SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
MIP Properties, Inc.
(Name of issuer)
Common Stock
(Title of class of securities)
553051103
(CUSIP number)
Gary P. Stevens, Esq.
J.E. Robert Companies
11 Canal Center Plaza
Suite 200
Alexandria, Virginia 22314
(703) 739-4400
(Name, address and telephone number of person
authorized to receive notices and communications)
Copy to:
Stephen W. Hamilton
Skadden, Arps, Slate, Meagher & Flom
1440 New York Avenue
Washington, DC 20005
202) 371-7000
May 21, 1995
(Date of event which requires filing of this statement)
If the filing person has previously filed a
statement on Schedule 13G to report the acquisition which is
the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1 (b)(3) or (4), check the
following box [].
Check the following box if a fee is being paid
with the statement [X].
CUSIP No.553051103
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
JER Partners, LLC
54-1757955
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) []
(b) []
3 SEC USE ONLY
4 SOURCE OF FUNDS
BK, OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) []
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Maryland
7 SOLE VOTING POWER
NUMBER OF 0
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 1,380,964
REPORTING
PERSON WITH 9 SOLE DISPOSITIVE POWER
0
10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,380,964
12 CHECK BOX IF THE AGGREGATE AMOUNT IN BOX (11) EXCLUDES CERTAIN
SHARES []
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
15.0%
14 TYPE OF REPORTING PERSON
00
CUSIP No.553051103
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Joseph E. Robert, Jr.
###-##-####
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) []
(b) []
3 SEC USE ONLY
4 SOURCE OF FUNDS
BK, WC, OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) []
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
7 SOLE VOTING POWER
NUMBER OF 157,400
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY EACH 1,381,964*
REPORTING
PERSON WITH 9 SOLE DISPOSITIVE POWER
157,400
10 SHARED DISPOSITIVE POWER
1,000*
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,539,364*
12 CHECK BOX IF THE AGGREGATE AMOUNT IN BOX (11) EXCLUDES CERTAIN
SHARES []
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
16.7%
14 TYPE OF REPORTING PERSON
IN
* Includes 1,000 shares of Common Stock owned by an
employee of The J.E. Robert Companies. Mr. Robert
disclaims beneficial ownership of such shares.
ITEM 1. SECURITY AND ISSUER.
This statement relates to the Common Stock, par value
$.01 per share (the "Common Stock"), of MIP Properties,
Inc., a Maryland corporation (the "Issuer"). The address of
the principal executive offices of the Issuer is 2020 Santa
Monica Boulevard, Suite #480, Santa Monica, California
90404.
ITEM 2. IDENTITY AND BACKGROUND.
This statement is filed on behalf of JER Partners
L.L.C., a Maryland limited liability company ("JER") and
Joseph E. Robert, Jr. JER is a recently formed limited
liability company that has not conducted any business other
than in connection with the transactions described below.
The address of JER's principal business and offices is 11
Canal Center Plaza, Suite 200, Alexandria, Virginia 22314.
The name, citizenship or state of organization,
principal business, principal business address and principal
office address of the members of JER Partners, LLC (the
"Members") is set forth below.
1. Name: J.E. Robert Company, Inc.
State of Organization: Virginia
Principal Business: Real Estate Asset Management
and Advisory Services
Principal Business and
Principal Office
Address: 11 Canal Center Plaza
Suite 200
Alexandria, Virginia 22314
2. Name: JER Asset Advisors, Inc.
State of Organization: Virginia
Principal Business: Real Estate Asset Management
and Advisory Services
Principal Business and
Principal Office
Address: 11 Canal Center Plaza
Suite 200
Alexandria, Virginia 22314
3. Name: Joseph E. Robert, Jr.
Business Address: 11 Canal Center Plaza
Suite 200
Alexandria, Virginia
22314
Principal Occupation: CEO, J.E. Robert
Companies
Name, Principal Business
and Address of
Organization: J.E. Robert Companies;
Real Estate Asset Management and
Advisory Services; 11 Canal Center
Plaza, Suite 200, Alexandria,
Virginia 22314
Citizenship: United States
During the last five years, none of JER or the Members
has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors), nor has any of
such persons listed above been a party to a civil proceeding
of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was or is
subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities
subject to, Federal or State securities laws or finding any
violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
JER and Joseph E. Robert, Jr. may be deemed to have
acquired beneficial ownership of 1,380,964 shares of Common
Stock pursuant to the Agreement dated as of May 21, 1995
(the "Proxy Agreement") among Steven C. Markoff, Jadwiga Z.
Markoff, Palm Finance Corporation, a California corporation
("Palm", and with Steven C. Markoff and Jadwiga Z. Markoff,
the "Palm Group"), JER and MIP Acquisition Corporation, a
Maryland corporation ("Merger Sub"), pursuant to which the
Palm Group granted JER its proxy to vote the 1,380,964
shares of Common Stock, or approximately 15% of the
outstanding shares of Common Stock, beneficially owned by
the Palm Group, in favor of the adoption of the Merger
Agreement dated as of May 21, 1995 among JER, Merger Sub and
the Issuer (the "Merger Agreement"), pursuant to which
Merger Sub will be merged with and into the Issuer (the
"Merger"). In connection with such transactions, Merger Sub
and Palm have entered into a Purchase Agreement dated as of
May 21, 1995 (the "Purchase Agreement"), pursuant to which
the surviving corporation of the Merger will sell certain
real and personal property assets to Palm after the
consummation of the Merger for $1,575,000, plus or minus
certain adjustments and prorations.
The total amount of funds required to consummate the
transactions contemplated by the Merger Agreement and to pay
related fees and expenses is estimated to be approximately
$58,000,000. JER expects to finance such amount as follows:
(i) approximately $8,000,000 will be raised in a private
equity offering exempt from registration pursuant to Section
4(2) of the Securities Act of 1933, as amended, and (ii)
approximately $50,000,000 will be borrowed from a financial
institution. JER has begun to contact potential equity
investors, but to date no agreements between JER and any of
such investors have been executed. JER has begun to
negotiate with commercial lenders, but to date no agreements
between JER and any commercial lender have been executed.
Prior to the execution of the Proxy Agreement, J.E.
Robert Company, Inc., a corporation of which Joseph E.
Robert, Jr. is the sole stockholder, purchased 157,400
shares of Common Stock with working capital.
ITEM 4. PURPOSE OF TRANSACTION.
(a)-(j) JER entered into the Proxy Agreement and J.E.
Robert Company, Inc. purchased 157,400 shares of Common
Stock to acquire the right to vote shares of Common Stock in
favor of the Merger Agreement. Pursuant to the Merger
Agreement, Merger Sub will merge with and into the Issuer,
with the Issuer continuing as the surviving corporation (the
"Surviving Corporation"). In the Merger, each outstanding
share of Common Stock (other than shares of Common Stock
owned by JER or Merger Sub) will be converted into the right
to receive $2.475 in cash. The Common Stock is currently
registered pursuant to Section 12(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and
the Company files reports pursuant thereto with the
Securities and Exchange Commission and the American Stock
Exchange (the "AMEX"). Following the consummation of the
Merger, the registration of the Common Stock under the
Exchange Act will be terminated and the Common Stock will no
longer be listed on the AMEX or otherwise publicly traded.
The consummation of the Merger Agreement is subject to a
number of conditions including, among other things, the
approval of the holders of not less than 80% of the
outstanding shares of Common Stock.
Upon the consummation of the Merger, the Surviving
Corporation will become a wholly owned subsidiary of JER.
Simultaneously with the consummation of the Merger, the
officers and directors of the Issuer will resign, and JER
will cause the officers and directors of Merger Sub to
become the officers and directors of the Surviving
Corporation. By operation of the Merger, the Articles of
Restatement of Charter of MIP will be amended and restated
to be in the form of the Articles of Incorporation of Merger
Sub as in effect immediately prior to the Effective Time.
Immediately after the Effective Time, the By-laws of the
Surviving Corporation shall be amended and restated in their
entirety to be in the form of the By-laws of Merger Sub as
in effect immediately prior to the Merger.
As soon as practicable following the consummation of
the Merger, subject to the terms and conditions of the
Purchase Agreement, the Surviving Corporation will sell, and
Palm will purchase, certain real and personal property (the
"Property"). The Property consists of (i) that certain real
property commonly known as Irwindale Executive Plaza, 5200
and 5240 North Irwindale Avenue, Irwindale California,
together with all improvements, structures and fixtures
located thereon, and that certain unimproved real property
commonly known as Sunwest Land, San Bernardino, California,
together with all rights, privileges and easements
appurtenant to each such property, (ii) the Surviving
Corporation's limited partnership interest in Discovery
Partners, a California limited partnership, (iii) the
Surviving Corporation's contract rights pursuant to that
certain Settlement Agreement, dated March 10, 1994, among
Larry J. Mielke, Thomas R. Tellefsen and MIP and (iv) that
certain Promissory Note, dated June 5, 1989, made by Donald
F. Sammis and Fernanda Sammis, husband and wife, Lee C.
Sammis, Trustee of the Donald F. Sammis Children's Trust
dated August 5, 1983, Mission Valley One, a California
general partnership and MBM Associates, a California limited
partnership, in favor of MIP, in the original principal
amount of $12,350,000, as amended. The purchase price for
the Property is $1,575,000, plus the product of (i) the net
Operating Cash Flow (as defined in the Purchase Agreement)
from March 1, 1995 until the date of the closing of the
transactions contemplated by the Purchase Agreement and (ii)
negative one, net of all prorations and closing costs as
provided in the Purchase Agreement. The consummation of the
Purchase Agreement is conditioned upon, among other things,
the consummation of the Merger and the receipt of all
consents, approvals and authorizations required to be
obtained in connection with the transactions contemplated by
the Purchase Agreement.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The following table sets forth the aggregate
number and percentage of the Common Stock beneficially owned
by each person named in Item 2.
Percentage
of
Number of Outstanding
Person Securities Securities
JER Partners LLC 1,380,964 15.0%
Joseph E. Robert, Jr. 1,539,364* 16.7%
J.E. Robert Company, Inc. 1,538,364 16.7%
JER Asset Advisors, Inc. 1,380,964 15.0%
* Includes 1,000 shares of Common Stock owned by an
employee of The J.E. Robert Companies. Mr. Robert
disclaims beneficial ownership of such shares.
(b) Pursuant to the Proxy Agreement, JER has the proxy
of the Palm Group to vote the 1,380,964 shares of Common
Stock owned by the Palm Group in favor of the Merger and any
other matter relating to the consummation of the
transactions contemplated by the Merger Agreement and
against any Competing Transaction (as defined in the Proxy
Agreement). JER therefore shares voting power with the Palm
Group over 1,380,964 shares of Common Stock. There are no
shares of Common Stock with respect to which JER has sole
power to vote or direct the vote, or sole or shared power to
dispose or direct the disposition. Set forth below is the
information required by Item 2 with respect to the Palm
Group, as reported in the Schedule 13D filed by the Palm
Group on October 26, 1994 (the "Palm 13D"):
1. Name: Steven C. Markoff
Business Address: 100 Wilshire Boulevard
Third Floor
Santa Monica, California 90401
Principal occupation
and address: Businessman
A-Mark Financial Corporation
100 Wilshire Boulevard
Third Floor
Santa Monica, California 90401
Citizenship: United States
2. Name: Jadwiga Zabawska Markoff
Business Address: 100 Wilshire Boulevard Third Floor
Santa Monica, California 90401
Principal occupation
and address: Director
Palm Finance Corporation
100 Wilshire Boulevard
Third Floor
Santa Monica, California 90401
Citizenship: Poland
3. Name: Palm Finance Corporation
State of
Incorporation: California
Principal Business: Commercial Finance Lender
Principal Business
and Principal Office
Address: 100 Wilshire Boulevard
Third Floor
Santa Monica, California 90401
According to the Palm 13D, during the last five years,
none of the persons listed above has been convicted in a
criminal proceeding (excluding traffic violations or similar
misdemeanors), nor has any of such persons been a party to a
civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such preceding was
or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities
subject to, Federal or State securities laws or finding any
violation with respect to such laws.
JER Asset Advisors, Inc. ("Advisors") is a member of
JER. There are no shares of Common Stock with respect to
which Advisors has sole or shared power to vote or direct
the vote, or sole or shared power to dispose or direct the
disposition.
J.E. Robert Company, Inc. ("J.E. Robert") is a member
of JER. J.E. Robert has sole dispositive and sole voting
power over 157,400 shares of Common Stock. There are no
shares of Common Stock with respect to which J.E. Robert has
shared dispositive or voting power.
Joseph E. Robert, Jr. is a member of JER and the sole
stockholder of J.E. Robert and Advisors, and may be deemed
to beneficially own all the shares of Common Stock
beneficially owned by JER and J.E. Robert. Joseph E.
Robert, Jr. therefore shares voting power with the Palm
Group over 1,380,964 shares of Common Stock, has sole voting
and sole dispositive power over 157,400 shares of Common
Stock, and has shared dispositive power over no shares of
Common Stock.
In addition, Joseph E. Robert, Jr. may be deemed to be the
beneficial owner of 1,000 shares of Common Stock owned by an
employee of The J.E. Robert Companies. Joseph E. Robert,
Jr. disclaims beneficial ownership of such shares.
(c) Except as disclosed herein, there have been no
transactions in the Common Stock that were effected during
the past sixty days by JER or any of the Members.
(d)-(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE
ISSUER.
Pursuant to the Proxy Agreement, JER obtained the proxy
of the Palm Group to vote the 1,380,964 shares of Common
Stock owned by the Palm Group in favor of the Merger and any
other matter relating to consummation of the transactions
contemplated by the Merger Agreement and against any
Competing Transaction (as defined in the Proxy Agreement).
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
1. Agreement and Plan of Merger, dated as of May 21,
1995, among MIP Properties, Inc., JER Partners LLC
and MIP Acquisition Corporation.
2. Agreement, dated as of May 21, 1995, among Steven
C. Markoff, Jadwiga Z. Markoff, Palm Finance
Corporation, JER Partners LLC and MIP Acquisition
Corporation.
3. Purchase Agreement, dated as of May 21, 1995,
between MIP Acquisition Corporation and Palm
Finance Corporation.
SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set
forth in this statement is true, complete and correct.
May 31, 1995
(DATE)
/s/ Joseph E. Robert, Jr.
(SIGNATURE)
Joseph E. Robert, Jr.
(NAME/TITLE)
SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set
forth in this statement is true, complete and correct.
May 31, 1995
(DATE)
JER PARTNERS LLC
By: J.E. Robert Company, Inc.
(Signature)
J.E. Robert Company Inc., Member
(Name/Title)
By: /s/ Gary P. Stevens
(Signature)
Gary P. Stevens, Executive Vice-President
(Name/Title)
EXHIBIT INDEX PAGE NO.
1. Agreement and Plan of Merger, dated as
of May 21, 1995, among MIP Properties,
Inc., JER Partners LLC and MIP
Acquisition Corporation . . . . . . . . . . . . .
2. Agreement, dated as of May 21, 1995,
among Steven C. Markoff, Jadwiga Z.
Markoff, Palm Finance Corporation, JER
Partners LLC and MIP Acquisition
Corporation. . . . . . . . . . . . . . . . . . .
3. Purchase Agreement, dated as of May 21,
1995, between MIP Acquisition
Corporation and Palm Finance
Corporation. . . . . . . . . . . . . . . . . . .
EXHIBIT 1
A G R E E M E N T A N D P L A N O F M E R G E R
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
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. The Merger shall
have the effects specified in the Maryland General Corporation
Law (the "MCL").
1.2 Closing
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
CHARTER AND BYLAWS
OF THE SURVIVING CORPORATION
2.1 Charter
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.
ARTICLE III
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
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
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
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 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, 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 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 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;
(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
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 (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 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, (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.
(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 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.
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,
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.
(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. SECTION 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.
(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 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 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.
(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 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 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 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 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.
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, 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 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.
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");
(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;
(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);
(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 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.
(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 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.
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.
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 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).
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: /s/ Joseph E. Robert
Name: Joseph E. Robert
Title: Member
MIP ACQUISITION CORPORATION,
a Maryland corporation
By: /s/ Joseph E. Robert
Name: Joseph E. Robert
Title: President
MIP PROPERTIES, INC.,
a Maryland corporation
By: /s/ Carl C. Gregory, III
Name: Carl C. Gregory, III
Title: Chairman of the Board and
Chief Executive Officer
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 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 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.
(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 VII
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 $.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 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.
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:
By: (SEAL)
Name: Name:
Secretary Chairman of the Board and Chief Executive
Officer
MIP Acquisition Corporation,
a Maryland corporation
ATTEST:
By:
(SEAL)
Name: Name:
Secretary President
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
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 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.
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.
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 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.
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
_______________.
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:
SUBSTANCE OF OPINION OFSKADDEN, 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 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.
________________, 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;
(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 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.
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
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
TABLE OF CONTENTS
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 . . . . . . . . . 23
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
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 . . . . . . . . . . . . . . . . . 33
8.1 Termination by Mutual Consent . . . . . . . . . . . 33
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 . . . . . . . . . . . . . . . . . . 35
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 . . . . . . . . . . . . . . . . . 39
ARTICLE X CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . 39
10.1 Definition of "Knowledge of the Company" . . . . . 39
10.2 Definition of "Subsidiary" . . . . . . . . . . . . 39
SIGNATURE PAGE 41
EXHIBITS
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
EXHIBIT G Form of Opinion of Gordon, Feinblatt, Rothman,
Hoffberger & Hollander, Special Maryland Counsel
to Purchaser and Merger Sub
SCHEDULES
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
EXHIBIT 2
AGREEMENT
AGREEMENT, dated May 21, 1995, among MIP Acquisition
Corporation, a Maryland corporation ("Merger Sub"), JER Partners,
L.L.C., a Maryland limited liability company (the "Purchaser,"
and together with Merger Sub, the "Robert Group"), Steven C.
Markoff and Jadwiga Z. Markoff (together with Steven C. Markoff,
the "Markoffs"), and Palm Finance Corporation ("Palm," and
together with the Markoffs, the "Palm Group").
WHEREAS, simultaneously herewith Purchaser and Merger
Sub have entered into an agreement and plan of merger (the
"Merger Agreement") with MIP Properties, Inc., a Maryland
corporation ("MIP" or the "Company") providing for the merger of
MIP and Merger Sub (the "Merger"), which Merger is subject to the
approval of MIP's shareholders;
WHEREAS, the Palm Group owns beneficially an aggregate
of 1,380,964 shares of common stock of MIP (the "Palm Shares") as
set forth on Annex A hereto;
WHEREAS, upon consummation of the Merger, the Robert
Group desires to sell and Palm desires to purchase certain
properties and assets of MIP and simultaneously herewith have
entered into an agreement (the "Purchase and Sale Agreement")
providing for the purchase and sale of such properties and
assets; and
WHEREAS, the Robert Group's willingness to cause
Purchaser and Merger Sub to enter into the Merger Agreement is
conditioned upon the execution and delivery by the parties hereto
of this Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES OF MERGER SUB AND PURCHASER
Section 1.1 Representations and Warranties of Merger
Sub and Purchaser. Merger Sub and Purchaser hereby represent and
warrant as follows:
(a) This Agreement has been duly authorized by all
necessary corporate action on the part of Merger Sub and
Purchaser, has been duly executed by a duly authorized officer of
Merger Sub and Purchaser and constitutes a valid and binding
agreement of Merger Sub and Purchaser enforceable against Merger
Sub and Purchaser in accordance with its terms.
(b) Merger Sub is a corporation duly incorporated,
validly existing and in good standing under the laws of Maryland
and has the requisite corporate power to enter into and perform
this Agreement.
(c) Purchaser is a limited liability company duly
formed and organized and in good standing under the laws of
Maryland and has the requisite power and authority to enter into
and perform this Agreement.
(d) The execution and delivery of this Agreement by
Merger Sub and Purchaser and the performance by Merger Sub and
Purchaser of their respective duties hereunder will not
contravene any contractual or legal restriction contained in any
document to which Merger Sub or Purchaser is a party or by which
either of them is bound.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE MARKOFFS AND PALM
Section 2.1 Representations and Warranties of the
Markoffs and Palm. The Markoffs and Palm hereby represent and
warrant as follows:
(a) This Agreement has been duly authorized by all
necessary corporate action on the part of Palm, has been duly
executed by a duly authorized officer of Palm and constitutes a
valid and binding agreement of Palm enforceable against it in
accordance with its terms.
(b) This Agreement has been duly executed by the
Markoffs and constitutes a valid and binding agreement of the
Markoffs enforceable against them in accordance with its terms.
(c) Palm is a corporation duly incorporated, validly
existing and in good standing under the laws of California and
has the requisite corporate power to enter into and perform this
Agreement.
(d) The execution and delivery of this Agreement by
the Markoffs and Palm and the performance by the Markoffs and
Palm of their duties hereunder will not contravene any
contractual or legal restriction contained in any document to
which the Markoffs or Palm is a party or by which any of them is
bound.
(e) The Palm Group is the beneficial owner of, and has
good and valid title to, the Palm Shares, free and clear of all
liens, encumbrances, claims, charges, assessments and limitations
of every kind whatsoever (collectively, "Liens"). There are no
outstanding warrants, subscriptions, rights, options, calls,
commitments or other agreements to purchase or acquire any of the
Palm Shares, nor does the Palm Group have any right to purchase
additional shares of common stock of MIP pursuant to any
outstanding warrants, subscriptions, rights, options, calls,
commitments or other agreements. The Palm Shares are not subject
to any voting trust or other voting arrangement, and the Palm
Group has not granted any proxy with respect thereto (other than
as established by this Agreement). The Palm Group has all
necessary power and authority to vote the Palm Shares in favor of
the Merger Agreement. Neither the Palm Group nor any of its
affiliates or associates (as such terms are defined in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as
amended) holds either of record or beneficially any securities of
MIP or any of MIP's direct or indirect subsidiaries other than
the Palm Shares.
ARTICLE III
PROXY AND COVENANTS
Section 3.1 Proxy. The Palm Group hereby constitutes
and appoints the Purchaser, so long as this Agreement and proxy
is in effect, as the Palm Group's true and lawful attorney and
proxy, with full power of substitution, for it and in its name,
place and stead, to vote the Palm Shares as its proxy, at every
annual, special or adjourned meeting of the stockholders of MIP
(including the right to sign its name (as stockholder) to any
consent, certificate or other document relating to MIP that the
law of the State of Maryland may permit or require) in favor of
the adoption of the Merger Agreement and any other matter
relating to consummation of the transactions contemplated by the
Merger Agreement and against any Competing Transaction. The
proxy hereby given shall be irrevocable unless terminated
pursuant to Article IV hereof. For purposes of this Agreement,
"Competing Transaction" will mean any of the following involving
MIP: (i) any merger, consolidation, share exchange, business
combination or other similar transaction (other than the
transactions contemplated by the Merger Agreement); (ii) any
sale, lease, exchange, transfer or other disposition of all or
any substantial portion of the assets of MIP (other than the
transactions contemplated by the Merger Agreement and the
Purchase and Sale Agreement); (iii) any tender offer or exchange
offer for any of the outstanding shares of capital stock of MIP
or the filing of a registration statement under the Securities
Act of 1933, as amended, in connection therewith; or (iv) any
public announcement of a proposal, plan or intention to do any of
the foregoing. The Palm Group agrees that such proxy is coupled
with an interest sufficient in law to support an irrevocable
proxy and shall not be terminated by any act of the Markoffs or
Palm, by lack of appropriate power or authority or by the
occurrence of any other event or events other than as provided in
Article IV hereof. In the event that Purchaser is unable to
exercise the power and authority granted hereunder for any
reason, the Palm Group agrees to vote all the Palm Shares in
favor of approval and adoption of the Merger Agreement and the
transactions contemplated thereby at any such meeting or
adjournment thereof and provide any such consents, certificates
or other documents relating thereto.
Section 3.2 Palm Group Covenant. So long as this
Agreement is in effect, the Palm Group agrees that (i) it will
not sell, pledge or dispose of the Palm Shares, or permit the
Palm Shares to become subject to any Liens; (ii) it will not
grant or enter into any warrants, subscriptions, rights, options,
calls, commitments or other agreements to (x) purchase or acquire
any additional shares of MIP common stock or (y) dispose of the
Palm Shares; (iii) it will not subject the Palm Shares to any
voting trust or other voting arrangement or grant any proxy with
respect to the Palm Shares (other than as established by this
Agreement), and the Palm Group will have all necessary power and
authority to vote the Palm Shares in favor of the Merger
Agreement; and (iv) neither the Palm Group nor any of its
affiliates or associates (as such terms are defined in Rule 12b-2
promulgated under the Securities Act of 1934, as amended) will
acquire either record or beneficial ownership of any securities
of MIP or any of MIP's direct or indirect subsidiaries, or become
a participant in or encourage or solicit a Competing Transaction.
Promptly after the execution and delivery of this Agreement, the
Markoffs will take whatever action is necessary to cause the
14,658 shares of common stock of MIP beneficially owned by them
to be registered in their names and held of record by them, and
Palm will take whatever action is necessary to cause the
1,366,306 shares of common stock of MIP beneficially owned by it
to be registered in its name and held of record by it in each
case as soon as practicable after the date hereof and in any
event so that the shares shall be registered in their names and
held of record by them, respectively, on the record date for the
determination of shareholders of MIP entitled to vote at the
meeting at which the shareholders of MIP will vote upon the
adoption of the Merger Agreement, it being understood that if the
shares are not so registered and held of record on such record
date the Palm Group will take whatever action is necessary or may
be requested by the Robert Group to insure that all the Palm
Shares are voted in favor of the adoption of the Merger Agreement
and the transactions contemplated thereby and against any
Competing Transaction. The Palm Group shall promptly notify
Robert Group in writing when all the Palm Shares are registered
in their names and held of record by them. Within two business
days after their receipt of proxy materials relating to the
Merger, the Markoffs and Palm will deliver all such materials to
the Purchaser.
Section 3.3 Robert Group Covenant. Subject to its
right to exercise its rights under Article VII and Article VIII
of the Merger Agreement, each of the Purchaser and Merger Sub
will use its best efforts to promptly take, or cause to be taken,
all action and do, or cause to be done, all things necessary,
proper or appropriate to consummate and make effective the Merger
as soon as practicable. Subject to the terms of the
Confidentiality Agreement between MIP and J.E. Robert Company,
Inc., the Purchaser will send to the Palm Group by telecopy
transmission a report on or before Thursday of each week while
this Agreement is in effect signed and dated by an officer of
Purchaser setting forth what progress was made during the
preceding week and what efforts are being made by the Robert
Group in order to consummate and make effective the Merger as
soon as practicable. The Palm Group acknowledges that such
information may be material non-public information concerning
MIP.
ARTICLE IV
TERMINATION
Section 4.1 Termination by Palm Group. The Palm Group
may terminate this Agreement and terminate the proxy given under
Article III hereof, upon written notice to the Purchaser, upon
the occurrence of any of the following events:
(a) If the Purchaser fails to confirm in writing to
the Company and to the Palm Group on or prior to the twentieth
business day after the date of the execution of the Merger
Agreement that it has obtained a commitment to provide the
Financing described in Section 6.10 of the Merger Agreement and
Purchaser has exercised its right to terminate the Merger
Agreement under Section 8.3(b) thereof.
(b) If preliminary proxy material soliciting the
approval by the stockholders of MIP of the Merger Agreement and
the Merger at the Stockholders Meeting shall not be filed with
the Securities and Exchange Commission on or prior to July 30,
1995.
(c) If the Merger shall not have been consummated on
or prior to November 30, 1995.
(d) If the Merger Agreement is terminated either by
Purchaser or the Company.
(e) If the Merger Agreement is amended or modified in
any material respect in a manner materially adverse to MIP, the
shareholders of MIP or the Palm Group without the written consent
of the Palm Group. The Robert Group covenants and agrees to give
the Palm Group prompt notice of any amendment or modification of
the Merger Agreement.
Section 4.2 Termination by Robert Group. The Robert
Group may terminate this Agreement, upon written notice to the
Palm Group, upon the occurrence of any of the following events:
(a) If the Merger shall not have been consummated on
or prior to November 30, 1995.
(b) If the Merger Agreement is terminated either by
Purchaser or the Company.
ARTICLE V
MISCELLANEOUS
Section 5.1 Merger Agreement. The Robert Group has
furnished to the Palm Group a true copy of the Merger Agreement.
All capitalized terms not defined herein shall have the meanings
set forth in the Merger Agreement.
Section 5.2 Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
given if delivered personally, telecopied (and is confirmed) or
sent by overnight courier service to the parties at the following
addresses (or at such other address for a party as shall be
specified by like notice):
(a) if to Merger Sub or Purchaser, to:
Jonathan Kern
Murry Gunty
Gary Stevens
J.E. Robert Companies
11 Canal Center Plaza, Suite 200
Alexandria, VA 22314
Telephone No.: (703) 739-4400
Telecopy No.: (703) 739-7764
with a copy to:
Stephen W. Hamilton, Esq.
Skadden, Arps, Slate, Meagher & Flom
1440 New York Avenue, N.W.
Washington, D.C. 20005
Telephone No.: (202) 371-7000
Telecopy No.: (202) 393-5760
and
(b) if to the Markoffs or Palm, to:
Steven C. Markoff
Palm Finance Corporation
100 Wilshire Boulevard
Santa Monica, CA 90401
Telephone No.: (310) 587-1470
Telecopy No.: (310) 319-0310
with a copy to:
Joshua M. Berman, Esq.
Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel
919 Third Avenue
New York, N.Y. 10022
Telephone No.: (212) 715-9100
Telecopy No.: (212) 715-8000
Section 5.3 Counterparts. This Agreement may be
executed in two or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective
when two or more counterparts have been signed by each of the
parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
Section 5.4 Entire Agreement; No Third-Party
Beneficiaries; Rights of Ownership. This Agreement (i)
constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, and (ii) is
not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
Section 5.5 Severability. If any term, provision,
covenant or restriction of this Agreement is held by a court of
competent jurisdiction or other authority to be invalid, void,
unenforceable or against its regulatory policy, the remainder of
the terms, provisions covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.
Section 5.6 Governing Law. This Agreement shall be
governed and construed in accordance with the laws of the State
of Maryland without giving effect to the principles of conflicts
of law thereof.
Section 5.7 Assignment. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of
law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will
be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
Section 5.8 Specific Performance. The parties
acknowledge that money damages are an inadequate remedy for
breach of this Agreement. Therefore, the parties agree that each
of them has the right, in addition to (and not in lieu of) any
other right they may have under this Agreement or otherwise, to
specific performance of this Agreement in the event of any breach
hereof by any other party.
Section 5.9 Further Assurances. The Markoffs and Palm
will, upon request, execute and deliver any additional documents
and take such other actions as may reasonably be deemed by the
Robert Group to be necessary or desirable to complete the
transactions contemplated hereby or to further evidence the proxy
granted herein or carry out any of the provisions hereof.
Section 5.10 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.
IN WITNESS WHEREOF, Merger Sub, Purchaser and Palm have
caused this Agreement to be signed by their respective officers
thereunto duly authorized, and the Markoffs have signed this
Agreement, as of the date first above written.
MIP ACQUISITION CORPORATION
By: /s/Joseph E. Robert
Name: Joseph E. Robert
Title: President
JER PARTNERS, L.L.C.
By: /s/Joseph E. Robert
Name: Joseph E. Robert
Title: Member
/s/Steven C. Markoff
STEVEN C. MARKOFF
/s/Jadwiga Z. Markoff
JADWIGA Z. MARKOFF
PALM FINANCE CORPORATION
By: /s/G. Douglas O'Keefe
Name: G. Douglas O'Keefe
Title: President
Annex A
The following table sets forth the shares of common stock of
MIP Properties, Inc. owned beneficially by Palm Finance
Corporation and Steven C. Markoff and Jadwiga Z. Markoff.
Shares beneficially owned by Palm Finance
Corporation* 1,366,306
Shares beneficially owned jointly by
Steven C. and Jadwiga Z. Markoff 14,658
Total: 1,380,964
___________________
* All the outstanding stock of Palm Finance Corporation is
owned by A-Mark Financial Corporation, all of whose
outstanding stock is owned by Steven C. Markoff. Thus, all
shares beneficially owned by Palm Finance Corporation may
also be deemed to be beneficially owned by Steven C.
Markoff.
EXHIBIT 3
EXECUTION COPY
PURCHASE AGREEMENT
MAY 21, 1995
BY AND BETWEEN
PALM FINANCE CORPORATION,
BUYER
AND
MIP ACQUISITION CORPORATION,
SELLER
PURCHASE AGREEMENT
THIS AGREEMENT is made as of May 21, 1995 (this
"Agreement"), by and between PALM FINANCE CORPORATION, a
California corporation ("Buyer"), and MIP ACQUISITION
CORPORATION, a Maryland corporation, ("Seller").
A. MIP Properties, Inc., a Maryland
corporation ("MIP"), is the owner of (i) that certain
real property commonly known as Irwindale Executive
Plaza, 5200 and 5240 North Irwindale Avenue, Irwindale,
California (the "Irwindale Property") and (ii) that
certain unimproved real property commonly known as
Sunwest Land, San Bernardino, California (the "Sunwest
Unimproved Property"), each as more particularly
described on Exhibit "A" attached hereto and made a part
hereof, together with all rights, privileges and
easements appurtenant thereto (collectively, the "Land")
and all improvements, structures and fixtures located on
the Irwindale Property (collectively, the "Improvements"
and, together with the Land, the "Real Property").
B. MIP is a limited partner in Discovery
Partners, a California limited partnership (the
"Partnership"), pursuant to that certain Agreement of
Limited Partnership of Discovery Partners, dated as of
June 10, 1985 (as the same has been amended as of the
date hereof, the "Discovery Partnership Agreement"),
between Thomas M. Coleman and Weyerhaeuser Mortgage
Company, as amended by First Amendment to Agreement of
Limited Partnership of Discovery Partners, a California
limited partnership, dated as of April 9, 1986, between
Thomas M. Coleman and Mortgage Investments Plus, Inc., as
amended by Second Amendment to Agreement of Limited
Partnership of Discovery Partners, a California limited
partnership, dated as of August 1, 1988, among Thomas M.
Coleman, Coleman Partners No. 3 and Mortgage Investments
Plus, Inc., and as amended by Third Amendment to
Agreement of Limited Partnership of Discovery Partners, a
California limited partnership, dated as of March 9,
1995, among Coleman Partners No. 3 and MIP Properties,
Inc.
C. MIP has certain contract rights pursuant
to that certain Settlement Agreement, dated March 10,
1994 (the "Greenhouse Settlement Agreement"), among Larry
J. Mielke and Thomas R. Tellefsen ("Debtors") and MIP.
D. MIP is the holder of that certain
Promissory Note, dated June 5, 1989 (as the same has been
amended as of the date hereof, the "Note"), made by
Donald F. Sammis and Fernanda Sammis, husband and wife,
Lee C. Sammis, Trustee of the Donald F. Sammis Children's
Trust dated August 5, 1983, Mission Valley One, a
California general partnership and MBM Associates, a
California limited partnership (collectively, the
"Original Borrower"), in favor of MIP, in the original
principal amount of $12,350,000, as amended by First
Modification of Note, Deed of Trust and Loan Documents,
dated as of January 6, 1992. The Note and the documents
executed in connection with the making of the loan
evidenced by the Note (including, without limitation, the
documents identified on Exhibit "B" attached hereto and
made a part hereof) shall be collectively referred to
hereinafter as the "Loan Documents".
E. Seller and MIP contemplate entering into a
Merger Agreement in the form of Exhibit "C" attached
hereto and made a part hereof (the "Merger Agreement"),
pursuant to which, if consummated, Seller will merge with
and into MIP (the "Merger") and MIP will be the surviving
corporation of the Merger (the "Surviving Corporation").
F. Seller desires that, after consummation of
the Merger, the Surviving Corporation sell and assign,
and Buyer desires to purchase and assume, all of its
right, title and interest in, to and under, and all of
its obligations with respect to, (i) the Real Property,
(ii) ninety-eight percent (98%) of the right, title and
interest of MIP as limited partner of the Partnership
(the "Discovery 49% Interest"), (iii) the Greenhouse
Settlement Agreement and (iv) the Loan Documents
(collectively, the "Property"), upon the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual
covenants and conditions contained herein, and other good
and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto
agree as follows:
1. AGREEMENT TO PURCHASE AND SELL.
1.1 Purchase and Sale. Subject to the terms
and conditions hereof, at the Closing (but effective (i)
as of March 1, 1995 with respect to the Real Property and
(ii) as of the date hereof with respect to other
Property) Seller shall cause the Surviving Corporation to
sell, transfer, convey, assign and deliver all of its
right, title and interest in and to the Property to
Buyer, and Buyer shall purchase the Property and assume
all liabilities (whether known or unknown, absolute,
contingent or otherwise) arising out of or relating to
the Property.
1.2 Discovery 49% Interest. Provided that the
transactions contemplated hereby are consummated, Seller
hereby grants to Buyer an option (the "Option") to
purchase the limited partnership interest in the
Partnership that the Surviving Corporation will retain
after the sale of the Discovery 49% Interest (the
"Remaining Interest"). The Option may not be exercised
until twelve and one-half months after the "Closing Date"
(as defined in Section 3.1 below), and shall expire on
the date (the "Expiration Date") sixty days thereafter.
The Option may be exercised by delivery of written notice
to the Surviving Corporation. The exercise price of the
Option shall be the fair market value of the Remaining
Interest, as mutually agreed upon by Buyer and the
Surviving Corporation; provided, however, that if Buyer
and the Surviving Corporation cannot agree on the fair
market value of the Remaining Interest, then Buyer and
the Surviving Corporation shall retain a third party
appraiser (the "Appraiser") acceptable to both Buyer and
the Surviving Corporation; provided, further, that in no
event shall the purchase price of the Remaining Interest
be less than $2,500 nor more than $7,500. If Buyer does
not exercise the Option on or prior to the thirtieth day
preceding the Expiration Date, Buyer, upon written notice
from Seller given not less than twenty days prior to the
Expiration Date, shall be obligated to purchase the
Remaining Interest prior to the Expiration Date for
$1.00. The fees and expenses of the Appraiser (not to
exceed $500 in the aggregate) shall be the sole
responsibility of the Buyer. The Surviving Corporation
shall make no representations or warranties of any kind
in connection with the sale of the Remaining Interest.
Simultaneously with the sale of the Remaining Interest,
the Surviving Corporation shall deliver to Buyer and
Buyer will deliver to the Surviving Corporation an
original counterpart of an assignment and assumption
agreement in substantially the same form as the
assignment and assumption agreement executed pursuant to
Section 8.4 hereof. Prior to the date hereof, the Buyer
has furnished to Seller a form of Consent Agreement among
Coleman Partners No. 3, the Buyer and Steven Markoff.
The Buyer and the Seller agree to take whatever
reasonable action is necessary or advisable to
simultaneously with the Closing (i) fulfill the
conditions precedent to the consent as set forth in the
form of Consent Agreement and (ii) make effective the
assignment of the Discovery 49% Interest from the
Surviving Corporation to the Buyer (consistent with the
provisions of Section 8.4 hereof) and the admission of
Buyer to the Discovery Partnership as a substituted
partner in accordance with the terms of the form of
Consent Agreement and the Discovery Partnership
Agreement; provided, however, that (A) neither the Seller
nor the Surviving Corporation shall be obligated to take
any action that could have the effect of increasing its
obligations under the Discovery Partnership Agreement,
and (B) any amendment to the Discovery Partnership
Agreement pursuant to the form of Consent Agreement shall
not adversely affect the Surviving Corporation as the
holder of the Remaining Interest. From and after the
Closing, Buyer and its assignees agree not to take any
action under the Discovery Partnership Agreement that
could increase the Surviving Corporation's obligations
under the Discovery Partnership Agreement (including,
without limitation, requiring the Surviving Corporation
to make any capital or other contribution thereunder) or
otherwise adversely affect the Surviving Corporation as
holder of the Remaining Interest. The Buyer and Seller
will share equally the fees and costs (not to exceed
$2,500 in the aggregate) of the general partner in
respect of responding to the requests for the consent.
Buyer and the Surviving Corporation shall execute such
further documents or instruments as may be necessary or
proper to consummate the sale of the Remaining Interest.
The provisions of this Section 1.2 shall survive the
Closing.
2. PURCHASE PRICE.
2.1 Purchase Price Calculation. The purchase
price ("Purchase Price") for the Property, which shall be
payable by the Buyer on the Closing Date, shall be equal
to $1.575 million, plus the product of (i) the net
Operating Cash Flow from March 1, 1995 until the Closing
Date and (ii) negative one, net of all prorations and
closing costs as provided herein. Operating Cash Flow
shall mean all the tenant and other revenues derived from
the Real Property less all tenant operating expenses
(including, without limitation, capital expenditures,
tenant improvements and leasing commissions) and taxes in
respect of the Real Property.
2.2 Interest. In the event that the Closing
Date occurs on or after the sixteenth (16th) calendar day
following the date on which the Merger closes (such 16th
day is referred to herein as the "Interest Accrual
Date"), Buyer shall pay to the Surviving Corporation
interest on the Purchase Price, which interest shall
accrue at the prime rate of Signet Bank as of the
Interest Accrual Date, for the period commencing on the
Interest Accrual Date through and including the Closing
Date; provided, however, that no such interest shall
accrue and be payable if the Closing shall not have
occurred due solely to a breach by Seller of any of its
obligations hereunder.
3. CLOSING; ESCROW.
3.1 Closing. Upon the terms of and subject to
the conditions contained in this Agreement, the
consummation of the transactions contemplated hereby (the
"Closing") shall occur on the date on which all of the
conditions to each party's obligations hereunder have
been satisfied or waived, or at such other time as Buyer
and Seller may agree, but in no event later than thirty
(30) days after the date on which the Merger closes.
Buyer and Seller each agree to use their best efforts to
cause the Closing to occur as soon as practicable after
the Merger has been consummated. The date on which the
Closing actually occurs is referred to herein as the
"Closing Date".
3.2 Escrow. To the extent feasible, this
Agreement shall constitute the escrow instructions of
Buyer and Seller and shall be deposited with the "Title
Company" (as hereinafter defined), as escrow holder (in
such capacity, the "Escrow Holder"). Buyer and Seller
shall execute such further escrow instructions as may
from time to time be reasonably necessary to close
escrow; provided, however, that any such supplemental
escrow instructions shall not require the imposition of
any additional obligations or liabilities on any or all
of Buyer, Seller or the Surviving Corporation. In the
event of any inconsistency between the terms and
conditions of this Agreement and any supplemental escrow
instructions, the terms and conditions of this Agreement
shall prevail.
4. SELLER'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
Seller represents and warrants to and agrees
with Buyer as follows:
4.1 Seller's Authority. Seller has the full
right, power and authority to carry out its obligations
hereunder, and the individual executing this Agreement
and all other documents and instruments to be executed
and delivered by Seller in connection with this Agreement
on behalf of Seller shall have the full authority to do
so. This Agreement is, and all instruments, documents
and agreements to be executed by Seller in connection
herewith shall be, duly authorized, executed and
delivered by Seller and shall be valid, binding and
enforceable obligations of Seller.
4.2 No Conflict. The execution and delivery
of this Agreement, the consummation of the transactions
herein contemplated, and compliance with the terms of
this Agreement will not conflict with, or, with or
without notice or the passage of time, result in a breach
of, any of the terms or provisions of, or constitute a
default under, any instrument to which Seller is a party
or by which Seller is bound, or any applicable regulation
of any governmental agency, or judgment, order or decree
of any court having jurisdiction over Seller.
4.3 No Implied Representation or Warranty; AS-
IS Condition. Seller makes no representations or
warranties, except as expressly set forth herein.
Without in any way limiting the foregoing, Buyer
acknowledges that the Property shall be sold to Buyer in
an "AS IS" condition and that neither Seller nor any of
its affiliates makes or has made any representation or
warranty of any kind whatsoever, either express or
implied, with respect to the Property or any related
matter including, without limitation, any representation
or warranty with respect to the condition, habitability,
size, usable area, occupation or management of the Real
Property or the "Personal Property" (as defined in
Section 8.7 hereof), the available uses of the Real
Property, the boundary lines of or any encroachments or
easements affecting the Real Property, the presence or
availability of water or sewage disposal on or to the
Real Property, the Real Property's compliance with
applicable statutes, laws, codes, ordinances, regulations
or requirements relating to leasing, zoning, subdivision,
planning, building, fire, safety, health, hazardous
material or environmental matters or the Real Property's
compliance with covenants, conditions and restrictions
(whether or not of record), other local, municipal,
regional, state or federal requirements, or other
statutes, laws, codes, ordinances, regulations or
requirements, the outstanding principal balance of the
Note, the status of any payments due to MIP under the
Loan Documents, the Discovery Partnership Agreement or
the Greenhouse Settlement Agreement or any other matters
affecting or relating to MIP's rights and obligations
under the Loan Documents, the Discovery Partnership
Agreement or the Greenhouse Settlement Agreement.
5. BUYER'S REPRESENTATIONS AND WARRANTIES.
Buyer represents, warrants to and agrees with
Seller as follows:
5.1 Buyer's Authority. Buyer has the full
right, power and authority to carry out its obligations
hereunder, and the individual executing this Agreement
and all other documents and instruments to be executed
and delivered by Buyer in connection with this Agreement
on behalf of Buyer shall have the full authority to do
so. This Agreement is, and all instruments, documents
and agreements to be executed by Buyer in connection
herewith shall be, duly authorized, executed and
delivered by Buyer and shall be valid, binding and
enforceable obligations of Buyer.
5.2 No Conflict. The execution and delivery
of this Agreement, the consummation of the transactions
herein contemplated, and compliance with the terms of
this Agreement will not conflict with, or, with or
without notice or the passage of time, result in a breach
of, any of the terms or provisions of, or constitute a
default under, any instrument to which Buyer is a party
or by which Buyer is bound, or any applicable regulation
of any governmental agency, or judgment, order or decree
of any court having jurisdiction over Buyer or its
properties.
5.3 No Implied Representation or Warranty.
Buyer makes no representations or warranties, except as
expressly set forth herein.
6. SELLER'S COVENANTS; BUYER'S DISAPPROVAL.
6.1 Interim Operations. In the event that MIP
requests the consent of Seller with respect to any
operating covenant set forth in Section 6.1 of the Merger
Agreement that relates to the Property, Seller shall
promptly seek and obtain the consent of Buyer (which
consent shall not be unreasonably withheld) prior to
delivering its consent to MIP.
6.2 Buyer's Diligence. Buyer acknowledges and
agrees that the provisions of this Section 6.2 are
subject to any and all limitations arising out of or
pursuant to the confidentiality provisions contained in
the Merger Agreement and the Confidentiality Agreement
between an affiliate of Seller and MIP.
6.2.1 Seller shall use reasonable efforts
to cause MIP to make available to Buyer, to the extent
applicable or available, the following: (i) a true and
correct copy of each of the leases and rental agreements
for the use or occupancy of the Irwindale Property
(collectively, the "Irwindale Leases"), together with all
amendments thereto; (ii) an "as-built" survey of the
Irwindale Property; (iii) unaudited financial statements
(including, without limitation, balance sheets,
statements of income and expense, and cash flow
statements) pertaining to the operation of the Irwindale
Property for 1994 and for the most recent interim period,
and all books and records within MIP's possession or
control pertaining to the historical financial condition
or results of operation of the Irwindale Property during
the last three full calendar years; (iv) all soils,
seismic, geologic and architectural reports, studies and
certificates and all other documents pertaining to the
Real Property which MIP possesses or are otherwise
reasonably available to MIP (including without limitation
all tax bills, licenses, permits, maps, environmental
studies, insurance policies, operating agreements, claims
and settlements); (v) all environmental reports, studies,
permits and all other documents pertaining to any use or
presence of environmentally hazardous or toxic materials
in, on, under or about the Real Property or pertaining to
any other environmental matter with respect to conditions
in, on, under or about the Real Property, or operations
and businesses conducted thereon; (vi) the Discovery
Partnership Agreement, together with any and all
amendments thereto, certificates pertaining thereto, and
the Federal and State income tax returns for the
Partnership for its last five fiscal years; (vii) a true
and correct copy of that certain Amended and Restated
Lease Agreement, dated as of October 1, 1990 (the
"Occidental Lease"), between the Partnership and
Occidental International Exploration and Production
Company ("Occidental"), together with all amendments
thereto; (viii) a true and correct copy of any deeds of
trust encumbering the real property and improvements
owned by the Partnership (the "Discovery Property") and
of the promissory notes secured thereby; (ix) a true and
correct copy of the owner's policy of title insurance
insuring that fee simple title to the Discovery Property
is vested in the Partnership and (x) such other documents
as Buyer shall reasonably request. The foregoing
documents are hereafter referred to as the "Diligence
Documents."
6.2.2 Seller shall use reasonable efforts
to cause MIP to allow Buyer and Buyer's representatives
to enter onto the Real Property at reasonable times, and
upon three (3) days' prior written notice from Buyer to
MIP, from and after the date hereof through the
"Disapproval Date" (as hereinafter defined) for the
purpose of conducting such inspections, tests, studies,
analyses and activities as Buyer deems appropriate
(collectively, the "Inspections"). Neither Buyer nor
Buyer's representatives shall disturb the tenants under
the Irwindale Leases or the Occidental Lease and Seller
and/or MIP shall have the right to have a representative
present during all Inspections. The cost of the
Inspections shall be borne entirely by Buyer. Buyer
shall indemnify, defend and hold Seller and the Surviving
Corporation harmless from and against any loss, cost,
damage or liability arising out of any Inspections.
Promptly following each and every Inspection, Buyer shall
restore the Real Property to the condition existing prior
to such Inspection. Buyer agrees to cooperate with the
Surviving Corporation in executing any further
indemnification or other agreement relating to the
Inspections reasonably required by the Surviving
Corporation. The indemnification and restoration
obligations of Buyer under this Section shall survive
termination of this Agreement or, if applicable, the
Closing.
6.2.3 Title. Within seven (7) days of
the date hereof, Seller shall order preliminary title
reports for the Real Property (the "PTRs") from either
Commonwealth Land Title Company or Chicago Title Company
(the "Title Company") and promptly deliver them to Buyer.
6.3 Disapproval. Prior to the later of (i)
the 20th business day preceding the scheduled date of the
special meeting of stockholders to consider the Merger
and (ii) the second business day after Buyer has been
notified of such date (the "Disapproval Date"), Buyer
shall deliver written notice to Seller of its reasonable
disapproval of any items disclosed by the Diligence
Documents the Inspections or the PTRs. Any such matter
not disapproved in writing by Buyer on or before the
Disapproval Date shall conclusively be deemed approved.
Seller shall not be obligated to cure or correct any
matter disapproved pursuant to this Section 6.3 (a
"Disapproved Item") nor shall Seller have any liability
for any failure to cure or correct any Disapproved Item;
provided, however, that the cure or correction of any
Disapproved Item shall be a condition to Buyer's
obligation to close.
7. CONDITIONS PRECEDENT TO CLOSING.
7.1 Mutual Conditions. The obligations of
Buyer and Seller to consummate this Agreement and to
render performance hereunder will be subject to the
following conditions precedent, which conditions may be
waived or the time for satisfaction extended by Buyer and
Seller in writing:
7.1.1 the Merger shall have been
consummated;
7.1.2 all consents, approvals and
authorizations (including, without limitation, any
consents required pursuant to the Discovery Partnership
Agreement) required to be obtained in connection with the
consummation of the transactions contemplated by this
Agreement shall have been obtained;
7.1.3 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; and
7.1.4 neither Buyer nor Seller shall be
insolvent or subject to protection under state or federal
bankruptcy laws.
7.2 Buyer's Conditions. In addition to the
conditions set forth in the foregoing Section 7.1, the
obligation of Buyer to consummate this Agreement and to
render performance hereunder will be subject to the
following conditions precedent, which conditions may be
waived or the time for satisfaction extended by Buyer in
writing:
7.2.1 that the Buyer believes that (i)
representations and warranties of MIP contained in
Section 5.1(m), 5.1(t) and 5.1(u) of the Merger Agreement
relating to the Property are true and correct in all
material respects as of the Closing Date and (ii) between
the date of the Merger Agreement and the Closing Date,
the Real Property shall have been operated in accordance
with the covenants contained in Section 6.1 of the Merger
Agreement and the projections set forth as Exhibit "D"
hereto (unless Buyer shall have consented otherwise);
7.2.2 any and all Disapproved Items shall
have been cured or corrected;
7.2.3 since the date hereof there shall
not have occurred any event that would or could cause a
material change in the status of the use, occupancy,
zoning, or condition of the Real Property or the
Discovery Property, or any property adjacent to the Real
Property or the Discovery Property, including but not
limited to environmental conditions, casualty, or
condemnation, that could or does materially adversely
affect the status of the use, occupancy, zoning,
condition or value of the Real Property; and
7.2.4 Buyer shall have received ALTA
extended coverage owner's policies of title insurance
(collectively, the "Title Policies") insuring that fee
simple title to the Irwindale Property and the Sunwest
Unimproved Property is vested in Buyer, (ii) an
endorsement to the policy of title insurance covering the
Discovery Property insuring that such policy is in full
force and effect in favor of the Partnership with Buyer
as a limited partner in place of MIP, and (iii) a Form
104.1 endorsement, naming Buyer as the insured, to the
existing policy of title insurance insuring the lien of
the deed of trust securing the Note (together with the
endorsement referred to in subparagraph (ii) above, the
"Title Endorsements"); provided, however, that the
Surviving Corporation shall not be required to execute
any affidavit or indemnity in connection with the
issuance of the Title Policies or the Title Endorsements
other than an affidavit substantially in the form of
Exhibit "E" attached hereto and made a part hereof;
provided further, that in the event that Seller has used
best efforts to cause the Title Company to issue the
Title Policies and the Title Endorsements at the Closing
and the Title Company will not do so, this condition
shall be deemed satisfied if Buyer shall have received a
commitment from the Title Company to issue the Title
Policies and the Title Endorsements.
8. SELLER'S OBLIGATIONS AT CLOSING.
Immediately after the closing of the Merger,
the Surviving Corporation shall deliver to Escrow Holder
the documents, instruments, items and payments required
by this Agreement to be delivered by the Surviving
Corporation, including, without limitation, the
following:
8.1 Deeds. A quitclaim deed for each of the
Irwindale Property and the Sunwest Unimproved Property
(collectively, the "Deeds"), so as to quitclaim to Buyer
all of the Surviving Corporation's right, title and
interest, if any, in and to the Real Property. The Deeds
shall be in recordable form reasonably satisfactory to
Buyer and Seller, duly signed and acknowledged by the
Surviving Corporation.
8.2 Title Insurance. The Title Policies and
the Title Endorsements; provided, however, that in the
event that Seller has used best efforts to cause the
Title Company to issue the Title Policies and the Title
Endorsement at the Closing and the Title Company will not
do so, this delivery shall be deemed satisfied if Buyer
shall have received a commitment from the Title Company
to issue the Title Policies and the Title Endorsement.
8.3 Assignment and Assumption of Leases. An
original counterpart of an assignment and assumption
agreement (the "Lease Assignment") in form reasonably
satisfactory to Buyer and Seller, dated as of the Closing
Date but effective as of March 1, 1995 (the "Effective
Date") and duly executed by the Surviving Corporation,
providing for (i) the assignment, without recourse or
warranty, to Buyer of all of the Surviving Corporation's
right, title and interest, if any, in, to and under the
Irwindale Leases and the Occidental Lease (collectively,
the "Leases") and the security deposits and prepaid
rentals, if any, maintained thereunder, and (ii) the
assumption by Buyer of all of the Surviving Corporation's
obligations and liabilities (whether known or unknown,
fixed or contingent) arising out of or relating to the
Leases accruing from and after the Closing.
8.4 Assignment and Assumption of Partnership
Interest. An original counterpart of an assignment and
assumption agreement (the "Partnership Interest
Assignment") in form reasonably satisfactory to Buyer and
Seller, dated as of the Closing Date but effective as of
the date hereof and duly executed by the Surviving
Corporation, providing for (i) the assignment, without
recourse or warranty, to Buyer of all of the Surviving
Corporation's right, title and interest, if any, in, to
and under the Discovery 49% Interest, and (ii) the
assumption by Buyer of all of the Surviving Corporation's
obligations and liabilities (whether known or unknown,
fixed or contingent) arising out of or relating to the
Discovery 49% Interest accruing from and after the date
hereof.
8.5 Assignment of Loan Documents. An original
counterpart of an assignment and assumption agreement
(the "Loan Document Assignment") in form reasonably
satisfactory to Buyer and Seller, dated as of the Closing
Date but effective as of the date hereof and duly
executed by the Surviving Corporation, providing for (i)
the assignment, without recourse or warranty, to Buyer of
all of the Surviving Corporation's right, title and
interest, if any, in, to and under the Loan Documents,
and (ii) the assumption by Buyer of all of the Surviving
Corporation's obligations and liabilities (whether known
or unknown, fixed or contingent) arising out of or
relating to the Loan Documents accruing from and after
the date hereof.
8.6 Assignment of Contract Rights. An
original counterpart of an assignment and assumption
agreement (the "Settlement Agreement Assignment") in
form reasonably satisfactory to Buyer and Seller, dated
as of the Closing Date but effective as of the date
hereof and duly executed by the Surviving Corporation,
providing for (i) the assignment, without recourse or
warranty, to Buyer of all of the Surviving Corporation's
right, title and interest, if any, in, to and under the
Greenhouse Settlement Agreement, and (ii) the assumption
by Buyer of all of the Surviving Corporation's
obligations and liabilities (whether known or unknown
fixed or contingent) arising out of or relating to the
Greenhouse Settlement Agreement accruing from and after
the date hereof.
8.7 Bill of Sale. An original bill of sale
(the "Bill of Sale") in form and substance reasonably
satisfactory to Buyer and Seller, dated as of the Closing
Date and executed by the Surviving Corporation, without
recourse or warranty, conveying, transferring, and
selling to Buyer all of the Surviving Corporation's
right, title and interest, if any, in and to any and all
tangible personal property located on or about the Real
Property (collectively, the "Personal Property").
8.8 General Assignment. An original
counterpart of a general assignment and assumption
agreement (the "General Assignment") in form and
substance reasonably satisfactory to Buyer and Seller,
dated as of the Closing Date but effective as of the date
hereof except that, with respect to intangible personal
property owned in connection with the Real Property only,
the assignment shall be effective as of the Effective
Date, and duly executed by the Surviving Corporation,
providing for (a) the assignment to Buyer, without
recourse or warranty, of all of the Surviving
Corporation's right, title and interest, if any, in, to
and under all intangible personal property owned by the
Surviving Corporation in connection with the Property
including, without limitation, (i) building and trade
names, (ii) transferable business licenses, (iii)
permits, applications, authorizations and other
entitlements, (iv) transferable warranties, (v) all
transferable utility contracts covering the Real
Property, Improvements or Personal Property or the
construction or fabrication thereof, and (vi) all
contracts, operating agreements, management agreements,
rental agreements, maintenance or service contracts
relating to the Real Property, and (b) the assumption by
Buyer of all of the Surviving Corporation's obligations
and liabilities (whether known or unknown, fixed or
contingent) arising out of or relating to any of the
foregoing accruing from and after the date hereof except
that, with respect to intangible personal property owned
in connection with the Real Property only, the assumption
shall be effective as of the Effective Date.
8.9 Notices. A notice to the tenants under
the Irwindale Leases of the transfer of the Irwindale
Property to Buyer.
8.10 Estoppel Certificates. An original of
each estoppel certificate signed by a tenant under one of
the Leases (including, without limitation, the Occidental
Lease), as and to the extent delivered to Seller pursuant
to the Merger Agreement.
8.11 FIRPTA. An affidavit signed by the
Surviving Corporation stating that it is not a foreign
person within the meaning of Section 1445 of the Internal
Revenue Code of 1986, as amended.
8.12 Other. Such other documents and
instruments as may be reasonably required in order to
effectuate the provisions of this Agreement and the
transactions contemplated herein.
9. BUYER'S OBLIGATIONS AT CLOSING.
Upon the Closing, Buyer shall deliver to the
Surviving Corporation (a) the payments required of it
pursuant to Section 2 above and (b) executed original
counterparts of: (i) the Lease Assignment, (ii) the
General Assignment, (iii) the Partnership Interest
Assignment, (iv) the Settlement Agreement Assignment and
(v) the Loan Document Assignment ("Buyer's Closing
Documents"). To the extent practicable, Seller and Buyer
shall cause the Exchange Agent (as such term is defined
in the Merger Agreement) to deduct the Purchase Price
from the Merger proceeds payable to Buyer upon the
closing of the Merger. If the Purchase Price is not
deducted from the Merger proceeds payable to Buyer on the
Closing Date, then (i) Buyer shall receive the Cash
Merger Consideration (as defined in the Merger Agreement)
pursuant to the terms and conditions of the Merger
Agreement and (ii) at the Closing Buyer shall pay the
Purchase Price to Seller in immediately available funds.
10. PRORATIONS AND ADJUSTMENTS.
The following shall be prorated and adjusted
between the Surviving Corporation and Buyer as of the
Closing, except as otherwise specified:
10.1 Prorations. At the Closing, all items of
income and expense (including, without limitation, those
set forth in subparagraphs 10.1.1 through 10.1.7 below)
shall be prorated as of 12:01 a.m. (i) on the Effective
Date, with respect to items of income and expense
pertaining to the Real Property, and (ii) on the date
hereof, with respect to items of income and expense
pertaining to the Discovery 49% Interest, the Greenhouse
Settlement Agreement and the Loan Documents, in each case
based on the actual number of days of the year elapsed as
of the day of the Effective Date or the date hereof (as
the case may be) between Buyer and the Surviving
Corporation:
10.1.1 all rents, additional rents and
any other amounts received from tenants of the Real
Property, including, without limitation, percentage
rents, escalation charges for taxes and operating
expenses, parking charges, cost-of-living increases or
other similar charges (collectively, "Rent Payments");
10.1.2 any and all real estate taxes and
assessments, water charges, sewer rents and vault
charges;
10.1.3 utilities expenses, including,
without limitation, telephone, steam, electricity and
gas;
10.1.4 any and all payments, distributions, refunds,
rights of payment, and any other amounts payable ("Rights
of Payment") and received or charges or expenses incurred
pursuant to the Discovery 49% Interest, the Loan Documents
or the Greenhouse Settlement Agreement or under any
contracts relating to the Real Property that shall remain
in effect after the Closing; provided, however, that the
first $1250 of Rights of Payment with respect to Property
other than Real Property received after the date hereof
and prior to the Closing Date shall be allocated to the
Surviving Corporation and any amounts in excess thereof
shall be allocated to Buyer;
10.1.5 any fees for licenses, permits or
similar rights which remain in effect after the Closing
Date;
10.1.6 all security deposits held on
behalf of tenants of the Real Property, provided that any
security deposits held on account of Leases terminating
on or before the Effective Date shall be paid to the
Surviving Corporation and all other security deposits
shall be transferred to Buyer; and,
10.1.7 such other items that are
customarily prorated in transactions of this nature shall
be ratably prorated.
10.2 Post-Closing Adjustments. Any item of
income in respect of the Property other than the Real
Property (the "Non-Real Property Assets") received by or
on behalf of Buyer within one hundred and twenty (120)
days after the Closing Date, which is attributable to a
period preceding the date hereof, shall be immediately
paid over to the Surviving Corporation. Any item of
income in respect of the Real Property received by or on
behalf of Buyer within one hundred and twenty (120) days
after the Closing Date, which is attributable to a period
preceding the Effective Date, shall be immediately paid
over to the Surviving Corporation. Any item of expense
incurred in connection with the Non-Real Property Assets
prior to the date hereof, but paid within one hundred and
twenty (120) days after the Closing Date, shall be the
responsibility of the Surviving Corporation, and if such
payment shall have been made by Buyer then the Surviving
Corporation will reimburse Buyer for such payment. Any
item of expense incurred in connection with the Real
Property prior to the Effective Date, but paid within one
hundred and twenty (120) days after the Closing Date,
shall be the responsibility of the Surviving Corporation,
and if such payment shall have been made by Buyer then
the Surviving Corporation will reimburse Buyer for such
payment. The parties shall make any necessary adjustment
after Closing by cash payment to the party entitled
thereto so that, except as otherwise expressly provided
herein, (i) with respect to all of the Non-Real Property
Assets, the Surviving Corporation shall have borne all
such expenses allocable to the period prior to the date
hereof and Buyer shall bear all such expenses allocable
to the period from and after the date hereof, and (ii)
with respect to the Real Property, the Surviving
Corporation shall have borne all such expenses allocable
to the period prior to the Effective Date and Buyer shall
bear all such expenses allocable to the period from and
after the Effective Date. The provisions of this Section
10.2 shall survive Closing for a period of one (1) year.
10.3 Relationship to Section 2. Any and all
items of income and expense arising from or in connection
with the Real Property that are prorated in accordance
with this Section 10 shall enter into the computation of
Operating Cash Flow in accordance with Section 2.1
hereof. In the event of any inconsistency between the
provisions of this Section 10 and the provisions of
Section 2.1 relating to Operating Cash Flow, the
provisions of Section 2.1 shall prevail.
11. TERMINATION.
11.1 Termination By Parties. This Agreement
may be terminated at any time prior to the Closing Date:
(a) by mutual written consent of Seller
and Buyer;
(b) by Buyer, if there has been a
material violation or breach by Seller of any agreement,
representation or warranty contained in this Agreement
which has rendered the satisfaction of any condition to
the obligations of Buyer impossible and such violation or
breach has not been waived by Buyer;
(c) by Seller or Buyer, in the event that
the Merger shall not have occurred by November 30, 1995;
or
(d) by Seller, if there has been a
violation or breach by Buyer of any material agreement,
representation or warranty contained in this Agreement
which has rendered the satisfaction of any condition to
the obligations of Seller impossible and such violation
or breach has not been waived by Seller.
11.2 Automatic Termination. This Agreement
shall automatically terminate (i) in the event of the
termination of the Merger Agreement or the Proxy
Agreement among Steven Markoff, Jadwiga Markoff, JER
Partners LLC, Buyer and Seller of even date herewith or
(ii) if the Closing shall not have occurred on or prior
to the thirtieth calendar day after the date on which the
Merger closes.
11.3 Procedure and Effect of Termination. In
the event of termination of this Agreement and
abandonment of the transactions contemplated hereby by
any or all of the parties pursuant to Section 11.1,
written notice thereof shall forthwith be given to the
other party or parties hereto and this Agreement shall
terminate and the transactions contemplated hereby shall
be abandoned, without further action by any of the
parties hereto. If this Agreement is terminated as
provided under Section 11.1 or 11.2:
(a) upon request therefor, each party
will redeliver all documents, work papers and other
material of any other party relating to the transactions
contemplated hereby, whether obtained before or after the
execution hereof, to the party furnishing the same; and
(b) no party hereto shall have any
liability or further obligation to any other party to
this Agreement pursuant to this Agreement; provided, that
nothing herein shall relieve any party hereto from
liability for any breach of its representations,
warranties, agreements or covenants hereunder.
11.4 The representations and warranties of the
parties contained herein shall not survive the
termination of this Agreement or the consummation of the
transactions contemplated hereby. Except for the
covenants and agreements of the parties set forth in
Section 12.12 and 12.13, the covenants and agreements of
the parties set forth herein shall not survive the
termination of this Agreement. Except for Section 1.2,
Section 6.2, Section 10, Section 12.8, Section 12.10,
Section 12.12, and Section 12.13 hereof, the covenants
and agreements of the parties set forth herein shall not
survive the consummation of the transactions contemplated
hereby.
12. MISCELLANEOUS.
12.1 Notices. All notices, claims, demands
and other communications hereunder shall be in writing
and shall be deemed given if delivered personally or by
telex or telegram or mailed by registered or certified
mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such
other address for a party as shall be specified by like
notice):
If to Buyer:
Steven C. Markoff
Palm Finance Corporation
100 Wilshire Boulevard
Telecopy No.: (310) 319-0310
With a copy to:
Greenberg, Glusker, Fields, Claman &
Machtinger
1900 Avenue of the Stars, Suite 2000
Los Angeles, California 90067
Attn: Stephen Claman, Esq.
Telecopy No.: (310) 553-0687
Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel
919 Third Avenue
New York, NY 10022
Attn: Joshua M. Berman, Esq.
Telecopy No.: (212)715-8000
If to Seller:
MIP Acquisition Corporation
c/o J. E. Robert Company, Inc.
11 Canal Center Plaza, Suite 200
Alexandria, Virginia 22314
Attention: Jonathan Kern
Murry Gunty
Richard Harkins
Telecopy No.: (703) 739-4419
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
1440 New York Avenue, N.W.
Washington, D.C. 20005
Attn: Stephen W. Hamilton, Esq.
Telecopy No.: (202) 393-5760
12.2 Descriptive Headings. The headings
contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.3 Entire Agreement. This Agreement
(including the Exhibits and other documents and
instruments referred to herein) constitute the entire
agreement and understanding of the parties hereto in
respect of the transactions contemplated by this
Agreement. There are no restrictions, promises,
representations, warranties, covenants or undertakings,
other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements
and understandings between the parties with respect to
such transactions.
12.4 Amendments. This Agreement may not be
changed, modified or, except as otherwise provided
herein, terminated, except by an instrument executed by
the parties hereto.
12.5 Waiver. No waiver by either party of any
failure or refusal by the other party to comply with its
obligations shall be deemed a waiver of any other or
subsequent failure or refusal to so comply.
12.6 Partial Invalidity. If any term or
provision of this Agreement or the application thereof to
any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this
Agreement, or the application of such term or provision
to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be
affected thereby, and each term and provision of this
Agreement shall be valid and be enforced to the fullest
extent permitted by law.
12.7 Further Assurances. Seller and Buyer
agree to perform, execute and/or deliver or cause to be
performed, executed and/or delivered at the Closing or
after the Closing any and all such further acts, deeds,
and assurances, in addition to those specifically
required hereunder, as may be reasonably required to
consummate the transactions contemplated hereby.
12.8 Post-Closing Access to Records. Upon
receipt by the Surviving Corporation of Buyer's
reasonable written request within a period of one year
after the Closing, the Surviving Corporation (at Buyer's
sole cost and expense) shall (a) at the Surviving
Corporation's principal place of business, during its
normal business hours, make all its records relating to
the Property available to Buyer for inspection, copying
and audit by Buyer's designated accountants and (b)
cooperate with Buyer in obtaining any and all permits,
licenses, authorizations, and other governmental
approvals necessary for the operation of the Property.
12.9 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO THE
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
12.10 Brokers. Seller represents and warrants
to Buyer that no broker, finder or financial adviser is
entitled to any brokerage, finder's or other fee or
commission in connection with the transactions
contemplated by this Agreement based upon actions of or
arrangements made by or on behalf of Seller or any of its
constituent partners or shareholders; provided, however,
that Seller acknowledges that the Sunwest Unimproved Land
is the subject of an Exclusive Listing Agreement dated
August 1, 1994 (the "Listing Agreement"), between MIP and
Daum Commercial Real Estate Services ("Daum"). The
Surviving Corporation shall be solely responsible for
commissions payable, if any, to Daum pursuant to the
Listing Agreement. Buyer represents and warrants to
Seller that no broker, finder or financial adviser is
entitled to any brokerage, finder's or other fee or
commission in connection with the transactions
contemplated by this Agreement based upon actions of or
arrangements made by or on behalf of Buyer.
12.11 Assignment. Neither this Agreement nor
any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto (whether
by operation of law or otherwise); provided, however,
that subject to the prior written consent of Seller
(which consent shall not be unreasonably withheld) Buyer
may assign any of the rights, interest or obligations
hereunder to a third party, but no such assignment shall
relieve Buyer of its obligations hereunder. Subject to
the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the
parties and their respective successors and assigns.
12.12 Expenses. Each party shall pay its own
costs and expenses incurred in connection with this
Agreement; provided, however, all transfer taxes, title
premiums and costs of title searches, escrow fees and
costs and recording fees and costs related to the
transfer of the Property shall be paid one-half (1/2) by
the Surviving Corporation and one-half (1/2) by Buyer.
12.13 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 or 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.
12.14 Third Parties. Nothing herein expressed
or implied is intended or shall be construed to confer
upon or give to any person or corporation other than the
parties hereto and their successors or assigns, any
rights or remedies under or by reason of this Agreement.
12.15 Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall
be deemed an original, but all of which shall constitute
one and the same instrument.
IN WITNESS WHEREOF, each of the parties hereto
have duly executed this Agreement, all as of the day and
year first above written.
BUYER:
PALM FINANCE CORPORATION,
a California corporation
By:/s/G. Douglas O'Keefe
Name: G. Douglas O'Keefe
Title: President
SELLER:
MIP ACQUISITION CORPORATION, a
Maryland corporation
By:/s/Joseph E. Robert
Name: Joseph E. Robert
Title: President
Exhibit "A"
Irwindale Property
Parcel A:
Parcel 2 in the City of Irwindale, in the County of Los
Angeles, State of California as shown on Parcel Map No.
17390, filed in Book 183 Pages 98 & 99 of Parcel Maps, in
the office of the County Recorder of said County.
Parcel B:
Easements for drainage and driveway purposes as more
particularly described and set forth in that certain
declaration of establishment of easements dated November
25, 1986 executed by Birtcher Campbell Reliance, Ltd., a
California partnership, upon the terms, covenants and
conditions contained therein, and recorded December 19,
1986 as Instrument No. 86-1772554 Official Records.
Sunwest Property
THAT PORTION OF PARCEL 3 OF PARCEL MAP NO. 11555, IN THE COUNTY OF SAN
BERNARDINO, STATE OF CALIFORNIA, AS PER PLAT RECORDED IN BOOK 136 OF
PARCEL MAPS, PAGES 20 AND 21, RECORDS OF SAID COUNTY, DESCRIBED AS
FOLLOWS:
BEGINNING AT THE SOUTHEAST CORNER OF PARCEL 3 OF SAID PARCEL MAP;
THENCE NORTH 00 DEG. 17' 04" WEST, A DISTANCE OF 66.44 FEET; THENCE
SOUTH 89 DEG. 42' 56" WEST, A DISTANCE OF 32.00 FEET; THENCE NORTH 00
DEG. 17' 04" WEST, A DISTANCE OF 354.86 FEET TO A NONTANGENT CURVE
HAVING A RADIUS OF 5000.00 FEET AND A RADIAL BEARING OF SOUTH 19 DEG.
27' 46" EAST; THENCE SOUTHWESTERLY ALONG SAID CURVE CONCAVE
SOUTHEASTERLY THROUGH A CENTRAL ANGLE OF 02 DEG. 50' 25" AND AN ARC
DISTANCE OF 247.85 FEET TO A NONTANGENT COMPOUND CURVE HAVING A RADIAL
BEARING OF SOUTH 22 DEG. 18' 11" FOR THE 5000.00 FOOT RADIUS CURVE AND
A RADIAL BEARING OF SOUTH 22 DEG. 50' 30" EAST FOR THE 4734.96 FOOT
RADIUS CURVE, THENCE SOUTHWEST ALONG SAID COMPOUND CURVE CONCAVE
SOUTHEASTERLY, AND AN ARC DISTANCE OF 171.41 FEET; THENCE SOUTH 63 DEG.
39' 52" WEST, A DISTANCE OF 18.58 FEET; THENCE SOUTH 50 DEG. 10' 09"
WEST, A DISTANCE OF 51.42 FEET; THENCE SOUTH 63 DEG. 39' 52" WEST, A
DISTANCE OF 328.00 FEET; THENCE SOUTH 26 DEG. 20' 08" EAST, A DISTANCE
OF 56.87 FEET; THENCE SOUTH 86 DEG. 18' 46" EAST, A DISTANCE OF 208.94
FEET; THENCE SOUTH 88 DEG. 41' 26" EAST, A DISTANCE OF 138.01 FEET;
THENCE SOUTH 43 DEG. 41' 26" EAST, A DISTANCE OF 21.51 FEET TO A
TANGENT CURVE HAVING A RADIUS OF 52.00 FEET; THENCE EASTERLY ALONG SAID
CURVE CONCAVE SOUTHERLY, THROUGH A CENTRAL ANGLE OF 78 DEG. 38' 26" AND
AN ARC DISTANCE OF 71.37 FEET TO A POINT WITH A RADIAL BEARING OF NORTH
34 DEG. 57' 00" EAST; THENCE NORTH 00 DEG. 17' 04" WEST, A DISTANCE OF
8.69 FEET; THENCE SOUTH 88 DEG. 41' 26" EAST, A DISTANCE OF 320.32 FEET
TO THE POINT OF BEGINNING.
THIS LEGAL IS MADE PURSUANT TO THAT CERTAIN CERTIFICATE APPROVING A LOT
LINE ADJUSTMENT, CERTIFICATE NO. 91-11, RECORDED FEBRUARY 11, 1992,
INSTRUMENT NO. 92-049266, OFFICIAL RECORDS.
Exhibit "B"
1. First Modification to Note, Deed of Trust and Loan Documents,
dated January 6, 1992, among MIP, as lender, and Donald F. Sammis
and Fernanda C. Sammis, husband and wife, Lee C. Sammis, Trustee
of the Donald F. Sammis Children's Trust dated August 5, 1993,
Mission Valley One, a California general partnership, MBM
Associates, a California limited partnership, and Mission Valley
Partners, a California general partnership, collectively, as
borrower, which agreement amends the Note and each of the
documents identified in items 2 through 7 below
2. Loan Agreement and Borrowers Certificate, dated as of June 8,
1989, among Original Borrower and MIP, dated as of June 8, 1989
3. Subordinate Deed of Trust with Assignment of Rents, Security
Agreement and Fixture Filing, dated as of June 8, 1989, by
Original Borrower, in favor of MIP
4. Assignment of Interest in Leases, dated as of June 8, 1989, by
Original Borrower in favor of MIP
5. Completion Guaranty, dated as of June 8, 1989, by Donald Sammis
and Fernanda Sammis in favor of MIP
6. Indemnity Agreement, dated June 8, 1989, by Original Borrower in
favor of MIP
7. UCC-1 Financing Statements, dated June 8, 1989, showing Original
Borrowers as debtor and MIP as secured party
8. Promissory Note secured by Deed of Trust, dated June 8, 1989, by
Original Borrower in favor of MIP.
9. UCC-2 Financing Statement, dated December 29, 1992, adding Mission
Valley Partners, a California general partnership as debtor.
Exhibit "C"
A G R E E M E N T A N D P L A N O F M E R G E R
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
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. The Merger shall
have the effects specified in the Maryland General Corporation
Law (the "MCL").
1.2 Closing
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
CHARTER AND BYLAWS
OF THE SURVIVING CORPORATION
2.1 Charter
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.
ARTICLE III
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
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
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
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 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, 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 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 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;
(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
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 (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 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, (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.
(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 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.
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,
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.
(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. SECTION 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.
(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 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 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.
(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 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 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 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 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.
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, 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 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.
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");
(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;
(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);
(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 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.
(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 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.
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.
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 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).
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: /s/ Joseph E. Robert
Name: Joseph E. Robert
Title: Member
MIP ACQUISITION CORPORATION,
a Maryland corporation
By: /s/ Joseph E. Robert
Name: Joseph E. Robert
Title: President
MIP PROPERTIES, INC.,
a Maryland corporation
By: /s/ Carl C. Gregory, III
Name: Carl C. Gregory, III
Title: Chairman of the Board and
Chief Executive Officer
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 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 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.
(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 VII
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 $.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 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.
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:
By: (SEAL)
Name: Name:
Secretary Chairman of the Board and Chief Executive
Officer
MIP Acquisition Corporation,
a Maryland corporation
ATTEST:
By:
(SEAL)
Name: Name:
Secretary President
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
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 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.
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.
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 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.
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
_______________.
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:
SUBSTANCE OF OPINION OFSKADDEN, 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 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.
________________, 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;
(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 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.
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
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
TABLE OF CONTENTS
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 . . . . . . . . . 23
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
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 . . . . . . . . . . . . . . . . . 33
8.1 Termination by Mutual Consent . . . . . . . . . . . 33
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 . . . . . . . . . . . . . . . . . . 35
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 . . . . . . . . . . . . . . . . . 39
ARTICLE X CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . 39
10.1 Definition of "Knowledge of the Company" . . . . . 39
10.2 Definition of "Subsidiary" . . . . . . . . . . . . 39
SIGNATURE PAGE 41
EXHIBITS
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
EXHIBIT G Form of Opinion of Gordon, Feinblatt, Rothman,
Hoffberger & Hollander, Special Maryland Counsel
to Purchaser and Merger Sub
SCHEDULES
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
Exhibit "D"
IRWINDALE
EXECUTIVE
PLAZA
Estimated
Cash Flow
March 1995 to
September
1995
<TABLE>
<CAPTION>
31-Mar 30-Apr 31-May 30-June 31-July 31-Aug 30-Sept Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash
Receipts
Office 25,111 25,111 22,158 39,891 39,891 39,891 39,891 231,945
Retail 8,167 8,167 11,119 11,119 11,119 11,119 11,119 71,929
33,277 33,277 33,277 51,010 51,010 51,010 51,010 303,874
Operating 24,942 24,942 24,942 24,942 24,942 24,942 24,942 174,594
Expenses
(Accrual Basis)
*
Net Cash 8,335 8,335 8,335 26,068 26,068 26,068 26,068 129,280
Flow
Tenant 86,883 56,630 165,655 15,405 15,082 339,655
Improvements
Commissions 42,501 732 49,993 11,804 10,064 115,094
Other Capital 0 0 20,600 3,000 0 0 0 23,600
Expenses
Capital
Expenditures 0 129,384 77,962 218,648 27,209 0 25,146 478,349 478349.26
Total **
0
Net Cash 8,335 (121,049) (69,626) (192,580) (1,141) 26,068 922 (349,069)
Flow
Cummulative (112,713) (182,340) (374,920) (376,060) (349,920) (349,069)
* The accrual pertains to property
taxes of $3,800 per month.
Thus, each installment (2) would be a total expenditure of approximately
$22,800 (due 4/10/95 & 12/10/95).
** See Capital Expenditures - 1995 schedule for
more detail.
Exhibit "E"
DECLARATION
1. Declarant has requested ____________________ (the "Title Company")
to issue its policy(ies) of title insurance, or commitment(s),
insuring an interest or title to that property described in
Exhibit A attached thereto (hereinafter referred to as "said
property") without exception to or providing certain affirmative
insurance against unrecorded matter.
2. Declarant knows of no leases, defects, liens, encumbrances,
adverse claims or other matters affecting said property other than
as shown on the preliminary report or commitment, order number(s)
_____________, dated ______________ and prepared by
______________________ or as reflected herein.
3. Declarant hereby affirms that there is no one in possession or
entitled to possession of said property other than the vestee
shown in said preliminary report except:
__________________________________________________________________
______________________________________
4. Declarant hereby affirms that there are no liens or rights to
liens upon said property for labor, services, materials,
appliances, equipment, teams or power furnished or to be furnished
to the work of improvements which are imposed by law and not shown
by te public records, whether done by the owner, lessee, sublessee
or tenant and which has been completed within the last year or
which is ________________________________________________.
5. Declarant hereby affirms that the only parties with rights to
possession of said property other than Declarant are those lessees
shown on Exhibit B which is attached hereto and made a part
hereof. Declarant further affirms that the parties shown on
Exhibit B have rights as lessee only and that no options to
purchase or rights of first refusal have been granted on said
property in connection with the lessee or otherwise.
This Declaration is made to induce the Title Company to issue its
policy(ies) of title insurance with respect to the above-referenced
order number(s).
Executed under penalty of perjury on this ____ day of ______________,
1995.
___________________________
Declarant
</TABLE>
