the Agreement
and Plan of Merger (the "Merger Agreement") nor the consummation by the Company
of the transactions contemplated thereby will, to our actual knowledge, (i)
conflict with or result in a breach by the Company of, or constitute a default
under (with or without the giving of notice or passage of time), or the
acceleration of any payment pursuant to any Material Contract (as defined in the
Merger Agreement) listed on Exhibit A attached hereto, to which the Company is a
---------
party or any of the properties identified on Exhibit B attached hereto (the
---------
"Properties") are bound, (ii) result in the imposition of any encumbrance
against any of the Properties, (iii) violate any judgment, order or decree
applicable to any of the Properties or (iv) violate any California or federal
law applicable to the ownership of the Properties, but excluding the effect of
any California or federal securities, tax or creditors' rights laws.
<PAGE>
EXHIBIT "D"
-----------
SUBSTANCE OF OPINION OF
PIPER & MARBURY, MARYLAND COUNSEL
TO MIP PROPERTIES INC.
----------------------
l. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Maryland. The Company has the
corporate power to own its current property and assets and to conduct its
business as now being conducted as described in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994. The Company has the
requisite corporate power and corporate authority to enter into, execute,
deliver and perform the Agreement and Plan of Merger (the "Merger Agreement")
and to carry out the transactions contemplated thereby.
2. Neither the execution, delivery or performance by the Company of
the Merger Agreement nor the consummation by the Company of the transactions
contemplated thereby will conflict with the Charter or Bylaws of the Company or,
to our knowledge, any provisions of law of the State of Maryland applicable to
the Company.
3. The execution and delivery of the Merger Agreement has been duly
authorized by all necessary corporate action on the part of the Company, and no
other action on the part of the Company or its stockholders is necessary to
authorize the execution and delivery of the Merger Agreement or to consummate
the Merger.
4. The Merger Agreement has been duly executed and delivered by the
Company and will constitute a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally. We advise you that the enforceability of the
Merger Agreement is subject to the effect of general principles of equity,
including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing, and the possible unavailability of specific performance
or injunctive relief, regardless of whether considered in a proceeding in equity
or at law.
5. Upon the filing with, and acceptance for record by, the Maryland
State Department of Assessments and Taxation (the "SDAT") of the Articles of
Merger duly signed, acknowledged and attested by or on behalf of the Company and
Merger Sub in accordance with the provisions of the Merger Agreement, each act
required to be taken by or on behalf of the Company under the Maryland General
Corporation Law to consummate the Merger will have been duly and properly taken.
6. No consent, order or approval of any Maryland court or
governmental agency or body is required on the part of the Company for the
execution and delivery of the Merger Agreement or the consummation of the
Merger, except such as have been obtained prior to the date hereof and remain
valid and outstanding, and except the filing with and acceptance for record by
the SDAT of the Articles of Merger as described in paragraph 4 above. We
express no opinion, however, as to any such consent, order or approval (i) which
may be
<PAGE>
required as a result of the involvement of Purchaser, Merger Sub or any
affiliate or agent of either of them in the transactions contemplated by the
Merger Agreement because of such entities or persons legal or regulatory status
or because of any other facts specifically pertaining to Purchaser, Merger Sub
or any of their affiliates or agents; (ii) the absence of which does not have
any material adverse effect on the Purchaser, Merger Sub or the Company and does
not deprive the Purchaser or Merger Sub of any material benefit under the Merger
Agreement; or (iii) which can be readily obtained without significant delay or
expense to Purchaser and Merger Sub, without the loss to Purchaser or Merger Sub
of any material benefit under the Merger Agreement and without any material
adverse effect on Purchaser, Merger Sub or the Company during the period such
consent, order or approval was not obtained.
D-2
<PAGE>
EXHIBIT "E"
-----------
FORM OF TENANT ESTOPPEL CERTIFICATE
-----------------------------------
TO: JER Partners, L.L.C. (the "Purchaser"), its affiliates, subsidiaries,
successors and assigns
RE: Property Address:________________________________ (the "Building")
Lease Date:______________________________________
Landlord:________________________________________ ("Landlord")
Tenant:__________________________________________ ("Tenant")
Square Footage Leased:___________________________
Suite Number: _______________________________ (the "Leased Premises")
It is our understanding that, pursuant to a merger, the Purchaser is
contemplating the purchase of all of the capital stock of Landlord (or a partner
of the Landlord) and that the Purchaser is requiring this certification in
connection with such transaction.
The undersigned Tenant under the referenced lease (the "Lease") hereby
ratifies the Lease and represents, warrants, and certifies to the Purchaser, its
affiliates, subsidiaries, successors and assigns the following:
l. A true and complete copy of the Lease and any and all amendments,
extensions, assignments and other modifications thereto, are attached hereto.
There are no other agreements, either oral or written, between Landlord and
Tenant with respect to the Lease or the premises (including the land and/or the
building(s)) leased under the Lease ("Leased Premises").
2. Rent has been paid through the last day of the current month and
all additional rent has been paid and collected in a current manner. There is no
prepaid rent except ____________________________ and the amount of security
deposit posted pursuant to the Lease is ____________________
3. Tenant took possession of the Leased Premises on _____________ the
lease commencement date is _____________ and Tenant commenced paying rent on
__________________. Rent is currently payable in the amount of ___________ per
month, and the following additional monthly payments are currently being paid
under the Lease: __________________________ (property taxes, property insurance,
CAM parking, storage, electricity, utilities, etc.), each as provided in the
Lease. Tenant's share of common area expenses and/or operating expenses is
__________ Percent (_____%). The base year for operating expenses is
___________________ and for real estate taxes is ___________, each as provided
in the Lease. (RETAIL TENANTS ONLY: The annual percentage rent payable, if any,
for the calendar year beginning January 1, 1994 and ending December 31, 1994
under the Lease was in the amount of ____________, and "Gross Sales" (as such
term is defined in the Lease), if any, during the calendar year 1994 were
_______________.
<PAGE>
4. The Lease terminates on _______________ and Tenant has no
expansion or renewal rights, or any other options or rights to extend the term
of the Lease, except as attached hereto.
5. All work, including construction, Tenant improvements and
alterations, to be performed for Tenant under the Lease has been performed as
required under and in accordance with the terms of the Lease and has been
accepted by Tenant. All conditions and obligations under the Lease to be
performed by Landlord as of the date hereof have been fully performed by
Landlord.
6. The Lease is in full force and effect, free from default by
Landlord or Tenant, and Tenant has no claims or defenses against Landlord or
offsets against rent.
7. Tenant has not assigned or sublet the Lease or any portion of the
Leased Premises, nor does Tenant hold the Lease or the Leased Premises under
assignment or sublet.
8. Except for the interest in the Leased Premises created by the
Lease and Tenant's personal property contained therein, Tenant has no interest
in the Leased Premises, the Building or any personal property used in connection
therewith, nor does Tenant have any right of first refusal, opportunity of
negotiation or right or option to purchase all or any portion of the Leased
Premises or the Building.
9. The statements contained herein may be relied upon by Landlord, by
the Purchaser by any prospective purchaser of the fee of the Leased Premises
and/or the Building, and any lender of Landlord or the Purchaser or any such
prospective purchaser, and their respective successors and assigns.
10. Tenant has not filed a voluntary petition for relief, and is not
the subject of any involuntary petition for relief, under the United States
Bankruptcy Code or similar bankruptcy laws. Tenant is in possession and
presently open and conducting business in the Leased Premises.
11. Tenant has not received notice from Landlord or any governmental
entity or instrumentality indicating that the Premises or the property of which
the Premises are a part, violate or fail to comply with any governmental law,
order, rule or regulation.
THE UNDERSIGNED individual is duly authorized to execute this Tenant
Estoppel Certificate on behalf of Tenant.
Dated: _____________, 1995
Tenant: By:
---------------------------------------
Name:
----------------------------------
Title:
---------------------------------
E-2
<PAGE>
EXHIBIT "F"
-----------
SUBSTANCE OF OPINION OF
SKADDEN, ARPS, SLATE, MEAGHER & FLOM,
SPECIAL COUNSEL TO PURCHASER AND MERGER SUB
-------------------------------------------
For purposes of this opinion: (i) the term "Applicable Law" means only
the laws of the United States of America which, in our experience, are normally
applicable to transactions of the type contemplated by the Merger Agreement;
provided, however, that the term Applicable Laws shall not include federal
securities laws or the securities laws of any state of the United States; (ii)
the term "Governmental Authorities" means any legislative, judicial,
administrative or regulatory body of the United States of America; (iii) the
term "Governmental Approval" means any consent, approval, license, authorization
or validation of, or filing, recording, qualification or registration with, any
Governmental Authority pursuant to Applicable Laws; and (iv) the term
"Applicable Order" means any order or decree of any Governmental Authority by
which Purchaser or Merger Sub is bound, the existence of which has been
specifically disclosed to us in writing by Purchaser or Merger Sub and which are
listed on Schedule A hereto.
1. The execution and delivery by Purchaser and Merger Sub of the
Merger Agreement and the performance by Purchaser and Merger Sub of their
respective obligations thereunder do not contravene (i) any provision of
Applicable Law or (ii) any Applicable Order.
2. The execution, delivery and performance by Purchaser and Merger
Sub of the Merger Agreement will not conflict with or constitute a breach of or
default under the agreements or instruments to which Purchaser or Merger Sub is
subject and which are set forth on Exhibit A hereto (which have been identified
to us by Purchaser and Merger Sub as all the agreements and instruments which
are material to the business or financial condition of Purchaser and Merger
Sub). We express no opinion as to whether the execution, delivery or
performance by Purchaser or Merger Sub of the Merger Agreement will constitute a
violation of or a default under any covenant, restriction or provision with
respect to financial ratios or any aspect of the financial condition or results
of operations of Purchaser or Merger Sub.
3. No Governmental Approval which has not been obtained is required
for the execution and delivery by Purchaser or Merger Sub of the Merger
Agreement or the consummation by Purchaser or Merger Sub of the transactions
contemplated thereby. We express no opinion, however, as to any such
Governmental Approval (i) which may be required as a result of your involvement
in the transactions contemplated by the Merger Agreement because of your legal
or regulatory status or because of any other facts specifically pertaining to
you; (ii) the absence of which does not have any material adverse effect on you,
Purchaser or Merger Sub and does not deprive you of any material benefit under
the Merger Agreement; or (iii) which can be readily obtained without significant
delay or expense to you, without loss to you of any material benefit under the
Merger Agreement and without any material adverse effect on you, Purchaser or
Merger Sub during the period such Governmental Approval was not obtained.
4. To our knowledge, there are no pending or threatened actions,
proceedings or investigations affecting Purchaser or Merger Sub or any of their
respective
<PAGE>
properties or assets that is likely to prohibit or delay the consummation of the
Merger or to have a material adverse effect on Purchaser and Merger Sub taken as
a whole. The opinions in this paragraph are rendered solely in reliance upon
representations of officers of Purchaser and Merger Sub, which representations
have not been independently investigated or verified by us.
F-2
<PAGE>
EXHIBIT "G"
-----------
________________, 1995
MIP Properties, Inc.
2020 Santa Monica Boulevard, Suite 480
Santa Monica, California 90404
Re: Merger of MIP Properties, Inc. and MIP Acquisition Corporation,
a Wholly-Owned Subsidiary of JER Partners, LLC
Dear Sir or Madam:
We have acted as special Maryland counsel to JER Partners, LLC, a
Maryland limited liability company ("JER"), and MIP Acquisition Corporation, a
Maryland corporation that is a wholly-owned subsidiary of JER ("Merger Sub"), in
connection with the merger ("Merger") of Merger Sub with and into MIP
Properties, Inc., a Maryland corporation ("MIP"), pursuant to the Agreement and
Plan of Merger between MIP, JER and Merger Sub dated as of _______, 1995 (the
"Merger Agreement"). All capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Merger Agreement.
In connection with the opinions contained herein, we have examined and
are relying upon copies of the following documents:
(a) Merger Agreement, Articles of Merger and the representations
and warranties of each of the parties contained in the Merger Agreement;
(b) Articles of Organization of JER and Articles of Incorporation
of Merger Sub, each of which as certified by the State Department of
Assessments and Taxation of Maryland ("SDAT") on _________, 1995;
(c) Operating Agreement of JER and resolutions adopted by the
members of JER relating to the Merger Agreement, the Merger and matters
relating thereto, as certified by the Secretary of JER;
(d) Bylaws of Merger Sub, Stock Ledger Book ("Stock Ledger Book")
of Merger Sub reflecting that all of the issued and outstanding shares of
the capital stock of Merger Sub is owned (beneficially and of record) by
JER, and resolutions of the Board of Directors of Merger Sub relating to
the Merger Agreement, the Merger and matters relating thereto;
(e) Certificates of the Secretary of JER and of a member of
Merger Sub dated _________, 1995 ("Certificates of Secretary") regarding
the matters described in clauses (c) and (d) above and the incumbency of
certain members of JER and certain officers of Merger Sub;
<PAGE>
(f) Certificate of Good Standing issued by the Secretary of State
of Maryland dated _________, 1995 to the effect that JER is validly
existing and in good standing as a limited liability company under the laws
of the State of Maryland law, duly authorized to transact business in the
State of Maryland;
(g) Certificate of Good Standing issued by the Secretary of State
of Maryland dated _________, 1995 to the effect that Merger Sub is validly
existing and in good standing as a corporation under the laws of the State
of Maryland, duly authorized to transact business in the State of Maryland;
(h) Certificates of certain members of JER ("Members
Certificate") and of certain officers of Merger Sub ("Officer's
Certificate") dated _________, 1995 containing certain representations of
material facts; and
(i) Telephonic confirmation from MIP or its counsel that the
Merger Agreement has in fact been delivered to MIP.
In basing the opinions and other matters set forth herein on "our
knowledge," the words "our knowledge" signify that, in the course of our
representation of JER and Merger Sub in matters with respect to which we have
been engaged by them as counsel, no information has come to our attention that
would give us actual knowledge or actual notice that any such opinions or other
matters are not accurate or that any of the foregoing documents, certificates,
reports, and information on which we have relied are not accurate and complete.
Except as otherwise stated herein, we have undertaken no independent
investigation or verification of such matters. The words "our knowledge" and
similar language used herein are intended to be limited to the knowledge of the
lawyers within our firm who have worked on matters on behalf of JER and Merger
Sub since March 10, 1995.
In reaching the opinions set forth below, we have assumed, and to our
knowledge there are no facts inconsistent with, the following:
(a) each of the parties thereto (except JER and Merger Sub) has
duly and validly executed and delivered each instrument, document and
agreement in connection with the Merger to which such party is a signatory,
and such party's obligations set forth therein are its legal, valid, and
binding obligations, enforceable in accordance with their respective terms;
(b) each person (except JER and Merger Sub) executing any such
instrument, document or agreement on behalf of any party is duly authorized
to do so;
(c) there are no oral or written modifications of or amendments
to any of the documents referred to above, and there has been no waiver of
any of the provisions of such documents, by actions or conduct of the
parties or otherwise;
(d) all documents submitted to us as originals are authentic, all
documents submitted to us as certified or photostatic copies conform to the
original
G-2
<PAGE>
document, all signatures on all documents submitted to us for examination
are genuine, and all public records reviewed are accurate and complete.
Based on our review of the foregoing and subject to the assumptions
and qualifications set forth herein, it is our opinion that:
1. JER has been duly formed and is validly existing as a limited
liability company in good standing under the laws of the State of Maryland, and
has the requisite power and authority to own its properties, conduct its
business as described in its Operating Agreement, and execute and deliver, and
to perform its obligations under, the Merger Agreement.
2. Merger Sub has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Maryland, has the
requisite power and authority to own its properties, conduct its business as
described in its Articles of Incorporation, and execute and deliver, and to
perform its obligations under, the Merger Agreement.
3. Based solely on the Stock Ledger Book and our knowledge, all of
the issued and outstanding capital stock of Merger Sub is owned by JER.
4. The Merger Agreement has been duly executed and delivered by JER
and by Merger Sub and constitutes the valid and binding obligation of each of
JER and Merger Sub, respectively, enforceable against each of them in accordance
with its terms, subject to (i) applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws affecting
creditors' rights generally, and (ii) the exercise of judicial discretion in
accordance with general principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at law). We express no opinion as to the
enforceability of any rights to contribution or indemnification provided for in
the Merger Agreement which are violative of the public policy underlying any
law, rule or regulation (including any federal or state securities law, rule or
regulation).
5. The execution and delivery of the Merger Agreement by JER, and the
performance by JER of its obligations thereunder, has been authorized by JER by
all necessary action required of a limited liability company.
6. The execution and delivery of the Merger Agreement by Merger Sub,
and the performance by Merger Sub of its obligations thereunder, has been
authorized by Merger Sub by all necessary corporate action.
7. Neither the execution and delivery of the Merger Agreement by JER,
nor the consummation of the transactions specified therein, will (i) conflict
with, result in a breach of or constitute a default under JER's Articles of
Organization or Operating Agreement, or (ii) to our knowledge, violate any
Maryland law, judgment, order or decree that is applicable to JER or any of its
properties in Maryland, if any.
G-3
<PAGE>
8. Neither the execution and delivery of the Merger Agreement by
Merger Sub, nor the consummation of the transactions specified therein, will (i)
conflict with, result in a breach of or constitute a default under Merger Sub's
Articles of Incorporation or Bylaws, or (ii) to our knowledge, violate any
Maryland law, judgment, order or decree that is applicable to Merger Sub or any
of its properties in Maryland, if any.
9. Except as to the filing and recordation with, and acceptance for
record by, SDAT of the Articles of Merger, and except as to any matters relating
to any federal or state securities or Blue Sky laws, to our knowledge, no
consent or approval of any Maryland court or government agency is required on
the part of JER and/or Merger Sub for the execution and delivery of the Merger
Agreement by them or for the consummation of the Merger. We express no opinion
with respect to any consents or approvals that may be required as a result of
MIP's involvement in the transactions contemplated by the Merger Agreement due
to any legal or regulatory status or any facts pertaining specifically to MIP.
We express no opinion as to the laws of any jurisdiction other than
the laws of the State of Maryland. The opinions expressed herein concern only
the effect of the laws (excluding the principles of conflict of laws) of the
State of Maryland as currently in effect. We assume no obligation to supplement
this opinion if any applicable laws change after the date hereof or if we become
aware of any facts that might change the opinions expressed herein after the
date hereof.
The opinions expressed in this letter are solely for your use, the use
of your counsel and for the benefit of (and the opinions expressed herein may be
relied upon by) Skadden, Arps, Slate, Meagher & Flom, counsel to JER and Merger
Sub; these opinions may not be relied on by any other persons without our prior
written approval. The opinions expressed in this letter are limited to the
matters set forth herein, and no other opinions should be inferred beyond the
matters expressly stated.
Very truly yours,
GORDON, FEINBLATT, ROTHMAN,
HOFFBERGER & HOLLANDER, LLC
By:_____________________________
Abba David Poliakoff,
Member of the Firm
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